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Monday, 10 Nov 2008

G20 Meeting Signals Global Interest Rate Cuts

This weekend's preliminary G20 meeting of finance ministers from leading industrialized nations, and other major developing economies, produced a general agreement on the state of the international economy and secured assurances from many of these nations that action must be taken. So far, according to the G20's joint statement, the measures to be taken involve further Interest Rate cuts and an increase to government spending.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupnoupdown
Weekly Trendupupupnoupdown
Resistance1.29581.5900100.001.18200.69580.8210
1.29311.584599.751.17910.69300.8188
1.29031.580099.351.17550.68910.8155
Support1.28201.568598.201.17000.68220.8100
1.27701.564597.851.16750.67950.8070
1.27301.560097.451.16500.67660.8044

Economic News

USD - Is the USD Changing Course?

An ominous start to the greenback's trading week began during today's early trading session. The USD lost ground to every major currency except the JPY. Receiving some bad news at the end of last week, with a lower-than-forecasted Non-Farm Employment Change figure, as well as a higher unemployment rate, the USD's recent price bubble is beginning to show signs of weakness. Even the monumental election of Barack Obama to the office of U.S. President wasn't enough to counter this negative economic data.


This weekend's preliminary G20 meeting of finance ministers from leading industrialized nations, and other major developing economies, produced a general agreement on the state of the international economy and secured assurances from many of these nations that action must be taken. So far, according to the G20's joint statement, the measures to be taken involve further Interest Rate cuts and an increase to government spending.


News outlets are beginning to release information about follow-up actions being taken by attending countries. China, for instance, announced a $586 billion economic stimulus package to be implemented in the near future. Brazil, Russia, India, and China all agreed on joint measures to increase the flow of trade between their economies as well as bolster foreign investment and ease liquidity shortages.


Looking at this week, it is difficult to make an accurate assessment of the USD's future movements. The past few weeks have proven more clearly that the market is truly unpredictable. With negative economic data being released regularly, the USD had continued to climb, defiant of market data. Now it appears this trend has stopped and the USD may be looking at an upcoming reversal. With very little news emanating from the U.S. economy, the attention appears to have shifted to the Euro-Zone, as well as the Asian bloc, for market forecasts.

EUR - Interest Rate Cuts May Revive Euro-Zone Economy

The auspicious beginning of a week which may find the EUR topping the USD consistently started during today's early trading hours. The EUR, with moderate gains being made against most of its currency rivals, has finally begun to revive itself from the panic-stricken daze it found itself in these past few weeks. A number of factors may have been responsible.


The first important event to note was the complacence of the USD following the historic election of Barack Obama. After steadying itself, the Dollar suddenly found itself more susceptible to the influence of those economic indicators which it had ignored since the beginning of the financial crisis. Now market data like the NFP Report and unemployment rate have a more significant impact on the value of the USD. This in turn allows the EUR to make gains against its primary rival.


The second factor has to do with rapid and relatively broad Interest Rate cuts being made throughout the Euro-Zone last week. This also aided the 15-nation currency to appreciate versus its European counterparts.


One of the remaining factors in the EUR's sudden appreciation is due to the G20's preliminary meeting of finance ministers this past weekend which arrived at a general understanding that global Interest Rates must be slashed and efforts must be taken to boost trade and capital flows; an effort which has already started in a number of major world economies.


Looking ahead, the Euro-Zone is set for a relatively quiet news week considering there are only a small number of vital economic data releases being delivered. After the U.S. Presidential election last week, followed by the release of rather intense market data, this week will be comparatively slower, yet has the potential for dynamic sparks should the speeches being delivered produce wild market volatility.

JPY - JPY Driving Down Bumpy Road

The Japanese Yen faced some difficulties at the end of last week; trading up around 99.10 in today's early trading hours against the USD. Japan's economic data revealed that manufacturing orders dropped significantly as a result of decreased exports from lower demand. The economic slowdown is rearing its ugly head in places which are often overlooked, as seen in the Asian economies recently.


China's announcement this weekend of an over $500 billion stimulus package may give a much needed boost to the Japanese stock market, as well as an increase to regional trade and capital flows. It will likely not provide the necessary strength to hold off the upcoming recession, however. If international Interest Rates are slashed further, according to the G20's recent call for such an action, the value of the JPY as the base of most carry trades will likely fall, generating a further appreciation to the Yen's value.

Oil - Oil Makes Light Gains in Early Trading

After dropping as low as $60 a barrel last Friday, the price of Crude Oil has now risen almost $4 a barrel, and appears to be climbing even further. Fears of the oncoming recession led most analysts to predict declining Crude Oil prices well into early 2009 as a result of the demand slump. However, with this week's forecasted U.S. Dollar drop, the price of Crude Oil very well may rise back up to the $70 mark by week's end.


The price of Crude Oil is attached to the value of the USD. As a result, when the value of the Dollar goes down, the price of Crude Oil goes up, and vice versa. Since Crude Oil Inventories appeared stable last week, this was an indicator that supply is not the problem. As such, the value of the Dollar may indeed be the driving force behind the value of Crude Oil. Investors would be wise to watch the movement of the USD to get an accurate gauge for the price of Oil.

Technical News

EUR/USD

After a few days of mixed results, it seems that the pair has consolidated around the 1.2850 level. However, currently the 1-hour chart is providing exclusive bearish signals, with its Slow Stochastic already pointing down. In the nearest time frame, traders may indeed join this bearish trend.

GBP/USD

The pair is continuing to provide mixed results, and is now trading around the 1.58 level. The one hour chart demonstrates a flat line ever since yesterday. Traders are advised to wait for a clearer signal before entering the market on this currency pair.

USD/JPY

The pair is continuing to fluctuate within a restricted price zone, and failed to mark a significant breach. All oscillators in 1 hour chart support that notion. Traders should wait for the breach and swing.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. The hourly charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

The Wild Card

Crude Oil

It seems that the strong bearish move that Oil experienced lately has vanished. As all oscillators on 4 charts are providing bullish signals, a bullish correction might be impending. This may give forex traders an excellent opportunity to catch the trend at a very early stage.

Current Time: 10/21 23:14 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/22
01:00EUR+ German 30-y Bond Auction2.25|1.1--1
02:30AUD+ CPI q/q0.5%0.4%-5
02:30AUD+ Trimmed Mean CPIq/q0.8%0.6%3
10:30GBP+ MPC Asset Purchase Facility Votes0-0-90-0-9-5
10:30GBP+ MPC Official Bank Rate Votes2-0-72-0-7-5
13:00AUD+ CB Leading Index m/m0.5%--1
13:30AUD+ MI Leading Index m/m-0.1%--1
13:50JPY+ Trade Balance-0.92T-0.91T-3
14:30CAD+ NZD Core Retail Sales m/m-0.6%0.2%-5
14:30CAD+ Retail Sales m/m-0.1%0.1%-3
14:30USD+ Core CPI m/m0.0%0.2%-5
14:30USD+ CPI m/m-0.2%0.0%-3
16:00CAD+ BoC Monetary Policy Report---5
16:00CAD+ BoC Rate Statement---5
16:00CAD+ Overnight Rate1.00%1.00%-5
16:30USD+ Crude Oil Inventories8.9M--3
17:15CAD+ BOC Press Conference---5
21:00GBP+ MPC Member Weale Speaks---3
23:00AUD+ RBA Gov Stevens Speaks---5
23:45NZD+ CPI q/q0.3%0.5%-5
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