Phase One Complete
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A journal of commentary, signals and continuing education in foreign currency markets. All times are GMT.
Phase One Complete
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Worse than expected EU data during the London session has put a temporary halt on the EUR/USD rally. After booking a profit on the recent retracement we are now faced with a rangebound market broadly defined from 1.4650 to solid support at 1.4550. US consumer confidence numbers come out this morning and should have little impact on that range. Indicators are mildly bullish but we will tread lightly with scalping opportunities and tight stops until the next breakout.
Continued weakness in the US Dollar has driven the EUR/USD currency pair to 1.4751 during the Asian session. In his remarks to Congress, Fed chairman Bernanke said the US economy is expected to "slow noticeably." Although he characterized the economy as "resilient" overall concerns about inflation, higher energy costs and the struggling housing market increased speculation for another interest rate cut in December. While our indicators remain positive, we look for an unsettled day to close the week. US import and export prices will be released at 13:30 GMT along with balance of trade numbers.
While there is some disagreement as to which way the numbers will fall, one thing certain is that there will be more volatility coming back into the market following the release of the US non farm payroll numbers. Generally, job growth is expected to wane slightly for the period. But mixed signals are coming from an increase in manufacturing numbers, the highest since April, and a reported decrease in layoffs. While the consensus is for a modest increase of 88,000 in payroll, some estimates range as high as 130,000. Given the increasing crude oil prices and declining interest rates in the US, it will take a positive surprise to prop up the US dollar. Anything less should continue the bullish outlook for the Euro. We will continue to play the long side of the EUR/USD currency pair.
All eyes will be on the US FOMC today as they release their decision on interest rates today. Many are expecting a quarter point cut.The US economy has been hammered by a credit crunch, turmoil in the housing market and rising crude oil prices. The economic slowdown seems ripe for a rate cut. Add to that the increase in the Eurozone inflation rate and you have the makings for a volatile day in the EUR/USD currency market. We still expect the EUR/USD spot to gain strength and a test of 1.4535 should be next.
After making new highs against the US dollar overnight, the Euro appears to be consolidating in preparation for an eventful week. The EUR/USD currency pair continues to show strength ahead of Wednesday’s anticipated rate cut my the Fed. Wednesday also brings US GDP numbers, and Friday spotlights the US non farm payroll numbers. with indicators pointing north, we will look to use dips as buying opportunities. Minor support is at 1.4350. Given the slowing US economy and rising crude oil prices, we expect to be long north of the figure.
The market has been a bit wild this week making it difficult to trade. That may continue today. The overnight surge in the EUR/USD currency pair brings it ever closer to a major resistance at 1.4340. A break of that level will have the bulls running for 1.5000. But given an excuse, the market may continue its consolidation. An anticipated rebound in US durable goods order could be that excuse. The US releases the durable goods numbers and the new jobless claims at 12:30 GMT.
As relative calm returns to the US equity markets we will once again try to find another trend in the EUR/USD currency pair. Credit worries hammered the equity markets last week. After hitting new highs against the US dollar, then retracing, the Euro is now consolidating at short term resistance of 1.4210. Although our indicators are neutral, we will watch for further declines from this level if resistance holds.
The EUR/USD currency pair stalled short of our target yesterday as it rallied to 1.4240. We expect further consolidation this morning ahead of the US PPI and retail sales data to be released at 12:30 GMT. The consensus is looking for a rebound in retail sales which could bolster the US dollar even further.Our indicators are currently neutral with a slight negative bias. We’ll wait for the data release to look for trading opportunities. And the US retail sales data are one of the best times to use the strategy found in the Institutional FOREX System.