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Daily Trading Forecast

Meagre Recovery in USD Likely to Continue

Wed, Jul 9 2008, 10:54 GMT
by Swiss e Trade Strategy Team

Swiss e Trade AG

Falling oil prices despite sabre rattling from Iran helped the Greenback a little further in its
recovery move since last Friday in early European trading today. Although this move is not yet convincing enough to point out a real new direction, it is likely to continue in today’s trading, based on still oversold levels longer term.

We therefore still prefer to buy the USD on weakness, as outlined in the major pairs below. The absence of market-moving news in the schedule puts a lid on volatility, so we expect a rather quiet trading day.

Intraday Market Outlook for Day Traders

EUR / USD
The EUR / USD is currently trading at 1.5692 and, over the last three days’ trading, we’ve seen lower highs and higher lows on the charts, indicating that we are entering a narrow trading range. When prices break out of this narrow range, we expect a continuation of the trend and the most likely move will be to the downside. We caution traders, though, about the fact that the U.S. dollar exchange rates are dictated by commodity and especially oil prices and we’d rather see a breakout first before entering a position.

GBP / USD
The GBP / USD, currently trading at 1.9710, appears ready to test support at 1.9650 in either today’s or tomorrow’s trading. We feel a break of support is possible, which could take prices down as far as 1.9400. Before a successful break of support can occur, an increase in volatility and trading volume will be necessary.

USD / CHF
The U.S. dollar has made some impressive gains against the Swiss franc and is currently trading at 1.0324. Prices broke above resistance in early European trading today, at 1.0345, but then settled back to the current level. Further gains in this currency pair are possible to next resistance at 1.0480 but, like the GBP / USD, an increase in volume will be necessary for this to happen.

USD / JPY
The USD / JPY rates have climbed since the beginning of July but seems to have hit resistance between 107.50 and 107.70. Currently the USD / JPY is trading at 107.51. Japan’s economic woes and very low interest rates have been the main factors behind this move. We feel further gains are possible to next resistance at 108.40 in the coming days. First, though, a clear break of resistance at 107.70 is needed and perhaps lower oil prices.

Published on  Wed, Jul 9 2008, 11:04 GMT