EURUSD: The EUR remained firm against the USD most of the session as the market neared the top at 1.497 and the psychological high at 1.50. The weakness in the U.S. equity markets this week and the subsequent rally in the EUR indicates that the world may be treating the EUR as a safe haven.
Based on the Fed January minutes released this week, it appears that the Fed does not seem to be too concerned with the value of the Dollar. Their focus is clearly on preventing an economic slowdown. Inflation does not seem to bother the Fed either. It seems that they feel they have more control over inflation than preventing a recession at this time. Reports out of the Euro Zone are indicating that the ECB is not going to follow the FED and lower rates. The European financial markets are pricing rates to stay at 4.0 %. The ECB seems to feel that the U.S. economic slowdown is not going to filter into the Euro Zone so they choose to remain focused on stemming inflation.
Technical Commentary: The uptrend continued in the EUR as the market is now in a position to challenge the 2008 top at 1.495. The all-time high is 1.497. Talk of a trade straight through to 1.50 has surfaced. The weak close indicates some light selling at current levels, but not enough to change the trend to down. The length of the current rally is 1.444 to 1.486. A normal pull back could take it back to 1.465 to 1.46 where new buyers are expected to support it. Continue to look to buy dips if given the opportunity as the main trend on the weekly chart is up. On another surge higher, look for initial selling following a test of the old tops. This action would be normal and not trend changing.
GBPUSD: There was no follow through rally in the GBP following Thursday's surprise stronger than expected retail sales. The strength of this report gave the BoE a chance to stop and catch its breath after a series of interest rate cuts. The focus now is whether the UK is entering into a stagnation period. More reports will be needed to determine this, however, talk of 50 basis point cuts have at least gone away for the time being. What we really learned this week is that the consumer ultimately controls the economy. The strong economic support demonstrated by the UK consumer in January has given the BoE an opportunity to take a less aggressive stand against interest rates.
Technical Commentary: The main range over the short run is 1.996 to 1.936 with a retracement zone at 1.965 to 1.973. Today's high at 1.970 took the market into this range where it met resistance and buying dried up. The main top at 1.9734 is resistance and a potential breakout price based on the bullish W formation-taking place. A breakout over 1.9734 sets up a further move to 1.996. Despite the strong move, the main trend is still down. With the main trend down, the market may still be in a sell the rally mode. It is still too early to tell if this is a major bottom forming, but the close over last Friday's close at 1.961is a a sign that the up move will continue into next week. GBP is holding the main bottom from 1/22 at 1.934 and a new higher main bottom at 1.936.
USDJPY: The weak U.S. equities markets triggered buying interest in the Yen today, but not enough to cause concern. With the stock market moving sideways to lower throughout the month, the Yen has been range bound. With the U.S. economy, still showing signs of weakness and the stock market seemingly setting up for another break, look for strength in the Yen. The key area to watch is 105 as the market could not hold minor support today. 105 is critical as most traders feel the BOJ will intervene at that level. Short-term traders should look at the short side of this market now rather than close to 105 as not to be caught short during an intervention.
Technical Commentary: The USD continued its weakness against the JPY as trading reached the 50% point between the low for the year at 1.049 and 108.591. Buyers came in at 106.725 as expected, but not enough to turn the market on a reversal. If 106.725 holds as a short-term bottom, then the next upside target would be 107.66 to 108.26. On the downside, a failure to hold 106.78 could trigger a further decline to the .618 retracement number at 106.35. The market is still range bound but weak. The trend turns down through 105.71. Continue to look for choppy two-sided trading back and forth over the 50% prices for short-term opportunities. Until the market breaks out either side of the main range, look for small moves to continue with sellers at 107.66 and buyers at 106.78.
USDCHF: The weak U.S. stock market caused traders to seek the safety of the CHF on Friday. The hard sell off during the day session kept a cap on the USD all day. Even a late session short covering rally did nothing to turn the USD higher. Continue to monitor the U.S. economic data and especially news of a bond insurer bailout to gauge the short-term direction of this market.
Technical Commentary: The main trend turned lower this week on the break under 1.088, setting up a potential further decline to the low for the year at 1.072 from Feb. 1. Look for more downside pressure as the trend remains down. Tops at 1.110 and 1.104 have to be penetrated to turn the main trend higher. A 50% to .618 zones at 1.087 to 1.091 could become short-term resistance. As long as the market does not regain this zone, the forecast is for lower markets to follow.
USDCAD: The CAD was down most of the day based on lower than expected retail sales. In a technically dominated trade, however, the CAD shook off the negative news and traded sideways throughout the day. Next week the market has two key reports which could set the tone at the March 4 BOC meeting. The first report, due on Tuesday, is the federal budget for the 2008-09 fiscal year and the second is the current account data for the fourth quarter due out on Friday. The market is still anticipating another interest rate cut on March 4, but needs confirmation.
Technical Commentary: The USD remained firm against the CAD as minor support at 1.006 held. The main trend is up, but the USDCAD still appears to be range bound at this time. Three ranges are actually controlling the trading action. The main range is 1.1875 to .90552 with a key retracement zone at 1.079 to 1.046. The second range is 1.086 to .9055 with the trading zone at 1.017 to .9961. Finally, based on the recent top, the last minor range is .9055 to 1.038, making .9717 and .9561 a major support zone and downside target. If the two bottoms at .9872 and .9755 fail, the down move could be sharp and decisive. There does not appear to be any price clusters for the market to grasp onto indicating volatile but range bound trading. Until the USDCAD breaks out of this tight range, look to trade both sides. With the trend up, however, trend traders should look to buy a break into the major support zone at 1.005 to 1.002 if given the opportunity again. Any move through 1.02 could attract some short covering. The fundamentals are supporting the start of an uptrend, but traders do not seem too attracted to the current pattern. Clearing out of this range is likely to attract new buying.
AUDUSD: Favorable interest rate spreads and a robust commodity trade continues to be supportive to the AUD over the long run. Stock market stability is also a reason for its attractiveness. March 4 is the key date to watch for the next interest rate hike.
Technical Commentary: Buyers came back on Friday driving the market higher and continuing the uptrend. The longer-term weekly chart indicates that the AUD has a clear shot at the 11/9 top at .9399. If the market should meet resistance at current levels and attract selling pressure, then wait for a buying opportunity on a pull back to .9062 to .9017. Trend line support is also at .9004. The long-term fundamentals are still bullish along with the weekly chart.
NZDUSD: The NZD is expected to benefit from strong commodity markets. Traders will also be watching the AUD for short-term direction.
Technical Commentary: The strong surge to the upside puts the market in a position to challenge the July 24, 2007 top at .8108. There could be some profit taking at this price on the first test. On the downside, the market may still be vulnerable to a short-term break to .7927 to .7892. With the main trend up, continue to look to enter the long side on breaks.
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