With more volume, the Dollar’s rally is halted

EUR/USD

The Dollar took a pause in its rally today as it lost to the Euro today. 4hr stochastics are trending up which indicates short term bullish movement, but 1.4100 looks like a good resistance area. Daily stochastics are still trending down which still has me bearish overall. I would watch for the Euro to hover around 1.4100 but I think we will see it bounce down from there to around 1.4050.

GBP/USD

The Cable dropped down nicely to around 2.0250 earlier today but bounced back up near its open to around 2.0330. The 4hr stochastics are trending up which means we could see some short term bullish movement, but daily stochastics are trending down which leads me to believe that we’re still going to see more bearish movement in the medium term. Look for the Cable to move up to around 2.0400, but we should see it bounce back down from there to around 2.0350 or even 2.0300.

USD/CHF

The Swissy found resistance at its 50 EMA on the daily chart at 1890 and has been falling ever since. Daily stochastics are just now entering overbought territory while 4hr stochastics are trending down. Currently the pair is trading around 1835 and I would look for it to continue down to 1800.

USD/JPY

Well the Dollar fell to 117.00 versus the Yen like I said yesterday, and I think we may see it continue to drop. Daily stochastics are in overbought territory and 4hr stochastics are trending down nicely. Look for the pair to continue to drop from 117.00 down to around 116.50.

I’m not really big into fundamentals but I feel that they are important to discuss. In this section I will be posting fundamental tidbits that I find interesting from various sources. If you find an article that you think would benefit everyone, please email me (Big Pippin) with your username, the article, and a link to where members can read the entire article.

Now onto the Fundamentals:
  • Eurozone ministers surely don’t want the Euro to be this strong….right?
    • As I said yesterday the Eurozone ministers were beginning their meeting to discuss the weak dollar, yen and renminbi… So… Some traders believe that means the ministers want the euro to be weaker… I believe traders that believe this are barking up the wrong tree… The European Central Bank (ECB) loves the strong euro, and I’ve explained why on several occasions in the past, but for those who missed class on those previous 1,000 times I’ve explained it… The strong euro does so much for the ECB’s mantra to provide price stability… A strong euro fights inflation, and increases its allure for foreign investment into the country. There are more reasons like the price of oil being reduced, so, you can see what I’m talking about now…
  • What’s the cause for the Dollar rally?
    • The dollars strength was not caused by the numbers released yesterday; as the ISM manufacturing data declined more than expected and the ISM Prices paid number also came in below expectations. These numbers show a US economy which is slowing and justify calls for additional interest rate cuts by the FOMC. No, the currencies, like Chuck, are taking a much needed breather. As Chuck explained yesterday, the Euro ‘gapped up’ over the weekend and this pullback is simply the markets way of filling in the gaps the currencies missed on the way up.
  • Housing Data will be extra important with the 50 BPS rate cute:
    • Let’s not blow off the housing data… After a 50 BPS rate cut last week, and the dollar’s fall VS the euro, I think the housing data will be very important.
  • The Chinese Yuan and what it could mean for the Dollar’s future:
    • And of course, if the Chinese do finally allow a much faster increase in the value of their currency, their need for holding US dollar reserves will likely shrink (i.e. much of the reserve build comes from the pegging process). And dollar for dollar they can buy more oil with a stronger currency (and every other major raw material they input—including pigs). At minimum, if this plays out, it could be yet another sentiment hit to the dollar.
News events to watch for tomorrow :
  • 10pm ET– JPY Interest Rate Statement

For a list of all of tomorrow’s news events, check out our Forex Calendar