Reply #22: dollar watch [View All]

[UpInArms]

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 84.18 Change +0.44 (+0.53%)

Dollar Ready to Finally Turn?

http://www.dailyfx.com/story/strategy_pieces/trade_or_fade/Dollar_Finally_Ready_to_Turn__1173073824179.html

The dollar wobbled and bounced around the 1.3200 level last week as traders fled leveraged positions following the sudden crunch in global equity markets. Economic data out of the US didn’t provide much support for the greenback either, as Q4 GDP was revised significantly lower to 2.2% from 3.5%. Meanwhile, other indicators sent conflicting signals regarding various aspects of the economy. In the manufacturing sector, Chicago PMI had been expected to edge up to the 50 level but hit the tape at a disappointing 47.9 – signaling contraction in the sector. This gloomy report was offset by a solid ISM manufacturing reading, as the figure rebounded to 52.3 and instantly neutralized the poor Chicago PMI figure. On the other hand, a 7.8% contraction in durable goods orders was weighed down by excess inventories. Consumer confidence reports indicated that demand should have been somewhat stronger, as the reading hit a five year high of 110.3 on labor market expansion and accelerated wage growth. In the housing sector, a 3.0% surge in existing home sales helped offset some of the 16.6% plunge in new home sales. However, with new home sales a better leading indicator and sub-prime lenders imploding faster and faster, the sentiment regarding the sector has become increasingly negative.

The dollar looks primed to breakout on the charts, and the economic calendar next week could perpetuate the scenario even sooner as ISM services is on tap on Monday. The reading is expected to ease back to 57.5 from 59.0, but traders will be focusing on the breakdown of the report for the employment component ahead of Friday’s Non-Farm Payrolls, which are estimated to fall back as well. Adding to the tumultuous mix is the Fed’s release of the Beige Book – the central bank’s analysis of economic activity around the country. Should traders see a marked slowdown in the labor market and services sector, dollar bears could propel EURUSD solidly through the 1.3250 level. However, surprisingly strong readings and an optimistic outlook by the Fed could lead the pair to make a definitive turn lower sub-1.3100. – TB



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Dollar Bull Returns...This Time For an Extended Visit

http://www.dailyfx.com/story/dailyfx_reports/daily_technicals/Dollar_Bull_Returns___This_Time_For_1173099209489.html

EURUSD – The decline to start the week confirms our bearish bias. Ultimately, we look for the decline that began at 1.3262 to test at least 1.2757. This is where the decline from 1.3262 would equal the 1.3370-1.2865 decline. The 1.3370-1.2865 decline took 29 days and the 1.2865-1.3262 rally took 33 days. Given that the decline now underway is the third wave (either a C or a 3), look for this decline to accelerate and reach the cited target in faster than 30 days. The major long term supporting trendline intersects with the 1.2700 figure at the end of March. Near term support is at the 2/22 low at 1.3080 but look for a test of 1.3018, which is the 161.8% extension of 1.3262-1.3142 / 1.3096.

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USDJPY – Price has broken below the confluence of the 200 day SMA, 61.8% of 114.42-122.21, and trendline drawn off of the May 2006 and December 2006 lows. We mentioned Friday that “a break of this support (daily close below) would indicate a major change in trend.” The USDJPY closed below the 200 day SMA on Friday but held above the trendline (on a closing basis). That trendline is at 1.1685 today and is now resistance. The next major support is the 12/5/2006 low at 114.44.

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GBPUSD – The decline below 1.9260 strongly suggests that a major top is in place at 1.9915. Ultimately, we look for the ending diagonal to be fully retraced, which means that price should test the lower 1.8000’s. Former support at 1.9260 is now resistance. Short term support is at the 61.8% of 1.8515-1.9919 at 1.9054 (200 day SMA is at 1.9036).

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