Forex Daily Outlook

As we expected, the dollar stayed on track and made further gains. Data out of the EU and the US put pressure on short dollar positions and a flight to safety continued, along with declining equity prices. Durable Goods Orders and New Home Sales out of the US came in below expectations; fundamentally this would hurt the dollar but in recent months, bad data has helped the dollar as investors and traders fear that the recovery analysts are talking about may not be so quick, so money flows back into US denominated assets such as treasuries. We are biased for more dollar gains in the short term. We think the Euro will find a bottom near 1.45 and will not fall below 1.4380. We still expect the Yen to be the big winner this year, falling to 87 or 85 before the dollar finds support.

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Euro Fib

The Euro Fibs are drawn on the 1H chart. Breaking higher will definitely break 1.50, breaking below 1.4820 opens more downside.

Forex Daily Outlook

The euro came within 5 pips of breaking through 1.5000, upon a rejection, the pair traded to a low of 1.4881. With the way the pair recovered in to the 1.4950 level before the NY close, we think there is still room to run further north. The Canadian dollar was the standout loser of the day, falling more than 2 cents after the release of their interest rate policy along with the statement that said they will keep rates at .25 until June 2010. Depending on how the loonie reacts over the next several days, we may or may not see another run towards parity. Data out of the US pointed to no inflationary pressure from producers of goods. There is little data being released today, much of it out of China, we’ll be keeping an eye on Chinese Industrial Production and their GDP.

October 20 - Daily Outlook

The euro looks prime for a break of 1.5000. If it stalls, then we’ll be expecting a reversal in the short term, perhaps some serious consolidation towards 1.47 level before another run at 1.5000. The Yen found support at 90.50, a close below that level is what we’re expecting, a break above 91.30 is not welcomed and will push us out of a trade. We have important data coming out of the US and Canada today, along with a speech by BOE Gov. King that will be carefully scrutinized for any subtle clues leading to a change in monetary policy. It’s important to note that the market may wait for the US data releases prior to running above the 1.50/Euro level. There has been much scrutiny of the US interest rate policy and economists are suggesting that Bernanke should raise interest rates sooner rather than later. Bernanke will be speaking on Friday.