Euro, Yeppy, Caddy - The Inside View

Daily Forex Technicals | Written by The LFB-Forex.com | Aug 04 08 06:26 GMT |

Eur/Usd: With outright recessions now expected in Ireland, Spain, Portugal and Italy, along with the sharp growth decelerations now occurring in France and Germany, overall GDP for the euro area probably peaked in Q1 and the ECB is going to have a hard time maintaining an inflation bias. We have noticed a lack of hawkish sounds from ECB officials recently and no doubt that (along with the recent depreciation of oil) has helped the dollar's gain. As far as oil is concerned it seems to be trading on the fundamentals now i.e. when the data is weak, price declines--that's very different from what had been occurring over the past year when weaker economic data drove traders to sell stocks and buy oil. It does look that as long as EUR/USD maintains a daily closing price below 1.5311 (support on July 7, and the base from which the euro made its most recent run to 1.60) it's likely to see the Euro test the channel low in the 1.5290 area. Risks-Trichet signals a rate increase at Thursday's press conference. Geo-political tensions with regards to oil. Eur/Jpy: The same basic idea is holding for EUR/JPY as well. Longer-term lines have been drawn from March 20 and May 12, both of which are connected to July 16. Because Friday's closing price has not broken either line, we're waiting to find an entry. As usual, there are 2 ways to trade a break of trend line support--go short on a daily close below the trendline, or wait until a daily close below there has been made and then trade on a test of the old support as the new resistance. Once that's been accomplished, the first objective is the support made at the July 16 low on 165.32.The same set of risks are in play for EUR/JPY as for EUR/USD. Cad/Jpy: The Canadian economy has contracted in three out of the last four months and for the first quarter of 2008. May's contraction (latest data) was attributed to a decline in energy sector, which was dragged lower by decreases in natural gas and crude oil production. With commodities looking to weaken going forward due to the global economic slowdown, it's very possible to see Canadian GDP contract for a second quarter. Of note is the fact that in May, GDP contracted even as the GDP of Canada's biggest trading partner, the U.S., expanded. The bearish rising wedge, complete with a triple top, is a strong technical signal that suggests the CAD/JPY pair is ripe for a fall, but we can be content enough to wait for a close below trendline support before making a short entry. This last uptrend started in March, and there's no reason not to believe we can't see price return to those levels over the next few months. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.