After unprecedented moves in August and September saw the Dollar gain hundreds of pips against all major currencies, the overbought market finally pulled back on Friday. With GBPUSD rising over 500 pips from 1.7446 lows and EURJPY almost 600 pips from its lows, investors anticipating bounces off important support, celebrated Friday’s retracement.
However, the recent move is only a short-term solution to a technically overbought—or more specifically, overstretched—Dollar. With market fundamentals pointing to more losses for equities and a line of financial institutions hoping to be saved by the US government (see: Lehman, WaMu and Merill) leading out the door, the long-term outlook for the US Dollar calls for more gains.
Next week’s movement will be important as market bears have used every opportunity this past month and a half to sell any significant rally with a vengeance. This past Monday in Europe, investors sold heavily into the Fannie & Freddie bounce, causing new lows by mid-week, and this trend is expected to continue.
Until a breakout of the trend down or an up-shift in volume to support a bull move (one that lasts longer than just 48 hours), investors’ sentiment to sell the rallies should hold firm.
IntegrityFX.com Daily Trading Outlook
EURJPY: The top of our channel on H4 is at 154.90 and we will look to sell to 148. Expect the pair to begin consolidating in this triangle over the next week and yield some solid technical opportunities before finally breaking out.
GBPUSD: The pair bounced off the 50% retracement of 6/01-11/07 and a range between the 50% and 38.2% at 1.8333 0should hold. This may be one pair we may look to short the Dollar with a tight stop loss on with a break of 1.7980. But the 100 SMA on H4 could act as solid channel resistance so we will be more inclined to wait and sell. This pair was very oversold and we were waiting for a retracement before re-entering our shorts.
EURUSD: The 62 EMA on H4 has consistently been a strong indicator of the direction of the trend on EURUSD. If the pair should break above the 62 EMA, the USD could be in trouble for longer than we anticipated. For now, we look to sell at around 1.4260.
USDCAD: This is a pair that has not moved in cadence with the rest of the market. If you have the stomach to sit in such wild swings, the USDCAD has yielded some great technical setups. 1.0550-1.08 should continue to be a great range trading opportunity.
John Rowa
Executive Director of Trading
1 951 823 0686 - Tel
+1 951 823 0687 - Fax
JRowa@IntegrityFXllc.com
www.IntegrityFXLLC.com