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Wednesday, 13 Oct 2010
Dollar Falls after FOMC Meeting Minutes
The U.S. dollar fell against the EUR on Tuesday after minutes from the U.S. Federal Reserve's latest meeting confirmed that the U.S. central bank would likely soon inject the markets with cash to support the fledgling economy
USD - USD Down Following FOMC Meeting Minutes
The U.S. dollar fell against most of its major currency rivals yesterday on news that policy makers at the last meeting of the Federal Reserve suggested they are closer to increasing money supply to revive a struggling U.S. economy. By yesterday's close, the USD fell against the EUR pushing the oft-traded currency pair to 1.3940. The dollar experienced similar behavior against the JPY and closed at 81.80.
Markets reversed course after meeting minutes from the Federal Open Market Committee showed that officials discussed several ways to aid the economy including buying additional longer-term Treasury securities. Fed policymakers also discussed how to nudge the public into expecting higher levels of inflation in the future, which would inflate asset prices, especially commodities and stocks.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Import Prices at 12:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Fed Chairman Bernanke's speech at around 20:10 GMT. Traders are advised to watch closely, as this is likely to set the pace of the dollar for the rest of the week.
EUR - EUR Benefits from USD and GBP Bearishness
The EUR strengthened against most of its major counterparts yesterday, further demonstrating that for the time being, that this is the currency that traders can rely on to provide them with steady profits. The 16-nation currency extended gains versus the British pound on Tuesday, going as high as 0.8810 amid a broad sell-off of the GBP. The EUR experienced similar behavior against the USD and closed at 1.3940.
Sterling also fell broadly against the majors, after UK trade activity declined markedly in August, which added to concerns over the deceleration of the economy in the third quarter. Figures released by National Statistics showed total August exports fell 2.1% for the month while imports fell 2.7%. The figures caused the trade deficit to go up, adding to the concerns regarding the British economic recovery.
Today, there is plenty of economic news coming out of both Britain and the euro-zone that will likely determine the GBP and EUR levels for the rest of the week. From the euro-zone, there is the Industrial Production figure at 09:00 GMT. From Britain, the most important news will be the Claimant Count Change and Average Earning Index figures at 08:30 GMT. Traders are advised to watch closely, as the indicators are likely to generate market activity.
JPY - JPY Sees Mixed Results versus the Majors
The yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged vs. the EUR yesterday and closed its trading session at around the 113.80 level. The JPY saw bullishness against the GBP as it jumped around 100 pips and closed at 1.2930.
Traders today have very little fundamental news coming out of Japan. The only indicator being released is the CGPI report. Analysts forecast the figure to be unchanged from its previous reading. This indicator typically generates little volatility, and traders are advised to follow the news out of the US and euro-zone. The results of today's main economic indicators will likely be the driving force for yen values.
Crude Oil - Crude Oil Prices Hold Near $82
Crude oil fell below $82 a barrel on speculation that U.S. inventories rose to a three-month high last week and signs that OPEC will leave production targets unchanged. Crude began dropping two days before the U.S. Energy Department's report, which is forecasted to show a gain of 1.4 million barrels to 362.3 million.
OPEC said in its monthly report on Tuesday there was a broad consensus that oil prices around their current range have helped support economic recovery and promote industry investment. While crude prices have dropped over the last two days, an upward correction took place in overnight trading. This appears to be largely due to the dropping value in the dollar. Analysts are forecasting that for now, as long as the dollar remains low, oil has the potential to go up.
The pair has seen much bullish behavior in the past several weeks. However, the technical data indicates that this trend may reverse soon. For example, the daily chart's RSI signals that a bearish move is imminent. Going short with tight stops might be a wise choice today.
The daily chart is showing mixed signals with its RSI fluctuating in neutral territory. However, the 4-hour chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the near future. Going long with tight stops may turn out to bring big profits today.
The cross has experienced much bearishness in the past few weeks, and currently stands at the 81.80 level. There is evidence in the daily chart's oscillators, including the RSI, indicating a possible bullish correction today. Going long with tight stops may turn out to bring big profits today.
The price of this pair appears to be floating in oversold territory on the daily chart's RSI, indicating an upward correction may be imminent. The upward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the upwards breach occurs, going long with tight stops may be preferable.
The Wild Card
Silver prices rose significantly in the last few weeks and peaked at $23.50 an ounce. However, the daily charts' RSI is floating in overbought territory suggesting that the recent upward trend is losing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage. Going short with tight stops seems like the preferred strategy.
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||0.4%|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||0.1%|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|