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Daily Trading Forecast

Misinterpreting the Fed's Remarks

Mon, Nov 23 2009, 11:25 GMT
by Swiss e Trade Strategy Team

Swiss e Trade AG

When Alan Greenspan said back in the late nineties that the stock market was in "irrational exuberance," Wall Street went into panic mood and dropped in response. Afterwards, when the interpretation of his words was clear, exuberance picked up again. Now the new Fed chief, Mr. Bernanke, stated last week that the Fed "will ensure a strong dollar" - and in response the dollar collapsed. But what the head of a central bank says is always subject to interpretation, most of it short-lived. "Observe what they are doing, not what they're saying" was always the best advice when dealing with central bankers. Of what we have seen so far - from fundamental and technical analysis - we conclude that the dollar has much more downside potential before year-end.

For today's trading, we expect more volatility to set in; market-moving data scheduled for today will be Existing Home Sales at 16:00 CET. Several central bankers are speaking today, which could have an intraday short-term effect, as the Fed's Bullard has had already bringing the dollar lower. See our major pairs' list below for the trading details.

by George Clement

Intraday Market Outlook for Day Traders

EUR / USD
The euro rally that began in Asian trading after the Fed's Bullard said QE should continue to a 1.4989 high presently. We see the movement as another unsuccessful attack on the 1.5020 resistance level, and reckon with a downside potential to the 1.4920 level first, and then with an upswing again, with a chance of exceeding the 1.5000 mark.

GBP / USD
The pound is now running into resistance zones against the dollar, after its upmove in early European trading to 1.6620 currently. We expect an intraday consolidation to 1.6560, leading later to higher prices around 1.6670 resistance.

USD / CHF
Against the Swiss franc, the dollar is on the move to test the old support zone around 1.0050 for the umpteenth time, currently trading at 1.0085. Again, we do not expect that support zone to be broken today, and see a sideways movement between that level on the downside and 1.0120 on the upside.

USD / JPY
It looks like a currency agreement between the dollar and the yen. Since the beginning of last week, the dollar's movements against the yen were in very low volatility and limited in range. A trading band between 89.50 and 88.60 contained the entire week's trading. We do not expect much change in this market character for today.

Published on  Mon, Nov 23 2009, 11:26 GMT