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Forex Profit Alert Daily Briefing
*** WATCHING: EVERYTHING! Be ready for a new trade soon...
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Dear Forex Profit Alert Subscriber
A happy New Year to everyone. Here’s to an action packed and profitable 2007 in the forex markets.
We finished 2006 with a nice run of profitable trades – and I’m sure we can carry on with that in the weeks ahead... although we need to be mindful of the still thin markets until the holiday season is over and traders around the world are back in their seats.
We certainly won’t be jumping straight back in – I’ll let you know as soon as a trade with the right risk/reward profile shows up.
For now, let’s take a look at what’s going on out there in the markets...
The US dollar (USD) enjoyed a period of relative strength over the Christmas period, as stronger than expected manufacturing and housing numbers helped the US unit gain back some lost ground versus the majors. Sterling (GBP) fell back from our pre-Christmas profit take levels to trade near 1.9550 and the euro (EUR), too, slipped to test 1.3050.
But this USD strength proved short lived and as New Year trading gets under way, the greenback is opening on an ominously weak note once again.
The real story for 2007 appears to be (at this early stage) whether or not the G20 central bank trend of liquidity removal will continue as interest rates continue to rise, helped in part by continuing inflationary pressures as a result of commodity (namely oil) price increases.
At this early stage it does seem likely that this will continue and so the challenge for 2007 will be global economies’ ability to ride out this liquidity withdrawal without sliding into recession.
As far as the currency markets are concerned, many operators are calling for faster Japanese interest rate increases and a faster appreciation of the yen (JPY).
Watching GBP/JPY
Certainly this never materialized last year and unless the Bank of Japan (BOJ) moves very rapidly then it is unlikely to in 2007 either, as the Japanese appetite for ‘carry trades’ continues.
If you look at a GBP/JPY chart,you will see the long-term moving average convergence is creeping ever closer as the potential ‘Golden Cross’ formation continues to unfold.
It could well be that I’ll be looking to get a trade on in this currency pair pretty soon – although at the moment, GBP/JPY has had too much of a run-up and could be due a pull back. We need to tread carefully here and wait for the opportunity to come to us...
Elsewhere, the talk continues to surround the direction for US interest rates and if the housing market and the consumer continue to disappoint then the next move for US monetary policy should be down.
However, there is much water to flow under the bridge and it is too early yet to predict how this scenario will unfold. Certainly early market moves today are pushing the USD on the back foot once again as 2007 trading commences.
Market action may be curtailed today as the US markets are partially closed as a mark of respect for the late President Ford who died last week. There is little in the way of economic releases today and Japanese markets are effectively closed until Friday (half day Thursday) for New Year bank holidays.
Data Today
** UK PMI Manufacturing Survey for December at 9.30am** Euro Zone Manufacturing PMI for December at 9.00am
** No US numbers today.
The market will look to data due later in the week for further clues on the US economy, namely the unemployment date due out on Friday.
The New Zealand dollar (NZD) has continued to strengthen through the Christmas break. It is currently 100 pips higher than where we took profits. Still, we did the right thing by locking in a profit ahead of the holidays and there will be plenty of opportunities to get back into this trade in the coming days/weeks.
Keep an eye on your inbox - we will be looking to trade again as soon as is possible this week and I am watching all the major currency pairs. I will give you an outline on what I am looking at as the week unfolds and we’ll trade as soon as we can.
That’s all for now – stay tuned...
Tom TragettForex Profit Alert
P.S. As I said, I’d love to know how you did on the last few trades and how you are finding the service. Please do drop me a line at mailto:fpa@f-s-p.co.uk to let me know.
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