Wednesday, November 15, 2006

Wednesday, November 15, 2006

The dollar made pretty decent moves verses the Swissy and Yen but ended up pretty much in place against the Euro. The biggest loser however was the Cable in which the dollar made a very nice rally against it. The GBP showed weak reports during their session and added to the fact that a higher than expected number came out for the US Empire Manufacturing Index, traders placed their bets that the dollar is still the stronger currency.

The FOMC minutes showed that the Fed is still worried about inflation and the slowing economy but the overall sentiment is that the Fed will still keep rates steady for the remainder of 2007.

After a few days of back and forth dollar movement, stochastics on the daily charts have been wishy washy. Now the stochastics seems to be resuming its trend for a dollar rally. I expect the trend to continue until the daily stochastics on the majors reach extreme levels again so unless we see devastating news for the dollar, watch for the Greenback rally to continue for a few more days.

Coming Up:

GBP Retail Sales
4:30 am ET; 9:30 GMT
Previous= -0.4%; Forecast= 0.2%
The forecast shows a possible increase in retail sales. With the weak GBP data out today, this number will be important for the Cable. If the retail sales happens to come out lower than the previous number of -0.4%, watch for a big drop in the Cable.

8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%
PPI came out lower than forecast which means that we should also be seeing a lower CPI number. If for some reason CPI comes out higher than expected, I think the dollar will rally. This number will have to be fairly big as traders will also probably want to wait for the TIC data and Industrial Production report due out later in the day.

9:00 am ET; 14:00 GMT
Previous= 116.8B; Forecast= 63.0B
Anything lower than 63.0B will cause the dollar to drop like a rock. TIC data is important because it basically funds our deficit so a lower than expected number will crush the dollar.

US Industrial Production
9:15 am ET; 14:15 GMT
Previous= -0.6%; Forecast= 0.2%

Chart Analysis:


Yesterday I said that we would see another bounce to 2850 and I hold firm to that claim. The Euro once again bounced off of 2800 and is currently at 2824. Stochastics on the 4hr chart is headed up with plenty of room for buying power so I expect the pair to reach 2850 and maybe even 2870. On the daily chart, stochastics is once again sloping down so we still have plenty of long term selling power. After the pair moves up to 2850-2870, we could see some of this selling power tomorrow.


Yesterday I said the Cable was showing an extended period of oversold in the 4hr stochastics and with another big drop today, that period has been extended even longer. To top it off, the pair has found support at the 200 SMA on the 4hr and the 50 SMA on the daily chart. I am seeing strong technical signs that this pair will rally tomorrow. Stochastics on the daily chart is also beginning to enter the oversold category which is also another sign that this pair will move up.

Trade Idea:

Buy at 1.8800; Stop Loss= 1.8720; Target= 1.8900


I said that the Swissy would reach 2500 if it could break 2450 and that's exactly what it did. Now the pair has bounced back down and is currently resting on its 50 SMA on the 4hr chart. I'm not clear on the direction for this pair tomorrow but if I play the correlation rule, I would expect this pair to go down since I believe that the Euro will rally tomorrow. My best guess is that the pair will move down near 2400.


Unlike the Swissy, the Yen shows a clearer sign that it will drop. The 4hr stochastics is reading overbought and I think the pair can go down to 117.50. However it faces some resistance along the way as the 50 and 100 SMA stand in between the current price and the 117.50 level.


The market is full of economic reports tomorrow so we should see a pretty exciting day once again. Since we have 3 major US reports, we will see the most movement if they all line up, whether they are all positive or negative.

No comments:

Subscribe to this blog