Here’s What The FX Markets Need For A Clear Path

  • September 27, 2004
  • Dave Floyd

More
data please.  While the never ending stream of economic data recently
has done little to change minds, the data has made cases for both bulls and
bears alike, unfortunately neither side has an upper hand.  It is obvious that
only more data will eventually guide the FX markets to a clear path, be it up or
down.

The G7 meeting this Friday
holds some hope of providing that catalyst.  Tomorrow’s piece will go into some
details as to the possible outcomes from this weekend’s G7 meeting.

Given the erratic nature of
the market in recent weeks, it has become obvious that dollar pairs add a higher
degree of difficulty in terms of forecasts.  In the interest of taking advantage
of movements in the marketplace, we will shift our attention for the time being
to some of the crosses as a way to minimize whipsaw price action.  We will focus
on the majors each day as a way to monitor developments, but our recent trade
recommendations have been more robust when avoiding dollar pairs.

Technical Notes:

EUR/GBP:  bull-trend line
broken in sharp sell-off on Friday, however, until key support is breached,
.6750, uptrend remains intact.  Short-term models indicate a wave 4 conclusion
around the end of this month and resumption of trend.  .6880 remains the level
to be breached to sustain longer-term gains.

EUR/JPY:  daily chart fails at
bear-trend line (136.58) as did most other currencies on Friday, however,
shorter-term model indicates possible long set-ups.  Look for an hourly close
above 136.07 for a move towards 136.85

EUR/AUD:  sharp break of 50 day
ema on Thursday has held.  A move below 1.7160 would signal short entry with a
target of 1.7000.

EUR/CAD:  daily model issues
short on move below 1.5610 with 1.5450 as near-term target

Dollar Index:  still flirting
with bull-trend line from mid-July (88.46).  Daily and weekly stochastics are
inconclusive as to price direction.

USD/JPY:  a successful break
above bear trend-line (110.93) leaves the door open for a move towards 112.

As always, feel free to send me
your comments and questions.


Dave