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Tuesday, 26 Oct 2010

G20 Summit Leaders Agree to Prevent Currency Devaluation War

Regardless of an agreement at the weekend's G20 summit to avoid a currency devaluation war, investors have begun to price in the expectation of an asset purchasing facility by the Fed following their upcoming policy meeting on November 2-3. Traders have been forecasting such a move for some time, and it appears that recent statements at the G20 hint at an upcoming QE move by the Fed, which has put strong bearish pressure on the greenback.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddownnodownnonono
Weekly Trendnodowndownupdownup
Resistance1.40601.583581.500.97901.00000.8955
1.40401.580581.300.97700.99800.8935
1.40101.577581.000.97400.99500.8905
Support1.39501.571580.400.96800.98900.8845
1.39201.568580.100.96500.99600.8815
1.39001.566579.900.96300.99400.8795

Economic News

USD - US Dollar Lower Amid Positive Data; Forecasts of Impending QE Move

The US dollar was hard pressed to make gains yesterday amid highly positive figures from the housing sector of the US economy. Existing home sales jumped to 4.53M, beating expectations for a gain of only 4.29M. The figures appear to have added momentum to estimates of consumer confidence, but were countered by speculation of a quantitative easing move being anticipated for early November.

Against the euro, the USD was trading lower at a price of 1.4075 from 1.3960 early in the trading day. As of this morning, the price has come down somewhat, trading at 1.3946 in mid-Asian trading. Against the Japanese yen, the buck fell back towards its 15-year low mark.

Regardless of an agreement at the weekend's G20 summit to avoid a currency devaluation war, investors have begun to price in the expectation of an asset purchasing facility by the Fed following their upcoming policy meeting on November 2-3. Traders have been forecasting such a move for some time, and it appears that recent statements at the G20 hint at an upcoming QE move by the Fed, which has put strong bearish pressure on the greenback.

EUR - Euro Benefits from G20 Summit and Surge in Industrial Orders

Agreements at the weekend's G20 summit to curb any attempts at a devaluation war have helped the euro in short-term trading. Investors still anticipate a move by the Fed to lower the US dollar and this has pushed many traders into the higher-yielding assets, such as the EUR and AUD. The surge in commodity prices, brought on by a lower dollar, assisted in the Australian dollar's recent rise.

The EUR/USD was trading higher at 1.4075, in late trading before coming down somewhat in today's early hours. The EUR/GBP is trading at 0.8869, while the EUR/JPY trades at 112.65, up from 112.40 yesterday.

Adding further bullishness to the EUR's recent movement was a sharp jump in industrial new orders in the euro zone. Forecasts yesterday were for an increase of 2.1%, from a previous decline of 1.8%. However, the figure showed a surge of 5.3% in industrial orders, highlighting the recent growth experienced by the euro zone. If today's German GfK consumer climate report shows improvement, as expected, the EUR may continue to gain modestly against its primary currency rivals.

JPY - USD/JPY Could See Small Boost from CB Confidence Figures

The Japanese yen made surprising gains against the US dollar in yesterday's trading as investors ditched the greenback for other currencies on the view that the Fed will intervene in the currency market soon. The JPY did not see similar gains against its other rivals. The EUR/JPY and EUR/GBP both appeared to flatten a bit, as did the CHF/JPY.

With today's economic news focused on the US and Europe, the Japanese currency will likely base its short-term value today on its primary counterpart, the USD. Expectations for the US consumer confidence report from the Conference Board may show an increase in individual sentiment. Overall pressure appears to be down on the US currency, but a positive read could give the buck a modest boost against the yen.

Crude Oil - Oil Prices Stronger on Weakened USD

Crude Oil prices experienced steady growth over the last 24 hours as the value of the US dollar sank. Expectations among analysts are for a move by the Fed to devalue its currency through an asset purchasing program, in essence releasing more dollars into the market. Commodity prices have gained support as a result.

The price of a barrel of oil climbed to $82.57 yesterday, and looks to be continuing higher as of this morning. It appears analysts are expecting a rise in commodity prices to coincide with the greenback's fall, leading up to the day of the announced monetary easing program by the Fed. The boost in oil prices has helped contain some of inflationary concerns in countries like Britain, but don't appear to be enough to combat other growth concerns in many of the more developing countries.

Technical News

EUR/USD

The daily and weekly RSI both show the price descending out of the over-bought region, suggesting that momentum may be shifting directions. A recent bearish cross on the weekly Stochastic (slow), and a doji candlestick formation on the weekly chart both support this notion. When the price begins to shift downward, going short may become a smart move.

GBP/USD

This pair looks to have flattened out over the past few trading days. The mild uptrend remains dominant, and no indicators suggest a change in direction. This pair appears to be consolidating towards the 1.6000 price level, but subsequent direction could go either way. Going long on the pair up to that target could prove wise, but traders should proceed with caution beyond that point.

USD/JPY

This pair's long, sustained drop has pushed almost every indicator into forecasting a reversal. Contrary to this technical analysis, however, is the fact that the price remains bearish. Traders would be wise to check the fundamental side of this currency pair since technical analysis appears less relevant in these conditions.

USD/CHF

Momentum for this pair appears to be shifting in an upward direction. A fresh bullish cross on the weekly Stochastic (slow) suggests strong upward pressure is mounting. A dramatic upturn in the daily RSI supports this notion. Going long could turn out to be a wise tactic.

The Wild Card

AUD/JPY

This pair has flattened and consolidated at the 80.00 price mark and appears poised for a downturn. A triple-doji candlestick formation on the weekly chart highlights mounting downward pressure. Forex traders should also note the recent bearish cross on the weekly Stochastic (slow). It appears going short on this pair, and at the peak of a potentially lasting downturn, is becoming the preferred position for this currency duo.

Current Time: 04/19 17:01 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/21
15:00USD+ CB Leading Index m/m0.5%0.8%-1
04/22
01:00AUD+ CB Leading Index m/m0.2%*-3
13:30CAD+ Wholesale Sales m/m0.8%0.7%-3
14:00USD+ HPI m/m0.5%0.6%-1
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