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Forex Trading Strategies by John Hardy at Saxo Bank
Trichet's Verbal Intervention Knocks EUR/USD back to support, but EUR/USD may be ready to rally to just short of 1.3100
Anticipation of whether the Fed will change its statement at tomorrow's FOMC meeting the key event risk through tomorrow.
November 9, 2004
Economic Data Today (all times GMT):
09:30 – UK Trade Balance (Sep)
10:00 – Germany/EU ZEW Surveys (Nov)
11:00 – Switzerland SNB Governor Hildebrand to Speak
12:00 – Sweden Industrial /Manufacturing Production & Industrial Orders (Sep)
15:00 – US Wholesale Inventories (Sep)
Highlighted Economic Data this week:
WED: Japan Trade Balance, Japan Consumer Confidence, Norway CPI, UK BOE Inflation Report, US Trade Balance, US Weekly Crude Inventories, FOMC Rate Decision
THU: Japan CGPI, Australia Employment Data, Germany GDP, Switzerland Retail Sales, ECBs Trichet to Speak
FRI: New Zealand Retail Sales, Japan Industrial Production, Japan GDP, US Retail Sales, US University of Michigan Confidence
Trichet finally sent the markets a warning yesterday in the wake of the just-adjourned G-10 meeting with a clear expression of disapproval of "brutal moves" in the currency markets - particularly EUR/USD, of course. This is the first real verbal intervention of any kind since the USD began breaking down through support about three weeks ago. But while the knowledge of disapproval is important for traders to recognize and creates some form of headwind for further progress higher - it doesn't really affect the fundamentals of the situation - only anticipation of real action (rate adjustments and/or actual intervention) could do that. Therefore - Trichet gave the market pause, but the market may be ready to charge higher once more. 1.2900 area in EUR/USD is key support.
We can't forget the upcoming Fed meeting - with the announcement in the early US afternoon. The Fed is sure to raise rates - but the market will focus more on whether the Fed changes its statement in any way. I don't think they will - and this would be considered bearish for the USD as many may be expecting a move to more hawkishness after the recent strongish US data.
EUR/USD - faded back to the 1.2900 area support (and even briefly dipped below overnight) in the wake of Trichet's comments, but remains well-supported. The slight sell-off may be all we see for now, as EUR/USD may be primed for another rally higher - on through the 1.2985 top and to perhaps 1.3060 before finding the next resistance.
GBP/USD - got off to a false start on likely stop running yesterday as GBP/USD briefly had a look above 1.8600 before promptly getting pounded back to support just above 1.8500. That may be all the consolidation this currency pair needs, however, as GBP/USD may rev its engines and have a try higher towards the 1.8775 major resistance.
USD/CHF - made a marginal new low yesterday just below 1.1760 before bouncing higher to 1.1840 resistance. That resistance may hold as USD/CHF may probe lower still to perhaps 1.1660/80 before finding support. Watch out for SNB's Hildebrand today, as CHF could move either way on his comments.
USD/JPY - USD/JPY made another try higher to 105.75 resistance this morning. USD/JPY has lost some momentum in the short term and could rise back to 106.50 area resistance on the weakish Japan data overnight. Further out, however, USD/JPY could continue lower to 100.00.
EUR/JPY - EUR/JPY did find some support at the 136.20 support level. . If the USD continues to weaken, EUR/JPY may finally push above 137.00 and could go on to make an attempt at 139.00. 136.20/136.00 is a strong support area.
AUD/USD - made an ugly top by coming all the way back to the 0.7560 support area. A bit uncertain whether lower support around 0.7500 will be tested now, or whether AUD/USD is ready to charge higher again towards the 0.7700 target. The latter is the preferred case considering the outlook for the other USD currency pairs.
USD/CAD - CAD looks very strong as USD/CAD remained for the most part below Friday's lows for the balance of the day and even probed the 1.1900 area before bouncing somewhat. 1.1975 resistance may hold for now as USD/CAD may fall once more and test new areas below 1.1840.
Saxo Bank A/S accepts no responsibility for the accuracy or completeness of any information here in contained nor for any forecasts or recommendations. Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that you will profit from the strategies herein or that your losses in connection therewith can or will be limited. Stops may not necessarily limit losses to intended levels. Please read the full disclaimer at http://www.saxobank.com/?id=193&Lan=DA&Au=2&Grp=6.
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