Forex Daily Forecast, Analysis and Prediction

The currencies of Australia and New Zealand have had a very interesting relationship lately. In the later part of 2010, the AUD-NZD rallied almost 900 pips, only to be followed by an over 600 pips sell off. These are large moves for this pair, especially considering that they happened during an only three months time span.

The Australian Dollar appears to be no longer the dominant currency from just couple of weeks ago. It has retreated from the all time high against the US Dollar and slipped in relation to most other active currencies. The AUD-JPY pair is no exception.

The ever-popular “cable” as the GBP-USD, is typically one of the more volatile currency pairs available for trading. With its strong moves and sudden turns, it provides plenty of trading opportunities, on both short and long-term time frames.

Last week the Euro-British Pound pair sold off dramatically. It fell about 365 pips, which is extreme, especially in the light of the most recent market activity. In fact, the plunge from 0.8646 to as low as 0.8281 created the largest weekly trading range in many months.

A combination of a very strong Swiss Franc and an extremely weak Euro made for a very powerful trend in the EUR-CHF currency pair. It has been moving down for months, making new all time lows along the way – seemingly one after another. The latest all time price extreme was 1.2399, established just two weeks ago.

The Australian Dollar had a strong run in the last days of 2010. While the rally was broad and against many currencies, the AUD-USD received the most attention. And for a good reason – this pair made another all time high, reaching 1.0255.

The Canadian Dollar was getting stronger for the better part of 2010. In the later part of the year, the USD-CAD found a firm support at the parity level. This level held for a few months, but was eventually broken on 12.31. and the price fell to 0.9887.

When the Australian Dollar was reaching the all time high against the US Dollar, it was also getting much stronger in relation to other currencies. Some of them moved to all time extremes, too. The EUR-AUD cross made the new record low several times, eventually falling to 1.2925 in late December.

During the last several days, the GBP-USD showed an increased intraday volatility. The popular “cable” had daily ranges averaging 200 pips, with the largest one of almost 300 pips, which took place on the last trading day of 2010.

The USD-JPY surprised many trades during the second part of December. Just at seemed that the price would challenge the post intervention high of 85.60, this pair changed direction. It sold off, falling from 84.50 to 80.90 in a span of about 2 weeks.

Currencies are known as some of the best trending financial instruments. This means, that major trends, once established, have tendencies to last for a long time. Unfortunately, this characteristic of Forex was not visible in the second half of 2010. Most of the currency pairs showed indecision, especially on longer-term charts.

EURUSD was very strong yesterday but so far it remains in the broad 1.3070 - 1.3270 range. And since it is near the upper limit of this range, the odds favor a pullback from here.

The prices declined to as low as 81.81 but then bounced back slightly. However, this bounce was nothing else than an oversold bounce and it didn't change the hourly trend: it remains strong downtrend.

EURUSD has risen above 1.3200 level and thus it appears now that a base has been built below that level. And that shifts the hourly trend on the upside. The larger degree picture though is still not very clear and actually as long as the 1.3280 resistance holds, the daily chart is more negative than neutral.

The market rallied on Friday slightly to 1.5475 and then pulled back again. This morning however it is once again trading near the important 1.5450 level. Thus, the hourly downtrend remains weak and actually it has weakened furthern compared with our last update.