European policymakers must not tear up the rule book when launching emergency economic rescue packages, ECB President Jean-Claude Trichet said. (Reuters)
EURUSD Daily: Euro continues to be the big winner against the dollar lately. Next key Fib retracement resistance daily comes in near 13600-level.
Ouch! Another seeming dollar correction is off the rails so far this morning, as it is sharply higher against all comers (yen the exception). Watching the dollar move sideways since November 21st is like watching an episode of the Twilight Zone—all kinds of game changing global macro events everyday and the world’s major currency just ranges. Let’s call it the “chop zone,” because that is what it can do to one’s short-term trading account—chop it up into small little pieces:
Well, the trend is certainly there. Central banks are cutting interest rates in a big way. The first two key news headlines above speak to that point. And of course, the Bank of England just announced a 100‐basis point rate cut this morning. The European Central Bank cut 75 basis points.
Heading into these two key decisions traders bid down both the pound and the euro. Selling pressure forced the British pound below key daily support but the price popped back up ahead of the announcement.
Oh the Canadian dollar! John Ross and I usually say: “They don’t call it the Loonie for nothing!” And at times, after playing a setup in the Loonie where we felt some degree of confidence, and got crushed still, we add another moniker—Currency Assured Destruction. I share this with you as a type of disclaimer, so to speak.
The Canadian dollar is getting hit, and looks as though it will test its old high. Politics seem one factor to blame, beside the fact that commodities aren’t helping.
Our attention turns towards the latest economic data from China. Yes, because it fits our fundamental story but also because the ramifications reach far and wide.
The low‐down: manufacturing in China shrunk by the largest margin ever ... EVER.
A Purchasing Mangers’ Index showed manufacturing contracted to 38.8 in November from 44.6 in October. A separate PMI showed a similarly dramatic plunge. Exports are plunging as developed economies enter recession and scale back noticeably on demand for China’s stuff.
