The Euro took a breather last Friday as well as today, and has been chillin just above 4800 around the 4815 mark. 4hr stochastics are trending down (although they have converged) and daily stochastics appears to be hooking down in overbought territory. This is a good indication that we may see the pair drop down soon. Add to the fact that there appears to be a bearish hidden divergence forming on the daily chart, and we have pretty good reason to be bearish. However, timing is everything, and I need a little more convincing before going short on the pair. I’d like to see the pair break below 4800 with some good momentum before taking a short trade so be on the lookout for any good entries. Until then I’ll be waiting…..like a lion….waiting to attack!
The Cable stayed pretty still today as it moved within the 9600-9700 range and ended up right around its open at around 9673. Both 4hr and daily stochastics are trending up which makes me pretty bullish on the pair, but the 9700 mark seems to be a good resistance point as the price has touched that area 3 times since February 13th and fallen each time. However, if the Cable can break through 9700, I could see it going all the way up to its 50 SMA on the daily chart at around 9770. Once again I’ll have to watch the charts and look for some good momentum.
Well the Swissy fell nicely on Friday like I said it would on Thursday and if you took the trade recommendation you should’ve easily nabbed at least 30 pips. Since then the pair has retraced back up to 1.0900 but has once again fallen down to around 1.0875. Daily stochastics are still trending down and 4hr stochastics have just crossed down. This usually makes me very bearish but although daily stochastics are trending down, it is heading into oversold territory which makes me cautious. I still think we could see the pair drop to 1.0800 if the pair can break below 1.0850 but I’m not 100% confident about that. Big Pippin only likes getting his money in when he knows he’s got a good chance of getting a good reward, and this ain’t one of those times baby!
The USD/JPY fell nicely on Friday and again, if you took my trade recommendation on Thursday, this should’ve been an easy win for you. Since that drop, the pair has retraced back up to 108.00. I’m still feeling bearish on the pair, but I think we might have to wait a little bit before seeing it go back south. Daily stochastics are trending down which is a good bearish sign, but I’m still waiting to see 4hr stochastics cross down. Currently it is in overbought territory (a good bearish sign) but it is still trending up. Another reason I’m bearish on the pair is that a good bearish hidden divergence seems to be forming on the 4hr chart. I will wait a little longer until I see the pair start to turn south before looking to go short.
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:
Philly Fed Index Shows Big Slump
- A key survey of manufacturing activity in the Philadelphia area found that conditions worsened this month and that the outlook for the sector is deteriorating.
- The Federal Reserve Bank of Philadelphia’s Business Outlook Survey index fell to -24.0 from -20.9 in January, when the index reached it’s lowest point in six years.
- Source: CNN Money
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 :
- 4:00am EDT- German IFO Business Index
- 4:30am EDT- GBP Business Investment
- 6:00am EDT- GBP CBI Distributive Trades
- 8:30am EDT- US PPI
- 10:00am EDT- US Consumer Confidence
For a list of all of tomorrow’s news events, check out our Forex Calendar