Watch out: Dollar in a very erratic trading session | The Euro ended the week with one of its best weeks since the end of 2008 | The Sterling gained
USDThe dollar gained against the Euro and a host of other currencies on Friday in a very erratic trading session. As the vibe in the stock markets turned negative, investors returned the greenback as a safe haven. The equity markets had been sharply positive all week long, with US markets gaining roughly 9%, Forex investors had taken the opportunity to test their risk appetite, however Friday seemed to indicate a migration back to the US Dollar.
The Dollar did erase early losses brought on by gains in stocks after decent economic data and hints that the US banks might not be as bad off as everyone thinks. Online Forex nalysts believe that the recent rally here for the USD against the Euro is all about the stock market. Investors are trying to gage whether or not the downslide in the economy is nearing a bottom – at this point, any good news can spur a rally. But the rallies are short lived because the sentiment is still quite negative.
At Friday’s close, the Dollar was up .15% to the Euro to 1.2926, up .3% to the Japanese Yen at 97.98, and unchanged versus the Swiss Franc at 1.185. The Dollar did fall to the Aussie and Kiwi, closing down ½% to the AUD to .6579 and down nearly 1% to the NZD at .5248.
EURThe Euro ended the week with one of its best weeks since the end of 2008. Much of the gains the Euro made this week were based on investors testing their risk appetite, as stated above, however news from European Central Bank executives also played a part in the Euro’s rebound. Last week, several ECB board members declared that the crisis was being managed more aggressively and that a light at the end of the tunnel is in sight.
The Euro closed up ½% to the Yen to 126.68, up .16% to the Swiss Franc to 1.5321, down .4% to the Australian Dollar at 1.9641 and down .35% to the Canadian Dollar to 1.6441.
GBPThe Sterling gained widely on Friday as investors appeared to be giving the battered UK currency a break on Friday. Much hype of the UK’s bank bailout plan and overall negative sentiment about the state of the British economy has kept the Pound down in recent weeks. As investors retreated from more risky positions on Friday they appeared to find value in the Sterling.
The Pound closed up ½% to the dollar closing at 1.4 flat and up .3% to the Euro at .9231, up ¾% to the Yen at 137.18 and up ½% to the Swiss Franc to 1.6591. The Pound did fall slightly to the Canadian Dollar to 1.7803 and to the Australian Dollar to 2.1271.
ChartAnalysis: USDCAD
The recent inability of the USD/CAD to stay firm above the 1.30 level coupled with significant tension in the fundamentals has put pressure on the currency pair. The rising trend line looks like the next key support level below the 1.2675 line of support. Another way to play for a stronger CAD is with a CADCHF or EURCAD trade. USDCAD will need to see 1.2950 again to give bulls renewed hope here....
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Forex Headlines and Forecast with Chart Analysis USD/CAD
Daily FX Chart: USD/CADThe Canadian Dollar has weakened lately against US Dollar, but considering the numerous factors against the CAD, it would seem that the Forex brokers and traders should be trading it higher. We note two factors that suggest USD/CAD may be ready to pivot higher here, even though it is in the middle of the recent medium term range between 1.1800 and 1.3000. First, the 21-day moving average fell last week and the investing and trading community has held this as support. Second, USD/CAD crossed above the 55-day moving average on Friday, only to close below that level. But today we see the pair charging back above that level, so it appears that we may be preparing for another go at the 1.3000 level. It all depend on what the Forex traders do with it today.
| Daily FX-Options | Comment |
| EUR/CHF | Back end volumes moved about 0.5. Volume lower on Monday, with the big broker trading firms selling 6 month 1.50’s in large amounts at a 9.1 volume. Front end volumes came lower as well suggesting that the current EURCHF range will continue. |
| EUR/USD | Forex traders pushed high volumes most of the day, with the 1 month down from 20/21 to 19.5/20.35. This could indicate that the Forex brokers do not believe the pair will collapse any time soon, Today expect the contract to trade in the range or experience a slight increase. |
| USD/JPY | Volumes are stable, a little interest for front end 90-91 strikes, and however they are mainly broker trading on the sell side. Expect that the current trading range will continue. |
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My Forex Analysis
I am certain you all noticed the vast opportunities in the FX markets so far. Take USD/JPY for example.
As you can see a double top (if you don't know what a double top is please drop a comment here) has formed when the graph tackled a solid resistance. I followed it, opened a short position and left it open for a couple of hours (approx):
I think those who paid attention to the moves noticed an attractive market, enriched with constant opportunities. The market will be extremely interesting tonight (CET) and throughout tomorrow's session due to the heavy releases.
Let's analyze them together and see why is tonight session (CET) and tomorrow are so attractive.
Let us first look at GBP
Nationwide HPI m/m:
The Graphs are available for all from The Nationwide official web site.
To summarize, the price in November fell to -0.4%, the pressure on the housing market may intensify due to poor economic conditions but big rate cuts may cushion the impact. So, we can see the high rate cut in November was supposed to cushion the impact. British mortgage approvals for house purchases fell to their lowest level in November since records began. Mortgage approvals are an important indicator for the housing market as it reflects housing demand. The Mortgage approvals fell to a shocking 27,000 in November as we discovered last Friday, which forced GBP down against a basket of currencies.
Therefore, the Nationwide HPI for December is very important. We are going to see whether the previous rate cut did the trick despite the grim expectations, which are not positive at all and have the strength to crush GBP.
Time of release: 07:00am GMT
Now lets see what is happening so far with The GBP?
One can easily note GBP is on the move, riding with the bulls. This trend may be reversed via the aid of the Nationwide HPI and Services PMI or they will not become an obstacle and ride with the GBP on the bullish trend, depending on the actual figures, worse or better then expected.
The new interest rate that will be released this Thursday may unleash a new reality to The GBP, which will definitely create a window of opportunities for us, the traders.
Now have a look at USD
ISM Non-Manufacturing PMI & Pending Home Sales m/m
If you followed the market today you would have noticed the sudden burst of USD, gaining against a basket of pairs until tackling solid resistance in some pairs, which forced the graph down although I believe those resistance levels may be to the test again.
Both financial indicators are expected to be negative; the new home sales are not expected to blossom and neither does the non-manufacturing PMI. These figures will be released simultaneously and are likely to impact all the major pairs, I will eye out JPY pairs as well such as GBP/JPY and EUR/JPY at time of release.
The Forex Broker I Recommend: http://www.finexo.com/
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