Daily Trading Forecast

Watch that Troublemaker Oil

Mon, Jul 14 2008, 11:00 GMT
by Swiss e Trade Strategy Team

Swiss e Trade AG


The Greenback`s intraday feeble recovery moves came to a sudden halt just before the weekend close when a sharply rising oil price made its waves again through the financial markets. In a U-turn, the USD attempted to test it`s old lows again, only to recover a little in the week`s trading start in late asian and early european trading. The logic behind oil price correlation and the USD is contested. True, higher oil prices have a negative effect on the US trade balance, but since when is the Forex market following the trade balance in intraday trading? However, in the absence of any further grips as to the development of interest rates on both sides of the Atlantic, that`s what the market is observing for the time being.

Since the sharp rise in the EUR and GBP pairs is already correceted somewhat, we expect the majors to remain in the bands as defined below. Today there are no scheduled data releases as market movers, but we expect more US influencing news today and tomorrow regarding the discussed national rescue of the big mortgage lenders.


EUR/USD

The pair is currently trading at 1.5860 after trading lower in the asian market from a high of 1.5947. The technical picture suggests a higher EUR/USD and points to a test of the historic high at 1.6018. Only a decisive and sustained move above the 1.6018 level will show the way for a new upward trend for this pair. If the EUR cannot further its gains, a disappointment for the USD bears and consequently a large sell off is possible.

GBP/USD

Currently trading at 1.9846, the pair`s failure to break the 2.0000 level has forced some traders to close their long positions, bringing it down to the current level. Like other majors, cable is reacting more to oil and equity markets than to economic fundamentals. We see support at the upward trending line at 1.9800 and resistance at Friday`s high at 1.9960.

USD/CHF

The pair has reversed its head first plunge to the 1.0000 level on Friday and turned higher to level 1.0230. The US bail out of mortgage agencies last Friday has supported the USD and this is the only reason for the Dollar`s recovery. We see todays trading range between 1.0140 and 1.0280.

USD/JPY

The pair is currently trading at 106.68. For traders we see support at 105.70 and resistance at 107.40. As with the other majors, trading will be mainly influenced by oil prices and the equity markets.



Risk warning: Swiss e Trade AG shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Swiss e Trade that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Published on  Mon, Jul 14 2008, 11:08 GMT

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Swiss e Trade AG shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Swiss e Trade that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

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