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Currency Pair Overview:
Pound Drops After GDP Report, Cad Strengthens
The currency market followed a pattern similar to the one seen in Monday trade. Despite the positive cash and futures equity markets, the major pairs have failed to move outside of their previous session ranges. The exception was the pound, after the U.K. GDP read disappointed investors once again. The Canadian dollar proved to be the strongest currency against the Usd, being the only one of the majors that actually strengthened against the dollar. Looking ahead, the overall trading volume is expected to remain subdued, as the market prepares for the Holiday break.
The euro (Eur/Usd 1.4305) continues to trade in the 1.4300 area for the third consecutive day, as the market has once again failed to find the momentum necessary to push lower and hold. On the 4-hour chart, the euro is trading in a steep downward channel, which will probably dictate the euro’s trading direction over the next few days.
The pound (Gbp/Usd 1.6005) is trading in a very sensitive area right now, in the 1.6000 zone, just above the 200-day moving average and slightly above a support trend-line that has been holding since Nov 12 09. A break lower will probably trigger a large number of sell orders into the market, driving the pound towards the 1.5800 area. On the fundamental side, things also appear downbeat for the pound. Overnight, a report showed that the U.K. GDP expanded less than expected in Q3, which justifies the current downtrend.
The aussie (Aud/Usd 0.8800) lacked a solid direction overnight, and just followed the market’s overall weak momentum. In Monday trade, the aussie broke below the 100-day moving average (0.8860), which has been an important swing area in the past. On the medium term, the aussie’s outlook lies to the downside, but some further tests at the 100-day moving average cannot be excluded.
The cad (Usd/Cad 1.0570) was the star of the overnight session, declining 70 pips at a time when the major currencies were losing ground against the U.S. dollar. With this downtrend, the cad is approaching the 1.0550 area, the same place where the market based over last week of trading, including Monday trade. At this point, it is questionable whether the cad can develop a downtrend on its own, without the help of the other major pairs.
The swissy (Usd/Chf 1.0470) had very small trading volumes overnight, as has happened a lot recently. Against the euro, the swissy is heading higher for a second consecutive day, after rumors emerged on Monday that the SNB intervened in the currency market.
The yen (Usd/Jpy 91.30) is heading higher for the sixth consecutive day, a time in which the pair advanced as much as 270 pips. The overnight trading volumes has been relatively subdued, but it is expected that the upcoming U.S. session will add some further momentum. To the downside, the yen might find important support in the 91.00 area, near the 100-day moving average.
TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.
