Woowee! The Euro ended up taking a nice spill today and if you took my sell recommendation yesterday you should be swimming in pips by now! With such a strong move it’s hard to say whether or not we’ll see a continuation tomorrow. Daily and 4hr stochastics are still trending down but 4hr stochastics have reached oversold territory. This could mean that the pair could slow down from its current downward rush. If you’re itchin to go short on this, I would hold off for the moment because we could see a slight retracement tomorrow. If you are in the money, you might want to consider taking all or partial profit and/or adjust your stops.
Well my timing is kind of off on the whole being bullish on the Cable. However, I still think this pair is bound to rally. We still have that bullish divergence on the daily chart and both 4hr and daily stochastics are still trending up. Look for the Cable to rise up to its 100 SMA on the 4hr chart at around 1.9740.
The Dollar ended up rallying like a monster against the Swissy like I said it would yesterday and now the pair has seemed to settle around the 1.1000 mark for the day. Although I think this pair still has great bullish momentum in the medium term, I would hold off from making any long trades at the moment. 4hr stochastics are heading into overbought territory and the pair also faces resistance at both its 50 EMA on the 4hr chart at around 1.1030 and the 1.1000 mark.
Well my sentiments were right and the Dollar did end up rallying against the Yen during the US session. We still have those 2 bullish divergence I mentioned in yesterday’s post. Not to mention the fact that 4hr stochastics are trending up as well as daily stochastics. I see many bullish signs for this pair right now and I wouldn’t be surprised to see it continue rallying up to 108.00.
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:
Euro Interest Rates about to Rise?
- And don’t look now, but Eurozone inflation is rising… Of course I told you it would, given oil prices, and that the European Central Bank (ECB) would have to drag its feet to cut interest rates… (I also tried to say that on CNBC, right?) Anyway, inflation for the 13-nations that make up the euro, rose 3.1% in November… Whoa Nellie! That’s way too high, given the ECB’s ceiling of 2%!
- The one thing to think about here is that should the ECB decide to raise rates, and the Fed decides to keep cutting rates (recall the discussion about the possibility of 50 BPS this month from the Fed) The euro would be enjoying a positive rate differential… You think the euro was popular as an offset currency to the dollar before? Wait till that happens (if it does of course!)
- Source: Chuck Butler: The Daily Pfennig, 01/08/08
Fed Looks to End Credit Crunch
- The Fed and other global central banks announce a new auction designed to let beleaguered financial institutions access more cash.
- In essence, the Fed is giving beleaguered banks the opportunity to access funds it might need for year’s end without having to borrow money directly from the Fed at the discount rate of 4.75 percent.
- The Fed added that it was coordinating with the Bank of Canada, European Central Bank, Bank of England and Swiss National Bank on the auction process in order to "address elevated pressures in short-term funding markets."
- Source: CNN Money
News events to watch for tomorrow :
- 8:30am EDT- US Housing Starts and Building Permits, Unemployment claims
- 10:00am EDT– Ben Bernanke Speaks
For a list of all of tomorrow’s news events, check out our Forex Calendar