foreign exchange traders sold the euro to 1.3099 today on more bad news

Foreign Exchange Outlook : The US dollar exchange rate rose again yesterday from 1.3282 at 8 am in New York to 1.3138 by mid-afternoon, but was already giving some of it back into the close at 1.3180. The euro exchange rate suffered yesterday from bad economic data and a dollop of worry over fiscal conditions that clearly will violate the Stability Pact and triggered ratings agency downgrades (Spain on top of Ireland and Greece), but then as the euro exchange rates fell under a critical level around 1.3250, foreign exchange traders got worried the euro exchange rate was getting oversold and the market was running out of sellers. The 1.3250 level is the 62% Fib retracement of the euro's upmove from the Oct low at 1.2329 to the Dec high at 1.4719.

Sure enough, the euro rate rose overnight to 1.3338, but when Europe took the trading baton from Asia, foreign exchange traders sold the euro anew to 1.3188 again, not quite matching yesterday's lows but having the virtue of creating a new hand-drawn resistance line on the hourly chart (at 1.3310). Reasons for the euro to dip again include a false rumor that Ireland was already going to the IMF (it's only threatening) and German GDP, which came in at 1.3% for 2008 when 1.4% was forecast and in contrast to 2.5% in 2007. Adjusted for working days, German 2008 growth was a mere 1%.

Sterling, dollar to japanese yen and euro to Japanese yen made a similar small corrective bounce. The correction may not be over, alas, and could turn into a bigger upmove - depending on what the ECB does and says tomorrow. Right now we think it’s a minor event but foreign exchange traders have their chaps and spurs on, and are ready to ride a bucking horse.

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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