Wednesday, November 29, 2006

Wednesday, November 29, 2006

The dollar made a little bit of a comeback but I'm not fully convinced that this is a true reversal.....YET! Sure the GDP came out higher than expected but New Home Sales dropped so the dollar is still not out of the mud. Today's dollar gain looks more like some profit taking by the sellers over the Thanksgiving holiday. We only saw a slight retracement in the majors and I'm not fully convinced the dollar is done dropping.

The Beige Book stated the obvious. There is moderate economic growth and housing sucks. Boring...we know this already. I think this is why the market didn't really react to this. The report did say that the labor market is getting tight in some regions so this could be another potential pitfall for the Dollar once the NFP rolls around. Just something to think about.

One thing I do want to note is that this retracement came in line with my technical analysis I had been doing the past couple of days. I saw bearish divergences on both the Euro and Cable and now those moves have taken place. It's still not clear where the dollar is going to go the rest of this week because the technicals still aren't giving any strong indications on the dollar's next direction. Once again we have a slew of economic reports for both the Euro, Pound, and Dollar so movement will be very dependent on these numbers. If we see good numbers for the Euro and Pound, and weak numbers for the Dollar, expect the dollar to lose big again. However, if the opposite is true, look for the dollar to add on to the ground it made up today.

Coming Up:

5:00 am ET; 10:00 GMT
Previous= 1.6%; Forecast= 1.9%

EUR Consumer Confidence
5:00 am ET; 10:00 GMT
Previous= -7; Forecast= -8

5:00 am ET; 10:00 GMT
Previous= 0.9%; Forecast= 0.5%

GBP Consumer Confidence
5:30 am ET; 10:30 GMT
Previous= -5; Forecast= -5

US Personal Spending
8:30 am ET; 13:30 GMT
Previous= 0.1%; Forecast= 0.1%

US Core PCE Index
8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%

US Chicago PMI
10:00 am ET; 15:00 GMT
Previous= 53.5; Forecast= 55

Chart Analysis:


The Euro finally found resistance at 3200 but with only a 50 pip retracement I'm not sure if this pair is done moving up. 4hr stochastics shows that there is still room for downward movement and we could see it reach 3100 or possibly even down to its 50 SMA. Tomorrow's move is going to be very data dependent so I'm not placing too much emphasis on the chart at this point. Technicals say the pair is going down but it's not giving me a resounding answer.


It's the same story with the Cable as the Euro. The pair found resistance at 9550 and retraced slightly to 9450. Yes I's 100 pips, but with the Cable, trust me...that's not that much of a move. 4hr stochastics is showing even more room for selling than the Euro's 4hr stochastics so I could see the pair dropping another 100 pips to 9350 and it could also possibly reach its 50 SMA.


The Swissy is "chillin out, maxin, relaxin, all cool and all..." at around 2100 right now. (*If you can guess what song that quote came from, you are super cool in my book) The 50 SMA is fast approaching the pair and could be the next resistance level although the 4hr stochastics is already hovering into overbought territory. Technically speaking, 2150 looks like an appropriate target for the Swissy in the near future.


The Yen is the lone ranger out of the 4 majors today. Unlike the other 3 pairs which show a little more room to continue its current direction, the Yen is already at a solid resistance level. The pair is right at its 50 SMA on the 4hr chart and stochastics is almost in the overbought territory. So I see 2 possible scenarios. The first is that the pair bounces down from where its at right now OR the pair follows the trend of the other 3 pairs and continues to move up to its 100 SMA before bouncing back down.


It will be another data dependent day tomorrow with the plethora of news reports due out. Today's market actions remind me of how I felt when I was 14 on my first date with a girl....unsure and reluctant! Tomorrow's news should give traders enough indication whether or not they should hold onto their dollars or sell them like hotcakes. Happy trading everyone!

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