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Thursday, 6 Oct 2011
EUR Drops on Speculation of Interest Rate Cut by the ECB
The EUR dropped ahead of today's ECB meeting as investors speculate the European Central Bank will cut interest rates to encourage growth in the region. The Pound also dropped ahead of today's decision by the Bank of England regarding its interest rate and asset-purchase program.
USD - Dollar Gains as Uncertainty about European Economy Grows
The USD has benefited recently as one of the two safe haven currencies as signs of economic downturn in Europe boosted demand for the currency as a refuge.
The EUR fell 102.21 yen; the 17-nation currency weakened 0.2% to $1.3322 after dropping to $1.3146 on Oct. 4, the lowest level since Jan. 13. The JPY was little changed at 76.73 per USD.
Traders today should follow the release of the US Unemployment Claims, heading to tomorrow's highly anticipated Non-Farm Payroll data. Traders should follow the release from the ECB regarding the interest rates as well as the general assessment of economic conditions. These will likely set the mood for the markets for the near future.
EUR - EUR Down Ahead of ECB Meeting
The EUR fell to a nine-month low versus the Dollar in today's early trading ahead of today's ECB meeting in which economists predict the European Central Bank will decide to cut interest rates to spur growth. The Pound has also dropped over speculations the BOE in today's meeting will expand its bond purchasing program, though interest rates are expected to remain unchanged.
Traders today are advised to follow the minutes released from the meeting of the European Central Bank as well as the Bank of England as they will likely set the mood for the markets for the near future.
JPY - JPY Gains versus Counterparts
The Japanese Yen gained versus the EUR and the Pound while remaining mostly unchanged versus the USD as uncertainty over the economic conditions in Europe spurred investors to turn the safety of the Japanese currency.
Traders today should follow the release of the US Unemployment Claims, heading to tomorrow's highly anticipated Non-Farm Payroll data. Traders should follow the release from the ECB regarding the interest rates as well as the general assessment of economic conditions. Negative economic conditions will further support the Japanese currency.
Crude Oil - Crude Rises on Expectation of US Growth
Crude for November delivery rose as much as $1.29 to $80.97 a barrel in electronic trading on the New York Mercantile Exchange. Oil prices got a lift Wednesday from a better than expected release of the ADP Employment numbers as well as a drop on Inventories.
Traders should follow tomorrow's release of the Non-Farm Employment data from the US as it tends to have a high impact on Oil price. Markets are also expected to see some volatility today with the release of the US unemployment Claims and interest rate decisions from the Bank of England and the European Central Bank.
Yesterday candlestick posted an outside day up, a telling bullish signal. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.3380 area. Initial resistance for the pair comes in at 1.3600. A close above that price level would signal an end to the sideways price action and open the door to the high of 1.3900. To the downside the euro may find willing buyers at 1.3300 where the 20-day moving average is located. Further support is found at 1.3260 off of the rising support line from the September low.
After failing to make a close above the 1.5550 resistance level, sterling was sold only to find support at its 55-day moving average near 1.5480. Rising daily stochastics hint at an additional test of the range between 1.5490 and 1.5600. The head and shoulders chart pattern shows a measured move which could take the GBP/USD higher to 1.5600.
A series of higher highs and lower lows has created a bullish channel on the daily chart but the pair will likely remain locked in a range that has contained the USD/JPY since early October. A number of resistance levels will provide ample opportunities to sell into any gains, a play that is in-line with the long-term trend. The top of the channel is found at 77.50 and is close to the 100-day moving average. Additional resistance is located at of 78.20. The bottom of the channel could prove to be supportive at 77.00 but a break here could test the September low at 74.00.
The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line at 0.9000. If this level is broken, it could turn into support as often occurs with previously broken trend lines.
The Wild Card
The kiwi has performed well over the past three trading days but has ran into resistance at its previously broken trend line from the mid-September low which comes in today at 0.7700. Forex traders may watch for a break here as there is limited resistance on the daily chart to prevent the pair from reaching its October 1st high of 0.7800. Support is seen back at 0.7600 and 0.7550 forex