| Daily Forex Technicals | Written by DailyFX | Jan 13 09 15:08 GMT | | |
| Many euro crosses were exhibiting high volatility this morning that was a carry over from the risk appetite seen since yesterday. However, this market dynamic has not imparted a singular direction to the euro itself, but rather cross currency volatility. Will this volatility hold up through to Thursday's European Central Bank Decision; and what can we expect from direction after this notable event risk? Our DailyFX Analysts weigh in. Senior Currency Strategist - Jamie SaetteleMy picks: EURUSD short, limit order at 1.3490, against 1.3805, target below 1.30 Near term, the decline from 1.3802 is in 5 waves and a corrective advance is due. Initial resistance is just below 1.35. Following the expected advance, additional weakness is expected as part of the complex correction from above 1.47. Support does not begin until former resistance at 1.3085. Measured support does not begin until 1.2968. open trades:
Currency Strategist - John KicklighterMy picks: Short EURUSD There is a good chance that the EURUSD will lose its momentum heading into Thursday's serious event risk; but the pair's direction and drive are hard to argue against at this point. At this point, the euro is having far less influence on the pair's decline than the dollar - which is likely moving in response to swelling risk aversion trends. Therefore, this development of this bear wave will be dependent on a number of factors: risk trends; the European Central Bank's rate decision; and speculative momentum. For a trade, we certainly need momentum and direction; but it is a precarious situation to depend upon the perfect cooridiation of so many fundmental factors to carry a position to profitability. Looking at things objectively, it is very difficult to gauge how risk appetite will develop over the coming days; but for the central bank decision, we can have a more straightforward forecast. Economists expect a 50 basis point cut that would bring the central bank to 2.00 percent. Beyond this cut though, traders are more concerned with the precieved pace of policy going forward to gauge whether the region's benchmark is destined to a near-zero level like its US, Japanese and perhaps UK counterpart are. Fundamental factors aside, the pure technicals of the EURUSD's price action are encouraging. The bearish reversal from the December 18th swing high has come in phases, but has been otherwise consistent. With today's development, we seem to be breaking a recent range that has developed within the larger bias by slipping below 1.3250/300. This former support was developed through a confluence of Fib levels, a clear pivot and the wave defining 50-day simple moving average (SMA). Without the burden of heavy event risk, a move like this could make its own follow through; but we will have to gauge momentum before, during and after the rate decision. An early exit to avoid the event risk would be reasonable - and a stop based on momentum (cut the position when the decline stalls) could best serve our needs. Regardless, this position should be built through multiple lots with a first target that merely covers risk and isn't more aggressive than a test of the congestion band through November. The second stop can be treated more aggressively as long as its stop is trailed to secure profit. Currency Strategist - Terri BelkasMy picks: Long EUR/GBP (pick from Monday) Sticking with my pick from Monday, EUR/GBP has yet to hit my profit target of 0.9318, where we have the 50% fib of 0.9805 - 0.8838. Indeed, lingering risk aversion in the financial markets, which wasn't really allayed by comments from Federal Reserve Chairman Ben Bernanke this morning, should continue to work in favor of British pound weakness. Currency Analyst - David RodriguezMy picks: Take partial profits on the EUR/JPY position On 12-31 I called for a EUR/JPY short against 131, and so far the trade has paid dividends. I'd like to begin taking profits on the trade, as it is already about 1000 pips in the green. A continued hold of 118.00 shows risk of a further bounce, but I don't want to close the entire trade here. Move risk on the position to 121.00 on the remainder and look for a test near 115.00 as a subsequent price target. Currency Analyst - Ilya SpivakMy picks: Hold EURUSD Short In yesterday's pick, I wrote that EURUSD was "[testing] a key support/resistance level at 1.3409. A daily close below here clears the way for a selling opportunity targeting 1.3075, the range top that contained the pair from 10/22/08 - 11/10/08." Entry conditions were met and the position was triggered at 1.3364. Set a stop-loss at at 1.3508 above yesterday’s wick high. Currency Analyst - John RiveraMy picks:Short EUR/USD The expectations that the ECB will cut rates by 50 bps and will need to continue easing as the region’s economic pictures grows dimmer has the Euro on the run. A push below 1.300 is a strong possibility with a re-test of 1.2500 not out of the question. However, President Trichet was overly optimistic about the global economy in 2010 in recent comments which could lead to hawkish post decision remarks from the MPC leader, which could curve Euro bearish sentiment. Currency Analyst - David SongMy picks: Short EUR/CHF Expectations for a 50bp rate cut by the ECB has weighed on the euro, and the regions currency is likely to face increased selling pressures over the near-term as market participants expect European policymakers to continue their easing cycle in 2009. After slipping to a low of 1.4299 on 10/27, the pair bounced back to reach a high of 1.5885 on 12/15, but the lack of momentum to push higher favors a bearish forecast for the pair. Moreover, the sharp retracement from the December high indicates that investors remain risk adverse, and I anticipate the euro-franc to face increased selling pressures over the week as risk sentiment continues to dictate price action in the currency market. I expect the euro-franc to work its way towards the 11/12 low of 1.4716 over the week, and a break below this level could drag the pair towards the 10/24 low of 1.4410 over the near-term. 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. 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Tuesday, January 13, 2009
Euro Battered Ahead Of ECB's Rate Decision
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