Well the Euro ended up dropping to its 50 EMA on the 4hr chart like I said yesterday, and now the pair is trading just above the 4650 mark. Both 4hr and daily stochastics are trending down which keeps me bearish in both the short and medium term. I would look for the pair to continue dropping tomorrow down to around 4600.
I’m glad I held off on doing anything on the Sterling. I had a slightly bullish bias, but we can see that today was anything but bullish as the Sterling fell over 150 pips!. 4hr stochastics are still trending down but are in oversold territory while daily stochastics are already in oversold territory and have formed a bullish divergence. I do think we’ll see the pair retrace back up soon. The questions is where? With this momentum, it looks like the Sterling could hit 9500 before we see a bounce back up.
Like I thought, the Swissy fell to 1100 and then bounced back to around 1150. This pair looks like it is in range mode. At the moment both 4hr and daily stochastics are trending up which leads me to believe that there is a good chance the pair will continue on up to 1200. Coincidentally, the 50 EMA is also at the 1200 mark which makes this a good level to take profit.
The Dollar stayed pretty flat today against the Yen and I am still holding off on trading this pair. In the medium term however, it looks like the Dollar may have a spark under it and I think we’ll see the Dollar eventually rally against the Yen to around 111.00.
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 :
- 4:30am EDT- GBP Trade Balance
- 7:00am EDT- GBP Interest Rate Statement
- 8:30am EDT- US Unemployment Claims
For a list of all of tomorrow’s news events, check out our Forex Calendar