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Daily Trading Forecast

USD: Continual Inverse Correlation with Stock Market

Mon, Nov 30 2009, 11:22 GMT
by Swiss e Trade Strategy Team

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Once again, the brittle nature of the investment world was revealed, when Dubai raised doubts about its ability to service its debt: Stock markets were battered immediately, and the dollar rose. Such a tight correlation with equities (even in the intraday market) was not always the case, on the contrary, back in the old days it used to be the exception. But the longer Wall Street continues to have that influence, it would be prudent to ask where it is heading. And there a central question comes up, namely the current monetary policy of central banks. Keeping interest rates near zero and practicing quantitative easing means these institutions expect the world's economy motor continue stuttering, a state which does not favor stocks because of dropping earnings. The other side of the coin is not better: if they are wrong, and the economy resurrects with the cost of money low like now, a bigger inflation phase is the consequence - bond yields would rise, with considerable damage to stocks. That, in turn, would support the Greenback. We are not there yet. Equity markets may well continue the rise over year end, the belief in a reviving economy is too big a factor right now. Accordingly, we expect the USD to lose even more territory.

In today's trading, we concentrate on favorable entry points to short the dollar, as described in detail below. There are no regularly market-influencing data scheduled for release today, except the U.S. Chicago Purchasing Manager Index at 15:45 CET.

by George Clement

Intraday Market Outlook for Day Traders

EUR / USD
The pair's recovery continues in early European trading, priced now at 1.5040 and seemingly in an attack move to the 1.5080 intraday resistance zone. We see that zone being broken in today's trading, but expect first some consolidation / correction move. Buy below 1.5010.

GBP / USD
The pound is consolidating its higher levels in this European morning and is currently trading at 1.6510. Further upmoves can be expected, after touching first on the downside the 1.6500 handle level. We see the potential up to 1.6620.

USD / CHF
The dollar is on a slight correction upwards against the Swiss franc in early European trading, priced right now at 1.0015. We expect the low volatility to make room for another dive of the dollar in today's trading, but would not sell it below 1.0060.

USD / JPY
Against the yen, the USD took a sideways trend lately, trading right now at 86.40 in this European morning. We see the range trading market continuing today, between levels around 86.70 on the upside and 86.10 on the downside.

Published on  Mon, Nov 30 2009, 11:23 GMT