Will USD Weaken Into The New Year?

• faithmight
• December 27th, 2009

Here we are at the beginning of the last trading week of the year! The $USD has staged an impressive rally in the past 2 trading weeks but going into the new year, the recent $USD rally could correct and the price in the $GBPUSD could, in fact, rally.

Studying the daily chart of the $GBPUSD, there are several red flags that signal an end to the USD’s strength, at least in the very short term.

1. Cable has been in near freefall since making the high at 1.6409 on December 16 with price sliding for 5 days with lower lows and lower highs. The down trend is very oversold.
2. After making the low at 1.5920 on last Tuesday, price failed to make a new lower low since then.
3. 1.6000 failed to act as significant resistance with price having already gone as high as 1.6021.

This last trading week can still see very volatile moves. The markets are still thin and this week is also shortened due to the New Year holiday. The econmic calendar is very light in this last week of the year. Technical trading should dominate and any news that moves the market will likely not come from the calendar. Be cautious of “surprise” announcements or rumors as the year 2009 comes to a close. All that being said, the $GBPUSD can easily remain in trend, despite being oversold, and break out below 1.5921. This development would invalidate the above rally scenario and find price heading toward the 1.5801 ST support.

Technically, based on the above Fibonacci levels of the latest bearish wave, a healthy retracement should see $GBPUSD rally to 1.6100 level. I would consider anything above 1.6100 to be a selling opportunity, particularly when markets return in full volume in 2010.

Trade carefully this week what you see, not what I think.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: $USD, GBP, GBPUSD

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