Forexperts

• Print
• E-Mail

The Week Ahead Forex and Dow Jones recommended levels EUR/USD - Euro Dollar, European Session - 05/09/08 More EUR/USD The Week Ahead GBP/USD Technical Analysis 5 September 2008 GBP/USD - British Pound Dollar, European Session - 05/09/08 More GBP/USD USD/CHF - Dollar Swiss Franc, European Session - 05/09/08 USD/CHF - Dollar Swiss Franc, American Session - 04/09/08 USD/CHF - Dollar Swiss Franc, European Session - 04/09/08 More USD/CHF

Early this past week the EUR/USD made a new all-time high to 1.6038 as fears of a financial meltdown at Fannie Mae and Freddie Mac drove traders to the more stable Euro. The lack of follow through to the upside following this new high made the rally appear stop-driven as traders quickly exited. News that the Fed and the Treasury were going to back a plan to stabilize Freddie and Fannie helped drive up the Dollar.

Despite Bernanke's comments before Congress about a weakening U.S economy and accelerating inflation, the Euro was never able to regain its upside momentum. A better-than-expected earnings report from Wells Fargo mortgage bank brought confidence to the financial sector which drove the overall stock market higher. Early on Thursday, J.P. Morgan helped continue the rally with positive earnings results. After the close on Thursday, bad news from Merrill Lynch, Google and Microsoft set the stock market up for a lower opening. The bearishness quickly dissipated as a friendly report from Citigroup helped stabilize the markets early and allowed for a strong finish.

The abovementioned stock market action provided resistance for the Euro late in the week as it was unable to regain the strong momentum from earlier in the week. Fundamentally, the U.S. economy shrugged off a higher-than-expected CPI report and a 17-year low in housing starts. Slow growth out of the Euro Zone continued to be the main theme while ZEW Business Survey showed a lack of confidence in the economy. Late in the week a report indicating more inflation in the Euro Zone was largely ignored by the market, but did bring talk that the ECB was gearing up for another possible rate hike in September. Another key factor supporting the Dollar last week was the 10% drop in crude oil futures. Although it indicates a possible lessening of inflation and gives a reason for the Fed not to raise interest rates, lower crude prices could help spark an economic recovery which would strengthen the Dollar in the long-run.

Technically, the EUR/USD posted a closing price reversal down on the weekly chart. A follow through break through 1.5783 will confirm this reversal top at 1.6038. This would then set up a further decline to 1.5671 to 1.5420. Continue to monitor the daily charts to try to get short on a secondary test of the top.

The USD/JPY traded higher late in the week on the good news from financial sector stocks. Wells Fargo, J.P. Morgan and Citigroup helped support the stock market. The better-than-expected earnings reports from the financial sector brought confidence back to the market and increased traders' appetite for risk. Investors aggressively borrowed in Yen and bought Dollars to support the rally. Reports that the Japanese economy may be weaker than thought also attracted selling pressure to the Yen. With growth more of an issue than inflation in Japan, the 0.50% interest rate gives the Bank of Japan very little room, if any, to cut interest rates. Some kind of economic stimulus package has to be implemented soon to help the Yen or the USD/JPY will continue to rise.

On the weekly chart, the USD/JPY remains in an uptrend as long as the last main swing bottom holds at 102.57. One bullish sign is the regaining of a resistance zone at 106.16 to 106.73. A trade through 108.50 reaffirms the uptrend. The minimum upside target of this rally still remains 50% of the 52 week range at 109.93.

The GBP/USD consolidated most of the week near its highest level since late March. Although the housing sector remains in a poor state and unemployment is up, reports of accelerating inflation have kept this pair higher as the U.K. financial markets trade as if the Bank of England is going to leave rates unchanged. Next week the market will be watching the U.K. Retail Sales report to determine the condition of consumer spending in the wake of the negative fundamentals. Since there has been talk of a recession, traders will also be focusing on the advance release of second quarter GDP to see if there has been a slow down in growth.

The weekly chart shows that the USD/GBP reached a 12-week high last week and closed higher. It also shows that this pair reached a key retracement zone at 1.9880 to 2.0002 before running out of buyers. Looking at next week, look for a retracement to 1.9760 before new buyers step back in.

The bullish stock market, buoyed by better-than-expected news from Wells Fargo, J.P. Morgan and Citigroup, helped rally the USD/CHF late in the week as traders sought a better return for their money in higher yielding assets. Internally, the Swiss Franc is feeling pressure because of an industry report showing investor confidence in the economy reached its lowest level ever. Traders are looking at this news as a reason to prevent the Swiss central bank from raising rates in the near term.

Based on the medium-term range of .9635 to 1.0625, this pair found support in the retracement zone at 1.0130 to 1.0013, making the weekly low at 1.0010. Buyers came in at this price and with help from the bullish stock market bought aggressively and reversed the weekly close to up. The current chart pattern needs a follow through rally through 1.0257 to confirm the 1.0010 reversal bottom. After the confirmation, look for the rally to continue to at least 1.0318 to 1.0390.

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