Wednesday, 16 Sep 2009

USD Continues Decline; Gold and Silver at New Highs

Investors remain wary of the US Dollar due to reduced optimism in the American economy. There is also the fear that the Federal Reserve will be forced to keep its interest rates at all time lows for longer than was anticipated. Statements from central bankers such as the Fed's Ben Bernanke and the Bank of England's Mervyn King have each stated a fear of rising pessimism and potential inflationary shocks.

Many investors are looking forward to the 13:00 GMT release of TIC Long-Term Purchases today as this event typically forces many large banks and investment firms to reevaluate their portfolios due to the new growth forecasts. With a growth in investment, there is the chance that Wall Street will make wide inroads while the USD continues to be taken down a notch from the surge in risk appetite.

Mixed signals continue to place added pessimism to an already shocked market, however. Gold and Silver have taken off to new highs, which typically results from risk aversion, yet the USD is dropping due to heightened risk appetite. Stocks are also climbing, yet central bankers are warning against too much optimism. The forex market has rarely been this exciting!

- The indicators used are the Slow Stochastic and Relative Strength Index (RSI).

- Point 1: The RSI is showing that the price is floating in the over-bought territory, suggesting downward pressure.

- Point 2: The Slow Stochastic is showing a fresh bearish cross, which suggests the next movement will likely be in a downward direction.

- Gold has risen to an unnatural high lately and technical analysis is now showing that it is positioned for a downward correction.

- Going short appears to be a wise strategy for the next few hours on this commodity.