Market Strategies

Forex Combination for this Market behavior

From our previous market view analysis, a mixture of good and bad reports coming from both sides of the continent have made the forex majors behave with price fluctuating wider than most have expected. As the USDX have made a remarkable recovery from a low of 75.63 to as high as 78.17 as of this writing due to the 5.3% decline of the trade deficit figures. This was the fundamental reason that supported our technical outlook where the key price level to watch was the 77.33 basis point levels for the US Dollar index. Staying above this figure until the end of the month would sustain its viability to hold back higher for the rest of the year. Unless, some other unforeseen reports comes out in the picture.

With the current behavior of the forex market; the appropriate combination to choose from would be the EURUSD vs. the EURGBP cross rate. Where the the EURGBP stays below the critical price level of 0.8660 will still drag the EURUSD lower as it is right now at the 1.3735 and still targeting the 1.3575-80 levels. Expect some corrective moves upon completion of this initial target. Meanwhile, the GBPUSD vs. the USDJPY and a combination of the GBPJPY to move higher at the 133.30-80 levels would be the most logical trade plan to have based on the current price levels and market behavior. Although, the GBPUSD has made some excellent correction lower to the 1.5950-60 levels where one can find a double-bottom price alignment that have triggered some short-covering from earlier positions.

This currency trade combination should provide a better positioning for prices to re-align after this week's trading. However, the GBPJPY may also provide a more market potential to move higher before the month of November closes.