Interesting Gaps Start the Week

Forex trading opened for the week in Sydney with huge gaps from Friday's close in New York concerning all euro pairs. Apparently, the gaps opened as stop loss sell orders were triggered and an avalanche ensued. I feel that the overall bias still tends to lean toward a bearish euro so now is the time to play closing the gaps and enjoy a short term profit.

Euro Rally Sustained?

Thanks to the ECB and BOE maintaining 1.0% and 0.5% interest rates respectively, coupled with poor numbers from the US regarding jobless claims and retail sales, the euro experienced a 120 pip rally yesterday against the dollar.  Will this continue through today?  It appears that EUR/USD is consolidating around 1.283 awaiting the next bit of financial news.

At 8:30 this morning, both Canada and the US will announce Trade Balance which potentially could increase volatility in the forex market.  I anticipate a slightly worse position for the US and a much improved trade balance for Canada which should strengthen the Canadian dollar and slightly weaken the US counterpart which should help to maintain the rally of the euro regardless of the situation in Greece.

The yen continues to strengthen placing a stranglehold on Japanese exporters.  I was surprised that the BOJ did not intervene on Tuesday as many had anticipated and still look for them to do so prior to the end of January.

Forex Day of the Week

It appears that out of this week, today is the day with an abundance of economic news including rate decisions from the Eurpean Central Bank (ECB) and Royal Bank of England (BOE) as well as infromation on Retail Sales and Initial Jobless Claims in the United States.  

Most experts anticipate that both central banks will leave rates unchanged at 0.5% for the UK and 1.0% for the European Union. Any deviation in those forecasts will have significant impact on the currencies.  A move or talk indicating a move up should prove bullish and any move or talk in the opposite direction will increase the existing bearish sentiment.

Look for good Retail Sales information from the US and slightly higher than expected jobless claims which should cast a very slight bearish bias on the dollar.  

Realizing I'm only correct a little more than half the time, I anticipate the euro and the pound to improve over last night's gain on the dollar as the yen continues to wallow waiting for Poppa to intervene.

Has Euro Rally Begun?

Has the euro rally begun?  With both EUR/USD and EUR/JPY completely beaten to near death last week, can the currency possibly fall any more?  The answer of course is yes but it appears that a fairly significant rally developed overnight while we Americans were sleeping.  Hopefully it will hold through the day and continue into the week.  European governments are moving rapidly to restructure debt and improve currency flow.

 With very little money moving news early in the week, Thursday appears like the big day with interest rate decisions from European Central Bank and the Royal Bank of England along with Retail Sales and Initial Jobless Claims from the United States.  Expect a ton of volatility Thursday as we ease through the rest of the week.

Euro Weakness Boosts Exporters

Euro weakness against most major currencies has strengthened European exporters who are now able to offer affordable products world-wide.  Will the ECB force the euro to remain weak to enable an economic recovery in the financially decimated region?  It appears that the majority of investors are now short euro with no real light at the end of the tunnel for those still looking for a rally.  Each day the news out of Europe becomes increasingly bleak.  Will we witness and end to the euro during this decade as some have predicted? I don't see that as a solution for anyone except for Germany and France.  I feel that the smaller debt-ridden countries like Greece and Ireland would see devastating currency devaluations that would completely break their financial back.

While I Slept - January 4

Apparently, the sluggish start to the year's market opening encountered some action as the EUR, GBP, and AUD rallies stalled considerably, and the yen gained on both the dollar and the euro.  As the European market climaxes and the Americans start to wipe the sleep from their eyes, it appears that yesterday's rallies will resume.

In other news, I watched the news all night as Ron Paul led in the Iowa Caucus by 24% at most times.  As the night drew to a close, the lead flip-flopped with Santorum slightly ahead of Romney and Paul left in the dirt at that time down to 22%.  With only one county left to report, Santorum led by close to 1,000 votes yet when I wake this morning, news around the world pronounced Romney the winner.  What happened?

When Will BOJ Intervene ??

With EUR/JPY under 100 for the first time in over 10 years and USD/JPY approaching all time lows, we all realize that it's only a matter of time until the Bank of Japan (BOJ) encourages worldwide intervention as they did on August 4th and October 31st of 2011.  Japan relies too heavily on exports to allow their currency to maintain the strength that it's carried through most of 2011.  It appears that Japanese exporters were buying up yen like crazy the last two days to close out their annual books in one currency so I would expect that trend to reverse itself this week as the markets re-open after the New Year because these same companies will be too low on dollars and euros.

Regardless of what takes place early in the month of January, I still anticipate the BOJ to intervene some time before January 15th.  Look to capitalize on a giant spike similar to what happened on October 31st when the yen lost 400 pips in a matter of minutes.

Buy EUR/JPY and USD/JPY now, maintain tight stops and set some sell orders 300-400 pips higher and look to make a tidy profit quickly.  The Bank of Japan has already proven that they will step in as necessary so look at this as only a matter of time.

I sincerely apologize to all who lost money on my EUR rally prediction.  I am in the same boat.  However, US corporations were all buying dollars at the end of the year so they will be forced out of necessity to reverse that trend early in 2012.  So hopefully EUR/USD will hit 1.39 before it touches 1.19 and we the long minority can all jump for joy!

But watch carefully for BOJ intervention and a jump of USD/JPY to 79.15-80.15 and EUR/JPY to 103.00-104.05.

I wish everyone a blessed New Year and say buy, buy, buy USD/JPY as well as EUR/JPY and cut your losses on peaks with EUR/USD.