Daily Outlook - March 13th, 2008

A combination of factors drove down the dollar's value after some positive news on Tuesday bolstered the currency for the short term. Economists expectations that U.S. retails sales are lagging has fueled a continued flight from the dollar. Positive news out of Japan strengthened the Yen against its pairs. Oil reaching nearly $110 a barrel was a drag on the world equity markets pulling down our Carry Trade pairs during the second half of London on through New York and seems to be continuing into today's Asia session (Asia's Nikkei currently down over 400 points).
From a technical standpoint, the GBP/USD broke significant resistance at 2.0120 and climbed to daily highs of nearly 2.0280. To the upside we have psycological resistance at the 2.0300 level and a daily Fibo level at 2.0460s. The GBP/JPY was unable to break the significant resistance at 208 level before Yen strength dropped the pair 400 pips in less than 20 hours. The pair is now sitting at its lowest level since early 2006 and a support level that was tested for the first time 4 days ago. A break of the 203.50s could mean a run to the 200 level (a significant psychological support level). The USD/JPY is sitting on lows that haven't been broken since the mid-90s. This 100 level was tested in 1999 (Bank of Japan intervened to keep the Yen above 100) and late 2004/early 2005 There is no sign the BoJ will intervene this time around but the level still acts as serious support and is unlikely to be broken this week.

What this all means for our upcoming trade day.
GBP/USD - No major British news is expected for the rest of the week so our GBP/USD trade entry will be managed as per the rules. US retail sales is set to be released at 8:30am EST and so in the event we are still holding a position at 8:00am, if we are in significant profit we will exit 1/2 of our position, if we are at breakeven or in the negative we will exit our entire position at market.
GBP/JPY - The GBP/JPY trades will be managed as per the rules unless an entry is signaled within a short distance of the major support at 203.57 at which point the entry would be set to occur upon the break of the support level.
USD/JPY - We will again trade the USD/JPY at 1/2 risk but take short entries up against significant support with more caution.