So far this year, the dollar has behaved exactly like the equity markets, in particular U.S. share markets, but historically the dollar has also showed weakness during the last quarter of the year. As usual, there are many reasons for this, but the chief reason is that foreign companies in the U.S. repatriate their earnings back to the respective countries they call home. With the financial crisis affecting company earnings, perhaps this year will be different.
Also watch the GBP, normally considered the weakest of the majors; it has displayed surprising resilience recently. We think the reason is due to the renewed interest in 'Carry Trade' positioning where traders sell or borrow low interest bearing currencies and buy higher interest bearing currencies which are placed in short-term time deposits. For instance, the difference between GBP and yen one-month LIBOR rates is currently about 0.35%. This makes Sterling very susceptible to any changes in England's QE policy.
by George Clement
Intraday Market Outlook for Day Traders
EUR / USD
The EUR / USD downward correction from recent highs at 1.5050 began Wednesday in European trading and accelerated yesterday to a low of 1.4821. Overnight the Asian market pushed the pair up and in early European trading it reached its current price of 1.4890. We think that the low for today has been seen already at 1.4821 and the EUR / USD is ready for a recovery. Share prices still dominate FX trading so we are watching equity markets, as well, for any signs of stabilizing. No recommendation.
GBP / USD
Cable remained in a sideways market yesterday after falling 250 pips from 1.6796 to 1.6515 yesterday due to the BOE chief King's dovish speech on England's QE policy given on Wednesday. But since the beginning of Asian trading last night, the GBP / USD has rallied to its current level of 1.6688. Cable's upward trend indicates a possible test of resistance today at 1.6800. But with the currently falling European equity markets, we are content to simply watch this market today.
USD / CHF
After testing important resistance at 1.0190, the USD / CHF has traded lower to its current price of 1.0155. For today's trading, we see resistance at 1.0190 to 1.0200 and support at 1.0060. We feel any rally in share markets today may prompt a new test of this year's low at 1.0035 but we advise traders to wait until the U.S. markets open to get an idea of the trend in U.S. share markets. Any short position should be established above the 1.0100 level.
USD / JPY
This week, of all the major currency pairs, the USD / JPY has remained in the tightest trading range, between 89.30 and 90.60. The USD / JPY fell in early European trading from its current daily high at 90.40 to its present level of 89.77. We believe this pair will continue to trade within this tight range and have no trading recommendation.
Also watch the GBP, normally considered the weakest of the majors; it has displayed surprising resilience recently. We think the reason is due to the renewed interest in 'Carry Trade' positioning where traders sell or borrow low interest bearing currencies and buy higher interest bearing currencies which are placed in short-term time deposits. For instance, the difference between GBP and yen one-month LIBOR rates is currently about 0.35%. This makes Sterling very susceptible to any changes in England's QE policy.
by George Clement
Intraday Market Outlook for Day Traders
EUR / USD
The EUR / USD downward correction from recent highs at 1.5050 began Wednesday in European trading and accelerated yesterday to a low of 1.4821. Overnight the Asian market pushed the pair up and in early European trading it reached its current price of 1.4890. We think that the low for today has been seen already at 1.4821 and the EUR / USD is ready for a recovery. Share prices still dominate FX trading so we are watching equity markets, as well, for any signs of stabilizing. No recommendation.
GBP / USD
Cable remained in a sideways market yesterday after falling 250 pips from 1.6796 to 1.6515 yesterday due to the BOE chief King's dovish speech on England's QE policy given on Wednesday. But since the beginning of Asian trading last night, the GBP / USD has rallied to its current level of 1.6688. Cable's upward trend indicates a possible test of resistance today at 1.6800. But with the currently falling European equity markets, we are content to simply watch this market today.
USD / CHF
After testing important resistance at 1.0190, the USD / CHF has traded lower to its current price of 1.0155. For today's trading, we see resistance at 1.0190 to 1.0200 and support at 1.0060. We feel any rally in share markets today may prompt a new test of this year's low at 1.0035 but we advise traders to wait until the U.S. markets open to get an idea of the trend in U.S. share markets. Any short position should be established above the 1.0100 level.
USD / JPY
This week, of all the major currency pairs, the USD / JPY has remained in the tightest trading range, between 89.30 and 90.60. The USD / JPY fell in early European trading from its current daily high at 90.40 to its present level of 89.77. We believe this pair will continue to trade within this tight range and have no trading recommendation.
