Outlook For Trading This Week: Feb 3-8

Posted on February 4th, 2008 by Yours Truly under Forex

All right, not much went on last week due to the influx of important news stemming solely from the United States stipulating that further rate cuts are forthcoming with many predicting cuts to 1.00% a realistic probability. Job growth as per the Non-Farm Payrolls numbers released on Friday declined dramatically from the already lowly December figures as the biggest job losses were seen in the manufacturing , financial and business services. If February payrolls decline even further, look for the Federal Reserve to cut another 50bp at the March meeting.

The spotlight for this week resides in the interest rate numbers from the AUD, EUR and GBP. Look for rate hikes coming from the Reserve Bank of Australia on Monday at a 25 bp increase to combat inflation as the RBA’s weighted-median index of inflation jumped 1.1% in Q4. Meanwhile the Bank of England takes the opposite view on Thursday as the latest PMI Manufacturing data missed badly signaling UK monetary authorities to follow their US counterparts by initiating a sustained policy of easing via rate cuts. Meanwhile the ECB continues to maintain maintain its rather hawkish posture and will be adamant in keeping rates at their current 4.0% due in part to their industrial sector remaining in an expansionary mode.

Meanwhile according to PFX Global’s Total Fundamental Strength Analysis chart, the pattern is exactly the same as last week with the the New Zealand and Aussie currencies continuing to be the most dominant pair with the Swiss and Yen to remain the weakest.

With respect to trading, the long-term EUR/GBP trade I have going on has reached the +75 pips mark and is 40 pips away from my first target which was the previous swing high and stop loss has been set to break-even.

The only current setup I see that is most likely to take place in the next few hours is the GBP/CHF on the 1-hr time frame and the fundamentals are in line with the weakening of the GBP as seen late last week. Entry around the 2.1380 area seems like an ideal area given that it is the current low of the day, we’ll see how this pans out.