Will a Rise in Services and a Strong U.S. Labor Report Ignite a Dollar Rally?

http://www.dailyfx.com/forex/fundamental/article/5_key_events/2011/01/03/Will_a_Rise_in_Services_and_a_Strong_U.S._Labor_Report_Ignite_a_Dollar_Rally.html

EUR/USD’s Lack of Direction Presents Scalping Opportunity

The EUR/USD has regained its footing as the overnight dollar rally has started to lose steam. The greenback was tracking higher on the back of an improved outlook for U.S. growth following a slew of strong fundamental releases to end the year. An inline manufacturing PMI print took the wind out of the reserve currency’s sails but failed to derail equity markets which were up over 1.0 % in early trading. Firm risk appetite has been a supportive factor for the pair as the buck continues to maintain its safe haven status. However, we can see that relationship is weakening leaving the pair directionless. The Euro-Zone sovereign debt crisis fading from the headlines has reduced downside risks and is helping create a scalping environment.

Key Technical Levels

Charts created using Strategy Trader– Prepared by John Rivera

The converging 200 and 50-Day SMA’s at 1.3082 and 1.3472 respectively are providing solid support and resistance barriers for the pair. A medium term range has started to develop and look poised to continue, furthering pout conviction in the pair as a target. An intra-day channel is developing and is providing target levels for traders to enter and exit positions. Also, keep in mind that there is a four day rising trend line that is placing support at 1.3270.

Charts created using Strategy Trader– Prepared by John Rivera

Key Support/ResistanceLevels to Watch

Pair	S/R	Level	Spot	Valid Since	Market Influence
CAD/JPY	Resistance	20-Day SMA	82.52	12/20/10	Low
EUR/USD	Resistance	50-Day SMA	1.3461	11/15/10	Medium
AUD/NZD	Support	50-Day SMA	1.3026	12/03/10	Low

Quantitative Metrics

The EUR/USD has seen its Bollinger band width narrow to 379 pips as the pair continues to trade sideways. The level of variance ranks at the bottom of the most traded pairs making it an attractive scalping target. The Average True Range (ATR) for the pair has also shrunk to 133 pips placing it in the upper echelon of the most active pairs-a red flag for high frequency traders. The implied volatility level for the pair is also on the rise which could be a warning signal for a potential breakout.

Charts created using Strategy Trader– Prepared by John Rivera

Volatility / Activity Indicators

	EURUSD	GBPUSD	USDJPY	USDCHF	USDCAD	AUDUSD	NZDUSD	GBPJPY	EURJPY
ATR(14)	0.0133	0.0144	0.6600	0.0109	0.0071	0.0088	0.0084	1.1456	0.9739
ATR%	1.00%	0.93%	0.81%	1.16%	0.72%	0.86%	1.09%	0.91%	0.90%
20-5 Day SMA	-0.0039	0.0107	1.4416	0.0215	0.0089	-0.0187	-0.0175	3.1262	1.6105
Boll. Band Width	0.0379	0.0644	3.7980	0.0644	0.0256	0.0520	0.0492	9.3965	5.1873
1 wk Implied Vol	13.1250	9.8450	10.4350	13.0250	8.6950	12.1800	12.4400	9.9300	11.2200

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To discuss this report or be added to the email list, contact John Rivera, Currency Analyst: jrivera@fxcm.com

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