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Market Opinion

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After a rollercoaster day, the Dow finished higher.

Thu, Dec 4 2008, 00:39 GMT
by James Whyte

ForexAmericas

Market View for Dec 4, 2008

After a rollercoaster day, the Dow finished higher by 173 points, shrugging off a dismal Beige Book outlook and a worse than expected ADP employment report, and instead focusing on soaring mortgage applications.  As mortgage rates move down, there is talk of the Treasury considering a plan to help home prices by helping mortgage rates move even lower.  Oil closed mostly flat for the day.  European and Asian stock markets were up marginally.  In Europe we look for the Halifax HPI in the U.K. today along with rate announcements from the BOE and ECB.

Our Focus for Today:

EUR/USD:  Euro has been ranging between 1.2600 and 1.2740 for the past two days.  For now we see 1.2725-30 as good resistance and we are looking to establish a short position around this level.  We do not expect the Euro to trade up to 1.2770. However, if it does we expect this level to hold. 

USD/JPY:  Dollar Yen held the 92.50-60 level to bounce once again against trend line resistance at 93.45.  We expect that 93.40-70 recent highs will hold for a retest of the 92.50-60 area, and would place a stop at 93.85. GBP/JPY tested 136.30 overnight, and has been bottoming in the mid 136’s most of the day.  These are levels not seen since the spring/summer of 1995, and 136.30-50 seems to be a good pivot point for that time period, in which we saw 129.35 as the absolute low.  If the 136.30 level breaks, we could see 134.90 first, then 132.90, and expect several bounces (fairly significant bounces) before we track lower.

GBP/USD:  The U.K. will announce Halifax HPI in today’s European session, and expectation for a rate cut range between 1 and 1.5 points.  The market may sell off ahead of each of these, as expectations are very low, so be prepared for a possible move higher after the numbers if the market is overly short ahead of  them.  1.4655 is the first support level (tested overnight).  Below that, Nov 13 low of 1.4555-60 is stronger support.  Top side, we could see the low 1.49’s, but expect that to hold for now (unless the U.K. posts any surprises).

Published on  Thu, Dec 4 2008, 05:54 GMT