News

This is an update to yesterday's AUDUSD triangle trade idea.  Risk can be minimized to .8865.  The target is below .8591 (new low). 

New York, August 20, 2008

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The once resilient Euro zone economy is slowly succumbing to the downward pressures of a strong euro, a slowing global economy and tight credit conditions. Looking ahead, I expect the EUR/USD to fall further and test 1.40 dollars per euro.

Japanese Yen Congestion Puts DailyFX Analysts On Both Sides Of The Market Momentum and direction have been drained from the Japanese yen's advance. Now...

5 waves down are already complete in the NZDUSD and a corrective advance is underway now.  Wave A of an A-B-C correction is likely complete at .7159.  However, notice that the rally is in 3 waves itself.  This means that a flat is probably underway. 

As long as price is above 108.36, our preferred count is that wave C of Y (within the W-X-Y from 95.72) is underway towards 116-118 (these are measurements that we discuss in more detail in the morning technicals), which the interest rate outlook favors as well. 

Although a low appears to be in place (at least temporarily) for the EURUSD,

the GBPUSD is vulnerable to a new low from a 5th wave thrust from a bearish triangle (wave 4) before a more permanent low is in place.

We argued for a bottom yesterday, writing that “on the hourly, there are 5 waves down from 1.6039.  Even more indicative of a near term bottom is that wave 5 is in 5 waves as well…A push through 1.4710 would be enough to convince us that at least a short term low is in place.” 

Talking Points   
•    Japanese Yen: Back Above 110
•    Euro:  Construction Contracts Further
•    British Pound: BoE Votes 7-1-1 To leave Rates Unchanged
•    US Dollar: MBA Mortgage Applications On Tap

The BoE voted 7-1-1 to keep rates unchanged for a second meeting in a row. Tim Besley continues to push for a rate hike, while perennial dove David Blanchflower called for easing. The majority chose to stand pat as a rate hike would have risked hurting confidence and a rate cut would increase the risk of keeping inflation elevated. Although the central bank continues to maintain that a rate increase would “material undershoot” CPI, and that wage growth has remained subdued.  Tim Besley argued that a rate hike would be a prudent pre-emptive move which would anchor inflation for the long-term. Yet, the MPC recognized that the growth outlook has worsened in the past month.