Battle of the Bears and Bulls GBP and EUR versus USD

What a ferocious battle between longs and shorts it was from late Thursday evening, overnight and into the New York session in the morning on Dec 21st. The EUR/USD and the GBP/USD oscillated wildly back and forth for the 24 hours leading up to the market close on Friday. In fact at time of writing I observed a 90 pip gain and loss in less than 24 hours on the GBP/USD. What this is all about fundamentally is simply that news is bad out of both the Euro Region/Great Britain and also out of the US. So the annalists are not looking at good economic news of one country over another but rather from which country is the news not as bad. This puts us in an interesting place technically. The USD had gaining very well over the last few weeks and in particular the last 10 days. The question going into the holidays is whether this trend will continue or is there a turn in the currency markets in Santa’s bag?

Let’s look at the technical indicators and the overall sentiment versus the USD.

• The Canadian Dollar is back below par and seems to be doing it’s best to stay below the very important $1.00 psychological level. Are we on our way to a double bottom?
• The COT reports (Commitment of Traders) has the EUR/USD as ‘ready for a turn’ to Bullish.
• We are at lower trend-lines on both the EUR/USD and GBP/USD and a turn is due
• And the Cary Trade seems to have been given some new life on Friday
• However one important factor not yet in line is that the GBP/USD COT report has yet to move from Bearish to Bullish

None of these factors alone or even together indicate the moment a turn in trader sentiment happens, however they should been seen as at least signaling that further Dollar strength  limited for the short term.

Have a Happy Holiday,

Pierre Charlebois