Daily Trading Forecast

The Calm before the Storm

Thu, Jul 3 2008, 10:40 GMT
by Swiss e Trade Strategy Team

Swiss e Trade AG


Traders are sidelined this morning waiting for today's ECB rate decision at 11:45 GMT followed by the U.S. non-farm payroll report at 12:30 GMT. There has been consistent talk in the market of a "buy on rumor, sell on fact" situation building that may halt the U.S. dollar's recent decline against the world's major currencies and even spark a dollar rally. Other factors supporting this scenario are the massive short-dollar positions in the market as well as the fact that tomorrow is the beginning of a long three-day weekend for the currency markets. If this situation does occur, we feel the U.S. dollar could continue its rally into next week as well.

Intraday Market Outlook for Day Traders

EUR / USD
The EUR / USD has maintained a very strong bid tone through Asian trading and is currently trading at 1.5885. The market is waiting for a planned increase of 0.25% from the ECB today and the U.S. non-farm payroll report. There is a chance that the EUR / USD may sell off after the ECB rate decision due to market talk we have heard about “buy on rumor, sell on fact.”

GBP / USD
Sterling has been defying gravity in trading this week but today may be its chance to fall under the influence of natural law again. Currently the GBP / USD is trading at 1.9854, just above support at 1.9845. On the GBP / USD hourly charts, a head and shoulder pattern has formed which, if the neckline is broken, could take prices down to next support at 1.9720 or even to 1.9600. An important factor will be the ECB rate decision and the U.S. payroll numbers which could change this scenario. We would advise traders to trade from the short side but to first wait for the ECB and U.S. figures coming later.

USD / CHF
The USD / CHF is hovering right above important support at 1.0130 and is currently trading at 1.0140. Of all the major currencies, the USD / CHF has traded in the most narrow range during this week’s trading. For this currency pair, we feel the U.S. non-farm payroll figures are the most important. We foresee a possible rally in the USD / CHF today if for no other reason than the closing of short positions before this week’s long weekend.

USD / JPY
The USD / JPY recovered some of the losses that it endured last night in Asian trading and is currently trading at 106.35. Like the USD / CHF, traders in the USD / JPY are awaiting eagerly the U.S. payroll numbers today for guidance. We feel any trend that forms after today’s figures will signal next week’s price movements.

Published on  Thu, Jul 3 2008, 10:42 GMT

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