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Friday, 15 Oct 2010

Can The USD Continue to Gain Ground Today?

A tightening of monetary policy in Singapore was the main factor in the dollar dropping to record lows against several of its main currency rivals in trading yesterday. The EUR/USD pair went as high as 1.4123 before staging a downward correction. At the moment the pair is trading around 1.4025, still well above the psychologically significant 1.4000 level. Whether or not the dollar can extend its gains today will likely depend on a batch of US news events.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupdownnoupdownup
Weekly Trendupupdownupnodown
Resistance1.41501.612082.300.96701.00150.8870
1.41101.608582.000.96350.99800.8840
1.40751.605081.650.96000.99450.8810
Support1.40001.598080.900.95300.98800.8735
1.39701.594580.450.95000.98450.8700
1.39301.591080.100.94700.98100.8670

Economic News

USD - USD Values Likely to Be Influenced by Bernanke Speech

After plummeting to record lows against its main currency rivals in early morning trading yesterday, the greenback was able to stage a recovery and recoup some of its losses. The USD/JPY pair hit its lowest point since April 1995 yesterday, when it dropped to the 80.88 level. While a correction did take place, investors continue to closely monitor the pair for any surprise moves. A similar trend occurred with the USD/CHF pair. After dropping as low as 0.9460, the cross was able to steadily increase throughout the day, and is currently trading around the 0.9550 level.

Today, investors will be paying close attention to a speech from the Fed Chairman, set to take place at 12:15 GMT. Any hints as to when, and to what extent the Fed may enact a policy of quantitative easing will likely determine dollar values for the near future. The current rumor is that the level of quantitative easing set to take place is not as great as originally thought. Should the Fed Chairman allude to this, the dollar will likely see some gains to close out the week.

In addition, traders will want to pay attention to the US Core CPI and Core Retail Sales figures, both set to be released at 12:30 GMT. While neither is forecasted to show substantial gains in the US economy, anything above the predicted values will likely help the USD in the short term.

EUR - EUR Tumbles in Overnight Trading

In a sign of just how fragile the euro-zone economies are, the 16-nation currency dropped against virtually all of its main rivals in overnight trading. Analysts attribute the drop to traders who felt that the euro was overvalued against most of the other currencies. Consequently, the EUR/JPY pair fell over 60 pips since last night and is currently trading around the 114.15 level. In addition, EUR/USD also saw a drop of around 50 pips before settling in at its current level of 1.4025.

Today, euro traders will want to pay close attention to the European CPI figure set to be released at 09:00 GMT. The CPI measures the change in price for consumer goods over the last month inside the euro-zone. The figure is considered to be a key indicator of inflation and tends to generate market volatility. Should today's figure come in at its predicted level of 1.8%, the euro may see a slight boost in morning trading. In addition, traders will want to pay attention to the speech from the US Fed Chairman at 12:15 GMT. Any talk about quantitative easing in the United States is likely to generate a lot of market activity, particularly among the EUR/USD pair.

JPY - Yen Falls after Nearing Record High against USD

After dropping to 80.88 yesterday, the USD/JPY pair has since staged a minor correction and is currently trading around the 81.40 level. While the pair is still a long way from hitting its all-time low of 79.75, analysts are paying close attention to any intervention the Bank of Japan may stage to bring the oft-traded cross back to a more reasonable level. Any gains the yen makes on the US dollar are largely seen as unfavorable in Japan, which depends on a weak currency to boost its export industry.

Today, any news out of the US regarding future quantitative easing measures is likely to impact the USD/JPY pair. Particular attention should be given to the speech from Fed Chairman Bernanke at 12:15 GMT. In addition, should any of the numerous US indicators set to be released today come in worse than expected, risk aversion could return to the market and boost the yen to close out the week.

Crude Oil - Crude Oil Slips Following US Report

A US report showing that fuel consumption fell to its lowest level in close to a year caused crude oil prices to slip yesterday. The commodity fell as low as 82.20 before staging a slight recovery in overnight trading. The poor economic climate in the US is largely to blame for the low consumption rates. Yesterday's worse than expected unemployment data highlighted how far the world's largest energy consumer needs to go before fully recovering from the economic crisis.

Today, traders are advised to follow the trend the US dollar takes in order to gauge the direction oil prices will go. Should the dollar fall in trading today, investors will likely turn to commodities like oil as an alternative investment. At the same time, if the dollar continues the upward correction started yesterday, oil is likely to drop further to close out the week.

Technical News

EUR/USD

The Stochastic Slow on the 8-hour chart shows a bearish cross has formed, and that a downward correction may take place today. This theory is supported by the Williams Percent Range on the same chart, which is currently in overbought territory. Going short with tight stops may be the preferred strategy today.

GBP/USD

The Relative Strength Index on the 4-hour chart indicates a downward correction could occur for the pair today. In addition, the Stochastic Slow on the 8-hour chart shows a bearish cross has formed. Traders will likely want to go short today in order to take advantage of the upcoming bearish trend.

USD/JPY

Despite its prolonged bearish trend, most technical indicators are showing the pair trading in neutral territory, meaning it is likely to stay around its current level for the immediate future. The exception is the Relative Strength Index on the 8-hour chart, which is approaching oversold territory. Still, traders may want to take a wait and see approach today in order to get a better idea of where the pair is heading.

USD/CHF

The MACD on the 4-hour chart is showing a bullish cross has formed, indicating an upward correction may take place today. At the same time, most other indicators are showing the pair in neutral territory. Taking a wait and see approach may be the wise choice for traders today.

The Wild Card

Dow Jones Industrials

The Williams Percent Range on the 8-hour chart shows the pair in overbought territory, indicating a downward correction may take place. The MACD on the 4-hour chart shows a bearish cross has formed, supporting our theory. CFD traders may want to open up short positions in order to take advantage of the impending bearish movement.

Current Time: 09/30 09:07 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/30
10:00EUR+ CPI Flash Estimate y/y0.3%0.3%0.3%5
10:00EUR+ Unemployment Rate11.5%11.5%11.5%3
10:00EUR+ Italian Prelim CPI m/m0.2%-0.3%-0.3%1
13:30CAD+ GDPm/m0.3%0.2%-5
13:30CAD+ RMPIm/m-1.4%-1.7%-3
13:30CAD+ IPPI m/m-0.3%-0.2%-1
14:00USD+ S&P/CS Composite-20 HPIy/y8.1%7.5%-1
14:45USD+ Chicago PMI64.361.6-3
15:00USD+ CB Consumer Confidence92.492.2-5
00:30AUD+ AIG Manufacturing Index47.3*-1
00:50CAD+ Tankan Manufacturing Index1211-3
00:50JPY+ Tankan Non-Manufacturing Index1917-3
10/01
01:00EUR+ German 10-y Bond Auction1.05|1.4*-3
01:00GBP+ 10-y Bond Auction---1
USD+ Total Vehicle Sales17.5M16.9M-1
02:30AUD+ Retail Sales m/m0.4%0.4%-5
02:35JPY+ Final Manufacturing PMI51.751.7-1
07:30AUD+ Commodity Prices y/y-11.5%*-1
08:15EUR+ Spanish Manufacturing PMI52.852.3-3
08:30CHF+ SVME PMI52.952.1-1
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