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Daily Trading Forecast

The Euro Becomes a Teen

Wed, Jan 7 2009, 11:11 GMT
by Swiss e Trade Strategy Team

Swiss e Trade AG

Parents know what they are talking about when their kids are entering their teens, with all the aspects of that difficult age when puberty hits. The euro is entering this phase now, one might say, soon reaching puberty. Being pampered so far by caring European parents, who most probably have no more say in the face of ongoing financial and economic woes, the euro must soon prove that it really is the strong offspring of a sound environment. That will be the acid test Eurosceptis long talked about, citing worries about a united currency not formed in a united state. True, so far the euro has developed impressive muscles, being valued still over 40% against the dollar since its birth, despite the downmark since the summer of 2008. But what are the merits of a strong currency - i.e. too strong in purchasing power parity - in economic dark times? Long-term low inflation, of course, but perhaps deflation as well. The Swiss National Bank refused to devaluate the CHF in 1930s (then merely against European trading partners), prolonging and deepening the country’s economic depression.

The USD is currently in a downward correction move in the major pairs, as a reaction to the sudden strength it developed at the beginning of the year. We see this downward correction soon bumping into intraday support zones, which would serve as a springboard for upmoves, however limited so far in todays trading, eventually forming a sideways trading range. See the details below.

by George Clement

Intraday Market Outlook for Day Traders

EUR / USD
The upmove the pair began yesterday continued in early European trading. With current prices at 1.3580, the market will soon meet stiff resistance between 1.3600 and 1.3650. We see that resistance holding in today’s trading, allowing down- and upswings within a trading range between that level on the upside and 1.3490 on the downside.

GBP / USD
Cable is consolidating its higher levels reached yesterday in European morning trading, currently at 1.4840 and in a slight selling tone. We see first some upmoves to the 1.4900 level and then the selling stance renewing, leading to prices around 1.4760, a support level which we expect to hold in today’s trading.

USD / CHF
The dollar lost further ground in early European trading and is currently priced at 1.1030 against the Swiss franc. We see today’s support at 1.1000 holding in today’s trading and expect an upmove from there to levels around 1.1150.

USD / JPY
Trading near support levels now around the 93.00 level, the dollar is presently valued at 93.20 against the yen. We expect the 93.00 support to hold more or less in today’s trading and see renewed strength developing in today’s trading, but not exceeding the 94.20 level.

Published on  Wed, Jan 7 2009, 11:15 GMT