This Pair Has Potential
While the FX markets
might be a bit thin, relative to the usual level of activity, we are
seeing one possible short set-up on GBP/USD. With the Dollar Index (DXC)
carving out what we see as a short-term bottom at 80.55, a technical break in
GBP, as noted below should offer good downside targets.
-Â 1.9143 (top red
line) and 1.9070 (bottom red line and
2/18/04 high) remain the two levels that may provide some support in the
near-term, however a break of these levels would expose a move towards 1.8950
Random Observations
Dollar Index remains under modest pressure,
although some longs have dipped their toe in in the last few hours. While any
outcome is possible, we see 80.55 as being a near-term bottom for the DXC as we
close out 2004 and may well be key when we re-open on January 3rd. Upside action
is still being contained by a longer-term regression channel now seen at
81.20. This same regression channel halted the early December rally (Dec 10th)
in the dollar and set-up the moves lower we have seen since then.
USD/CAD, many CAD longs are fearing a dollar short squeeze, but USD/CAD has now
set-up nicely for further weakness, especially on a break of 1.2130 which would
expose 1.2080 and 1.2040
With Japanese corporates done for the year, orders for USD/JPY are few. We see
range trading over the next couple of days with some solid resistance at
103.60-80 (trend-lines) while also hearing of solid option related bids at
102.50-70. Day traders may find an angle to exploit, position oriented traders
should observe.
GBP continues to be the pair that is exhibiting potential for a trade. Granted,
with markets thin, this has made us a bit more cautious on trade entry, and we
will readily concede that a break of 1.9220 a few hours ago should have been
sold. One large support level remains, 1.9150, a break of that and we will
likely see 1.8950 over the course of several days.
Hearing that on average, orders on the desks in
London for EUR are around $20-25 mln, very light relative to the norm but enough
to push market around as most desks are staffed with ‘junior’ traders.
I will be doing a free FX
Webcast on Tuesday January 4, 2005 at 1:30 PDT. I will be discussing
current trade set-ups and some macro themes as we head into 2005. Sign up
information in the next day or so.
As always, feel free to send me your comments and
questions.
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