Hello Traders,
Hope you had a wonderful New Year with family and friends. We’d like to give you some intermediate term perspectives as we go into the first month of the year.
Non-Farm Payrolls is coming up this Friday and will likely set the tone of the USD for the remainder of the month. Most of the old time bank and fund analyst are forecasting that the US economy will continue to recover, albeit it slowly, but at a better pace than the Eurozone, the UK and Japan in particular. So, we’ll continue to watch for continued weakness on their currencies.
Canada and Australia, on the other hand, being viewed as primarily commodity exporting countries, continue to make gains against the Buck. Oil prices are rising as a result of the colder winter’s demand for petroleum products in the Northern Hemisphere and Australia’s raw materials continue to find demand from China. This is keeping pressure on the AU and U/CAD and will likely continue even though the US’s econ continues to recover.
We still see the Euro weakening to 1.40 or lower as the year progresses forward as structural financial imbalances continue to unfold. If you look on a Weekly chart of the EU, you’ll notice how much time this pair likes to spend hovering between 1.38-1.35. And while the ECB mandate of price stability works well under normal market expansionary conditions, the same policy is crippling some of its weaker member nations in this current global recovery. Therefore, most economists think that Europe will lag the US in GDP growth and interest rate hikes going forward. This perception will continue to bode well for the USD unless, or until there’s some other fundamental paradigm shift. The Euro Bulls would love to push price back up to 1.4500. And if this occurs, we’ll be looking to short between 1.4465-1.4490. These would be small position type entries to hold longer term as we saw price start making a final descent below 1.4400 where we’d look to add to our shorts. Currently however, the pair seems to have price contained above 1.4460 with a triple top. A break above here would be perceived as the last “head fake” before a trend resumption much deeper south.
Meanwhile, the Pound continues to “flip around” in a big range. Just when you think it might break lower, it gathers some momentum and goes back up to its top on the 4 hour chart. The UK is an oil producing nation. And in spite of its dismal financial status, oil seemed to give it a boost. And yet the Pound Bears smash it back 100+ pips settle around 1.6100. We’re really keeping our eye on the Daily chart for a break out below 1.5900. And, let’s also keep an eye out for an hourly close below 1.6074. This needs to be a bear candle close. Then, we’d be looking for some more down side.
That’s all for now. We’ll be watching the Asian session for some potential setups as well.
