Pound rallies against the Euro exchange rate - at last

Foreign Exchange Currency Outlook : The US dollar rate is rising strongly this morning pretty much across the board, from a high of 1.4719 on Dec 18 to 1.3918 at the Friday close in New York to 1.3657 so far this morning. The move breaks the linreg channel drawn on the hourly chart and also the 50% retracement of the December move up in the euro. The 62% Fibonacci retracement comes out at 1.3377 - but that’s just the recent move. If we go back to the lowest euro exchange rate low last Oct 28 (1.2335), the 62% retracement is 1.3246.

The euro rate is suffering in part on expectations of really bad data this week, including retail sales, and also on a dovish comment from ECB VP Papademos, who said over the weekend that rate cuts might be needed to guard against recession.

Might be?

We have a flood of bad eurozone data today and it’s only Monday.

The odd move is the US dollars rise against the yen, priportedly on a cascade of carry trade unwinds, also breaking the linear regression channel on the hourly chart and actually touching the 62% retracement of the move down from the intermediate high on Nov 25 (97.42) to the low in mid-Dec at 87.19. The 62% level is 93.51. If we expand the timeframe back to the August dollar high of 110.67, the 62% retracement is 101.68. As you know, Dear Reader, we think Fibonacci numbers are superstitious crap, but a lot of people observe them so we must be vigilant.

We have a 3-week dollar high against the euro and a 4-week high against the yen. Sterling is not as weak, which Market News explains as "the pound able to take full advantage of general pressure on the euro. Sterling strength was aided by a euro-sterling sell recommendation by Goldman Sachs, along with expected sterling demand to emerge at the 1100GMT fix linked to HSBC's quarterly dividend payments and UK oil companies' sterling repatriation needs."

Bye For Now Barbara Rockefeller
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