- The USD index is close to flat compared to last week, as expectations for US monetary policy are essentially unchanged. The approximate $15 drop in oil prices over the last week should be interpreted as a dollar positive development, as the positive implications that it has for economic growth could boost expectations for monetary tightening in the US. Resistance from a downward sloping trend-line drawn off the June high comes in at 72.52.
- EUR/USD hit a new record high of 1.6038 this week. This marked the peak of the pair’s multi-year rally, as a rapidly deteriorating Euro zone economy should begin to weigh on the overvalued currency. In fact, while we believe that the ECB is very unlikely to cut rates, the market may begin to price in such an event. As such, it is recommended to establish a structural EUR/USD short position.
- GBP/USD rallied sharply earlier in the week on the back of higher than expected June UK CPI data, breaking above the 200-day moving average that has recently restrained the pair as well as the down-trend drawn off the multi-decade high posted last November. However, the pair is now struggling to stay above the 200-day moving average (currently 1.9957). Yet, market expects sterling’s yield support to eventually help GBP/USD post further gains.
- USD/JPY continues to be range bound, with the 200-day moving average (currently 107.17) capping rallies, and the 100-day moving average (currently 104.05) supporting it on the downside, a pattern observed since late May. The outlook for range-bound trading was supported on Friday with a balanced message delivered by BoJ Gov. Shirakawa, suggesting no change in monetary policy for the foreseeable future.
Forex Stragety - July 18 2008
July 18th, 2008 · No Comments
Tags: Forex Trading
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