Friday, November 10, 2006

Happy Friday to everyone. It's been a pretty dull week in the currency market due to the lack of economic reports and most of the movement has been based on various statements from head honchos of different countries. It's true we've seen plenty of spikes but a clear directional trend is still up in the air. I'm going to keep this update short because it's Friday and I want to start my weekend already!

The lingering story is still the statements made by Zhuo regarding China's plans to diversify their reserves. This diversification plan means that other currencies and even commodoties may rally. As a result, the dollar once again lost ground to the majors today. Enough said!


Coming Up:

Next week we have interest statement announcements from both the ECB and BOJ. Both of those head honchos have been suggesting that they may be raising rates. This will add further selling pressure to the dollar against the Euro and Yen so it should be an exciting week.


Chart Analysis:

EUR/USD












The Euro rallied all the way up to 2900 before closing around 2850. On Monday we may see the pair retrace down to 2800 as that's where the 50 SMA seems to be headed on the 4hr. chart, making it a decent short term support. Stochastics on the 4hr. chart is now heading down after being in overbought territory, so a short term drop is possible.


GBP/USD












Remember how 9100 is the 3 month resistance for the Cable? Today the pair spiked up to almost 9200 before coming right back down to around 9100. So does this mean that today's high is the new resistance? I doubt it. What we saw today seems just like a knee jerk reaction and with the price closing back down at 9106, this still seems to be the level to break. Now if we see another move to higher and a close around 9150 then I would consider 9100 to be broken. We'll have to wait and see. According to the stochastics on both the 4hr. and daily chart, the pair shows signs for a drop on Monday and the pair could head towards its 50 SMA on the 4hr chart which is around 9050.


USD/CHF












I'm still getting confusing signs on the Swissy. The 4hr stochastics shows signs for a rally while the daily stochastics seems to be showing signs for a drop. After a spike to 2350, the price closed slightly above 2400. I'm still not sure on this but going by correlation with the EUR/USD (remember, I expect a short term drop), I'd expect this pair to rally up to 2450.


USD/JPY












The Yen looks poised for a short term rally to 118.00. Stochastics on both the 4hr and daily chart are headed up but we do face some resistance at 117.80 because that is where the 50 SMA is on both charts.


Conclusion:

I'm glad this week is over. It's too hard to trade when the market moves based on nothing but statements. I want to see hard facts and I need economic reports to do that. I think next week will be a lot more exciting with the ECB and BOJ interest rate statements coming out so be prepared. Have a restful weekend because next week should be one heck of a trading week!