Daily Currency Forecast: G8 Dollar Bashing Kept to a Minimum

by: Ralph Shell

EUR/USD Commentary and Trade Ideas

Currency fund managers reported that first half trading results were mixed as the trend followers failed, while the hit and run swing traders enjoyed some success. The last EURO trend was a good example, ending after about 15 days. After the NFP report. the enthusiasm for equities has abated taking the market south. The dollar bashing at the G8 meeting has been minimal so a combination of these two factors has caused the dollar bears to retreat. The pair is currently trading at 1.3910, having failed to hold support in the 1.3950 area. Even if equities stabilize later today, the EURO may have lost some friends and the thrill, for the moment may be gone. Traders can try to sell the 1.3950/1.40 area with a target in the 1.3700 range.

Bias: Lower

Bias Term: Medium

Support: 1.3890 1.3830 1.3770

Resistance: 1.3970 1.4050 1.4110

GBP/USD Commentary and Trade Ideas

Finally the bear got a little satisfaction as they were able to take out the old support at 1.6200, selling off to the 1.61 area. Global equity weakness helped the USD and and plans by the Bank of England to expand quantitative easing by 25B were negative for the pound. This morning's market action was probably exaggerated by sell stops after a new low was printed, and once they have run their course a little bounce might be expected. Try to scalp the short side on a rally back into the 1.6260 to 1.6300 area.

Bias: Lower

Bias Term: Medium

Support: 1.6150 1.6090 1.5970

Resistance: 1.6270 1.6340 1.6450

USD/JPY Commentary and Trade Ideas

This morning's sell off has blown through some previous support in the 95 area and is currently trading at 94.80. It remains to be seen if the global equities sell off will result in a major melt down or remain a modest correction after last quarters vigorous rally. Once the stocks show some stability we want to buy the pair, but think it is prudent to wait, and watch the events. A rally back in the 96.50/97 level seems possible. The US Treasury is auctioning 35B 3 year, 19B 10 year, and 11.B, 30 year bonds this week, all issues of interest to the Japanese. Their participation in this auction will probably mean they will use the current yen strength to buy some dollars.

Bias: Higher

Bias Term: Medium

Support: 94.60 93.90 93.00

Resistance: 95.20 95.80 96.90

USD/CHF Commentary and Trade Ideas

Last week's recommendation to buy the pair in front of where we suspected the SNB might intervene was the right approach but we exited the trade prematurely. Currently we are trading at 1.0880 after checking out the 1,0950 area. Weaker equities are cited as the reason for the dollar's morning gains. We suspect this is mostly psychological, and would be surprised if the USD can muster a rally much past 1.10. Will stay on the sidelines but we are looking for a sell spot.

Bias: Neutral

Bias Term: Medium

Support: 1.0850 1.0760 1.0700

Resistance: 1.0940 1.1010 1.1180

USD/CAD Commentary and Trade Ideas

With equities, crude and gold all trading lower, it is surprising to find the CAD so far today, holding steady against the USD. The early excitement did take the CAD to 1.1670 but it has since come back to the 1.1610 level. The dollar rally versus the CAD looks to be stalling, and somewhere in the 1.16 to 1.18 level I wish to be short the USD versus the CAD. Canada is willing to explore and develop their natural resources, while the US policies are designed to "save the world" and strangle the US economy.

Bias: Lower

Bias Term: Long

Support: 1.1530 1.1470 1.1400

Resistance: 1.1650 1.1740 1.1790

AUD/USD Commentary and Trade Ideas

The AUD is grudgingly trading lower having briefly traded a little under .79 this morning before rallying back to .7925. As the economic news unfolds, the pending early recover seems to be a mirage. The entrenched longs in this market must be getting a little tired of the wait. Without some new bullish input, this market may be headed lower. Should the equity sale end, and this market mounts a little rally, look for a selling opportunity.

Bias: Neutral

Bias Term: Medium

Support: .7820 .7700 .7610

Resistance: .7950 .8010 .8100

NZD/USD Commentary and Trade Ideas

The aging bull market is showing some signs that the party, though it may not be over, is calming down. Without some bull news causing the market to print a new high, we look for some of the stale longs to hit the exists. No current trading suggestions.

Bias: Neutral

Bias Term: Medium

Support: .6300 .6240 .6170

Resistance: .6400 .6530 .6600