As Predicted Yesterday

4 Month Trading Range Pierced Today

What’s Next?

The question now is will the Euro continue higher or drop back into the range.  There is projected resistance at 1.5130 and 1.52.  The answer may come from ben Bernanke’s testimony tomorrow - or perhaps with Thursday’s US GDP report.

The Dollar began it’s slide after Fed Vice Chairman Kohn said Tuesday that, ” “Interest rates cuts will not stop…”  the housing market from going through tough times.”

The Loonie Gains on Weak Dollar

The US Dollar dropped from 1.02 to below 0.98 in rapid fashion. Attendees of my Monday morning session on FX Street were treated to in depth analysis on the USD-CAD showing support levels that sliced through.

Current Support is seen at 0.9809 and 0.9776 and resistance at 0.9917.

US GDP Report this Thursday - I will be broadcasting a special Live Coverage Webinar Free here on FX Street beginning at 7:30am Eastern time. Click Here to Tune in

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), Tune into his broadcasts weekly on FX Street with “1stonForex the Week Ahead”.  He is available as a Mentor and Trading Coach to Select Clients Click Here for a Free Survey and 15 Minute Consultation

Back in mid December I was interviewed by Futures magazine for their January issue. When I was asked my thoughts on the rapidly falling US Dollar, I responded that it was in no ones interest to see the US Dollar crumble…. at least not too fast. Especially as it had recently seen a huge depreciation that needed to be digested like a large holiday meal.

Predictions Past and Present

When asked about the Euro  - I predicted accurately that the prices would stabilize in a range between 1.45 and 1.50 for the time being. That was mid December and the article was published January 1st. We are still in that trading range as of this post Feb 25.

Well it appears to me as that this prediction has played itself out and time will tell if the Euro is now ready to break out of this 500 pip range.

Euro Stuck in a Range- For How Much Longer? 

Mu

Correlation Between Euro and Pound vs Dollar - Is it Over?

Or Will the Euro Drop and Pound Rise?

The interesting thing is that the Euro and the Pound have traditionally traded in a decent correlation versus the US Dollar. However, while the Euro has stabilized at lofty levels, the Pound spent the end of 2007 giving up it’s gains and stabilized at a lower level of it’s own 500 pip range between 1.94 - 1.99

So the question is will the correlation come back together? If it does - we could expect the Euro to drop to the lower end of it’s range around 1.43 as the Pound could appreciate to around 2.035 - where they could meet in the middle and correlate again.

Or - the other possibility is that the ECB and Trichet could raise rates and leave the Dollar and the Pound behind. But I find that to be unlikely.

US GDP Report this Thursday - I will be broadcasting a special Live Coverage Webinar Free here on FX Street beginning at 7:30am Eastern time.

To read my thoughts published in Futures magazine and to register for the free Webinar visit the Investors Education Network home page.

The Three Wise Men Spoke The True Issues

But Did Anyone Hear Them?

US Treasury Secretary Paulson, FOMC Chairman Ben Bernanke, and SEC Commissioner Cox took to the hot seat in front of congress Thursday January 14th - but there was no love on Valentines Day for these three scape goats for a financial problem that was truly caused by a lack of of oversight by government regulators that were never seen. Further distressing was that you would never know that the following comments are pressing issues for the United States…

Moments of Truth and Clarity:

Bernanke: Entitlements will take up the entire US Budget by 2030 !!!

Paulson: Yes, There are short terms problems – but there are long term issues that need your attention!!

SEC Secretary Cox: Why are you encouraging spending - instead of saving?

If a Tree Falls in the Forest…

If a Truth is Told - Will the Media Listen? Let alone the three stooges running for president… At least one of them has experience with being tortured! The above comments from the congressional testimony should be bold headlines - but they are not quoted anywhere I can see except right here!

A US Congressman sternly asked Bernanke to react quickly the next time he sees a problem.  The fact is that Ben Bernanke should be credited with avoiding a Black Tuesday Jan 22, 2008 with his unscheduled 75 basis point cut. But instead of accolades, a US Congress with nothing better to do than investigate steroid use in baseball chastised these public servants stuck in a no-win situation that regulators should have seen and prevented.

Other highlights of the day include:

Bernanke stated that continuing trouble in the credit markets could trigger more action.

Meanwhile – in New York, the Insurance Commissioner said that there will not be a bailout of Insurers but suggests that splitting Insurance companies into two parts is an option – one with bond policies and another with “troubled structured finance” may be an option. Could this be the next shoe to drop?

Meanwhile - across the pond, European Central Bank’s Weber has made comments stating that Inflation is above the ECB’s stability threshold of 2% and that Interest rate expectations for the ECB to cut rates is “inappropriate” - Rate cut or increase for Euro zone?

As of 12:30 Eastern time – reaction on the currencies was interesting:

The Euro gained from 1.4580 to 1.4640,

The Pound bounced from 1.9860 to a high of 1.9741 and fell back to 1.9690

The Canadian Loonie seems to be grounded near parity fluctuating with a range between 0.9940 and 1.0030

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), Tune into his broadcasts weekly on FX Street with “1stonForex the Week Ahead”.  He is available as a Mentor and Trading Coach to Select Clients Click Here for a Free Survey and 30 Minute Consultation with Jerry

The equity markets sold off hard Tuesday and the non mfg ISM became the  goat of the day. My car radio blasted the financial news while I was taking care of last minute preparations for attending the World Money Show in Orlando. So now Joe and Jane public are being explained what the ISM non-mfg index is….

I get home to see the Euro has sold off 200 pips since the London open…. It makes me think… If the ISM non mfg index is bad news for the US economy - then why would the Euro fall out of favor? The calls for more rate cuts in the US are getting louder to have Bernanke lower rates to 2.0% or  lower!

Dollar Rallies - What’s Wrong with this Picture?

Follow me here……The Reserve Bank of Australia raised rates as expected to 7.0%, while the consensus that the BOE will lower rates, and the ECB will hold steady on Thursday - and now the pundits are screaming for the FOMC to lower rates to 2.0% in the US and….. the Greenback stages a Rally???? (Click on Chart to Enlarge)

AUD-USD Falls after Rate Hike Down Under

Common Fundamental Analysis Sense would have had the Australian Dollar strengthen - or at least continue it’s path along a very nice trend channel on this 30 minute chart. Instead, about an hour before the RBA announcement - the trend channel was broken and the US Dollar is now plowing a new channel in the opposite direction.

Dollar Intervention at work ahead of G7?

Ohhh.. what’s that…. the G7 meets this weekend and the the buzz is that FX will be on the agenda…. Maybe that explains it…

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), Tune into his broadcasts weekly on FX Street with “1stonForex the Week Ahead”.  He is available as a Mentor and Trading Coach to Select Clients Click Here for a Free Survey and 30 Minute Consultation with Jerry

And Across the Pond…

The big story last week was the FOMC justifiably cutting the Fed Funds rates to 3.0% with the

Non Farm Payrolls coming in with negative growth for the 1st time in over four years.

But this week has Australia, the UK, and the Euro zone set to adjust rates.

Let’s look at the Aussie for now

Currently the consensus is that the RBA - Reserve Bank of Australia being concerned about inflation 

will raise rates from 6.75% to 7.0%,  On Thursday the Bank of England is poised to cut from 5.5 to 5.25%

There is momentum in the AUD to continue it’s appreciation.

So Let’s Look at the Charts:

Interest Rate Differential - Gap Widens!

With US rates at 3.0 and RBA set to raise to 7% - That’s a significant spread.

Click on Charts to Enlarge

Not Sure What To Do with this information?

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), 

Tune into his broadcasts weekly on FX Street with “1stonForex the Week Ahead”.

He is available as a Mentor and Trading Coach to Select Clients

Click Here for a Free Survey and 30 Minute Consultation with Jerry