Currency Trading: DailyFX

The US Dollar has broken key technical support, opening the door for a further 2 percent decline. Meanwhile, stocks continue to stall, signaling a potential double top and hinting that the link between risk and the greenback may be fading.

• Dollar Struggles Ahead of 2Q GDP – Fed Maintains Dovish Outlook
• Euro Rallies as Economic Confidence Tops forecast, German Unemployment Declines
• British Pound Continues to Trend Higher Ahead of GfK Consumer Confidence Survey
• Australian Dollar Regains Footing as Swan Talks Down Recent Inflation Report
• Japanese Yen Rallies Extends Yesterday’s Advance On the Back of Risk Aversion
• New Zealand Dollar Pushes Lower Following Dovish Comments Subsequent to RBNZ Rate Hike

Student's Question:

  As per the Doji/Double Doji description, the pattern implies indecision. How do you determine the direction of the trade? Thanks

The Pound was boosted in early trading as the consumer credit report posted an unexpected 0.2B gain versus forecasts of a 0.1B decline. However, a sharp reversal in equity markets quickly erased the GBP/USD’s advance as the pair continues to be driven by risk sentiment with the relationship strengthening to 46% from 42% a week ago.

Another solid week of U.K. fundamental releases, including the CBI sales report which reported that 51% of retailers surveyed said that sales were better than a year ago versus 18% that had negative results, added to prevailing bullish sentiment. Domestic demand may continue to improve as the consumer credit report surprised with a 0.2 billion pound increase versus expectations for a 0.1 billion pound decline.

EURUSD – Euro Forecast to Gain Versus U.S. Dollar
GBPUSD – British Pound Turnaround May Be on the Horizon
USDJPY – Japanese Yen Positioning Remains
USDCHF – Swiss Franc May Continue to Strengthen against Dollar
USDCAD – Canadian Dollar Forecast to Break Below Narrow Range
GBPJPY – British Pound Forecast to Advance Against Yen
 
View individual currency SSI charts in our FX Sentiment section
 

As the world’s largest economy is expected to expand at a slower pace in the second-quarter of 2010, the advanced GDP report could spur further weakness in the U.S. dollar and lead the central bank to hold a loose policy stance throughout the second-half of the year as the outlook for future growth falters.

EURUSD – Euro Forecast to Gain Versus U.S. Dollar
GBPUSD – British Pound Turnaround May Be on the Horizon
USDJPY – Japanese Yen Positioning Remains
USDCHF – Swiss Franc May Continue to Strengthen against Dollar
USDCAD – Canadian Dollar Forecast to Break Below Narrow Range
GBPJPY – British Pound Forecast to Advance Against Yen

 

View individual currency SSI charts in our FX Sentiment section

Interested in building your own SSI-based strategy? Request SSI data on our forex forum.

The GBPUSD looks vulnerable but it is difficult to short without a point of reference to place a stop. It is best to wait for a top to form and then short a bounce.