Highlight & Analysis
| 24 January 2011
Fundamental vs. Technical
With the State of the Union Address on Tuesday, the President would surely emphasize on the administration's accomplishment for both the economy and jobs creation looking forward with the agenda agreed during the meeting with Hu Jintao of China.
URL:http://www.youtube.com/watch?v=vPRnsN1F-Cg
Deals made and with a new economic team that strives for improve competitiveness in the global market in exports and jobs creation will highlight a positive tone for the US Dollar. Although, the troubles in Ireland have placed some slight pressure on the Euro as of this trading session at the levels of 1.3572 corrective move. However, the reports for the week would play a significant part as UK GDP expected to be at 2.6 vs. 2.7 would weigh on the GBPUSD with some influence between the cross rate of the EURGBP to be steadier from the previous week working at 0.8514; whereas the 0.8550-80 levels may find some resistance for the next corrective move lower thereafter. Expect wider price movements within the week.
While the Pound may find some bearish effect from the widening deficit and some of the austerity measures made may reflect on the report. However, any further decrease from its expectations may prove to be more bearish with wider fluctuations downwards. Prompting the EURUSD to be supportive with the EURGBP cross to continue to move higher before the news. Although, we do have a cap of 0.8660 resistance for the EURGBP which has been placed for the past month and we do see a real approach to this price levels at current levels.
On the other hand, the USDX would rely more from the coming FOMC meeting, Durable goods orders, Consumer Confidence from the University of Michigan and the Friday's US Gross Domestic Product. These reports would be dictating the directional trend for the USDX in spite of its technically motivated bearish chart formation both on a daily and weekly basis. With an opening week of 78.30bp would provide a week of wider fluctuations on both directions but would maintain a bearish tone as it has indeed been bid-off to the lows below the 78.65/80 levels. And its initial target of 78.05 would be re-tested but will find some bouncing support and fresh longs on these levels. Most of the bullish positions has been settled from smaller speculators found mostly from retail trades at the first two weeks of the new month of January.
A more favorable long trade would be on the USDCAD working at the 0.9923 with a risk/ tolerance level at 0.9830 stop. However, a reasonable time frame would be within a week's wait where the inital target of 1.0015 and subsequent 2nd level at the 1.0090/10 which happens to be its 21 week MA. Any significant price movement upwards would need to adjust trail orders whenever it is fueled by the USD movement by Friday. Although, we need to see some realistc volume build-up to support this trade.Any price nearest to its previous low would be an ideal entry.
Meanwhile, we maintain our positiion and market sentiment on the USDCHF and USDJPY including the AUDUSD and the NZDUSD from our last market view analysis. A weekly overview for analysis will surely carry weight unless and fundamental factor would surprise everyone else. For the past couple of weeks we have seen some speculative trades that would have suffered a great deal due to the wide price fluctuations in the FX market. If anybody says otherwise they would have been lucky. As a matter of trading principle; watching and waiting how market prices move for the new year would make more sense than jsut taking the plunge. the market will always be there; we just have to play this smart and discplined.
