And then they changed the rules again…OPINIONS | WRITTEN BY MATTHEW LIFSON | CREATED: MAR 14, 2013 19:54 GMT; LAST MODIFIED: MAR 14, 2013 19:57 GMT

There are a lot of traders out in “FX Land” scratching their heads at the moment, wondering “what happened today”? Earlier this morning, the US posts good news as thejobless claims number was better than expected, and Euro news showed a disappointing EMU employment number.

Well, if we follow what has happened the last few weeks, we remember that “risk” and the “DOW” seemed to have decoupled. Stocks have moved higher the last few weeks and the USD has followed suit.

All the traders buying “risk” currencies because stocks moved higher, got caught in a rather serious bind. Articles were written about how things had changed, how they had gone back to pre 2008 when strong DOW meant a strong DOLLAR.

So, what happened? Did we miss something? I don’t think so. What I think happened is simply a very “short” market running into a very strong support level at 1.2910. The inability to break lower, had traders caught with short positions and as the “stop-loss” buying commenced, positions were squared and the EUR benefited as it improved against both the USD and JPY.

We did print a yearly low earlier at 1.2910. Getting all technical on you, this was the 76.4% retracement of the 1.2660-1.3710 move. That the currency bounced is not surprising. The “bear trend” remains intact and will remain as long as we stay below the 1.3080 resistance level. EUR needs to close above 1.3135 to reverse this trend.

Keep one thing in mind. Nothing has changed in Europe. The Italian political problem still remains. The economies of Spain, Cyprus and Greece are still problems and France isn’t far behind.

While some will blame the “reverse decoupling effect” on today’s move, I simply think the market got itself way too short. Corrections of this nature are not out of the ordinary. We should continue the downward trend next week.

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Forex - GBP/USD pushes higher but upside limited

The pound pushed higher against the dollar on Thursday but remained close to two-and-a-half year lows as demand for the greenback continued to be underpinned by optimism that the U.S. recovery is gaining traction.

GBP/USD hit 1.4963 during European afternoon trade, the session high; the pair subsequently consolidated at 1.4961, gaining 0.26%.

Cable was likely to find support at 1.4830, Tuesday’s low and the pair’s lowest since June 2010 and resistance at 1.5046, the high of March 8.

The Department of Labor said the number of people who filed for unemployment assistance in the U.S. fell by 10,000 to a seasonally adjusted 332,000, last week compared to expectations for an increase of 8,000 to 350,000.

The unexpectedly strong data, together with recent stronger-than-forecast data on nonfarm payrolls and retail sales fuelled optimism over the durability of the U.S. economic recovery.

Sterling remained under pressure after data earlier in the week showing that U.K. manufacturing and industrial output slumped in January reinforced concerns over the threat of a triple dip recession and the risk of further easing by the Bank of England.

The pound was higher against the euro, with EUR/GBP down 0.42% to 0.8649.

Also Thursday, official data showed that U.S. producer prices rose by a seasonally adjusted 0.7% in February, in line with expectations. 

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