Forexperts

• Print
• E-Mail

Forex and Dow Jones recommended levels EUR/USD - Euro Dollar, European Session - 05/09/08 EUR/USD - 1.4287 Daily Market Outlook - Sep 5 More EUR/USD USD/JPY Technical Analysis 5 September 2008 Forex and Dow Jones recommended levels USD/JPY - Dollar Yen, European Session - 05/09/08 More USD/JPY

Commodity correlations have broken down in the short runbut it remains unclear if this will persist. Gold has broken down significantly, in line with a stronger USD and weaker Euro, but oil has diverged and actually made new all-time highs adjusting for the change in contract dates. For today at least, the weak USD/strong oil relationship has not functioned, but it seems unlikely it is dead just yet. Traders need to keep one eye on oil and the other on the USD.

Technically speaking, damage has been done to the EUR/USD uptrend, but its not dead yet. 1.5550 is critical trendline-support that effectively contained the EUR/USD plunge this week and weakness below that level is likely to trigger further downside potential. Also, intermediate trendlines were broken and they now offer viable selling points at 1.5710/20, followed by the 21-day moving average at 1.5780. Ichimoku charts saw EUR/USD plunge through the Tenkan line at 1.5787 and the Kijun line at 1.5680, and both offer resistance now. The cloud top is the next source of support at 1.5425 ahead of the overall range low at 1.5330/40. Also of note, the USD index tested higher into its Ichimoku cloud on Friday, but has not been able to close above the cloud base at 72.84.

What to conclude from this?There have been a lot of short-term shifts in expectations, and this has unfolded against a deteriorating economic backdrop, especially in the US, amid markets lacking in conviction. Data will remain an important short-term driver and while I reckon with renewed USD weakness based on expected incoming weak data, I cant rule out that we are experiencing a larger shift in trend. More often than not, major price breaks precede concrete fundamental evidence suggesting trend conditions have changed, so I will be watching the following price points very closely. The USD (via the USD index) is on the cusp of breaking higher if it can close above 72.84 on a daily basis. Such a close would suggest significant upside potential for the greenback on the order of 1.5-2.0% to the top of the cloud initially. Similarly, EUR/USD has tested critical trendline support at 1.5550, which may provoke a bounce. If that level fails and EUR/USD drops through the top of its cloud at 1.5425, it argues for sharper weakness to the cloud bottom at 1.5135. I remain a USD-bear at heart, but I am prepared to flip if USD resistance breaks (EUR/USD support at 1.5550 breaks) as the follow-through could be substantial. USD/JPY above 105.00 is another signal that the USD may break higher.

Key data and events next week: FOMC, ISM & NFP

Given the highly uncertain outlook, I would continue to anticipate heightened volatility in short-term trading conditions. Beginning May 1 and 2, Golden Week holidays in Japan and Labor Day holidays in China will tend to see reduced liquidity during Asian market hours, potentially leading to even higher volatility.

US data next week is heavy with important data, not the least of which is the FOMC rate announcement on Wednesday afternoon. Starting on Tuesday morning, well see the Feb. S&P/CaseShiller home price index and the Conference Boards consumer confidence reading for April. Wednesday starts with the ADP national employment report, advance 1Q GDP, and the April Chicago PMI, followed by the FOMC rate decision in the afternoon. Thursday sees March personal income & spending, March PCE core inflation readings, weekly jobless claims, April ISM manufacturing, and March construction spending. Friday finishes up with the April unemployment report and March factory orders.

Eurozone data sees May German GfK consumer confidence to start with on Monday. Tuesday sees April French consumer confidence and French business survey of overall demand. Wednesday sees March German unemployment reports and April Eurozone CPI estimates, along with a series of European Commission surveys of business and consumer confidence for April. Thursday has no European data of note. Friday sees March German retail sales, March French producer prices, and final-April manufacturing PMIs for the Eurozone.

UK data is mercifully light. Sometime between Monday and Wednesday, the Nationwide Building Society will release its house price index for April. Tuesday morning sees March consumer credit and mortgage lending data, along with the April CBI distributive trades report, a privately calculated survey of retail sales. At midnight local UK time on Tuesday night, the April GfK consumer confidence index will be released. Thursday morning sees April manufacturing PMI, followed on Friday by the April construction PMI.

Japanese data begins on Monday morning with March retail trade. Wednesday morning sees the Nomura/JMMA manufacturing PMI for April, March unemployment report, March household spending and preliminary March industrial production, followed in the afternoon by the BOJ rate decision and March housing starts and construction orders. Thursday afternoon sees March labor cash earnings. Friday sees no data of note.

• EUR / USD
• USD / JPY
• GBP / USD
• USD / CHF
• AUD / USD
• USD / CAD
• EUR / JPY
• AUD / JPY
• GBP / JPY
• EUR / GBP
• GBP / CHF
• EUR / CHF