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Friday, 5 Nov 2010

Gold at Record High as USD Plummets after Fed Announcement

Crude oil and gold reached level highs Thursday as investors turned to commodities amid concerns over the effect of the Federal Reserve's 600 billion quantitative easing plan on the U.S. dollar and the U.S. economy.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupdownupno
Weekly Trendupupdowndownupup
Resistance1.45591.664782.100.99671.04250.8955
1.43791.643281.470.97971.02700.8856
1.42971.635181.080.96891.02090.8796
Support1.41171.613680.440.95201.00530.8696
1.40191.600280.190.94590.99580.8657
1.38391.578779.550.92900.98030.8558

Economic News

USD - Dollar Plummets versus Higher Yielding Currencies

The Dollar dropped versus riskier currencies such as the euro and British pound and reached record lows versus the Australian and New Zealand dollar amid fears the Fed's 600 billion bond buying plan will prove detrimental to the USD. The Fed's plan to buy $600 billion of U.S. Treasuries over the next eight months, unveiled Wednesday, was slightly higher than market expectations. The possibility of further quantitative easing in the future put further pressure on the greenback

The concern is that the program will prove ineffective in boosting the U.S economy while flooding the markets with cheap dollars. Investors turned to riskier currencies and commodities as an alternative investment.

Today, the USD may see further pressure with the release of the Non-Farm Employment Change and Unemployment Rate at 12:30 GMT and the Pending Home Sales at 14:00 GMT. Investors are also advised to follow Ben Bernanke's speech at 18:00 GMT for any clues regarding the future of monetary policy.

EUR - EUR Trades above $1.42

The EUR traded above $1.4200 Thursday, testing its highest level since January, over concerns about the future of the greenback after the Federal Reserve announced a $600 billion bond buying program in order to stimulate the lackluster U.S economy.

The euro is currently trading around $1.4205, up from $1.4132 late Wednesday. It reached a high as $1.4282 Thursday. The EUR received a further boost versus the USD when the European Central Bank kept rates steady, adding momentum to the euro's rally.

The pound appreciated against 15 of its 16 counterparts, climbing above $1.62 after the Bank of England kept the interest rate steady at 0.5% kept its bond-purchase program unchanged. The sterling also received a boost as a report showed that housing prices rose by more than expected. The U.K. pound reached a high of $1.6294 from $1.6092 Wednesday, and is currently trading around $1.6265.

Today, traders are advised to follow the British PPI input at 9:30 GMT as well as the Euro-Zone retails sales data at 10:00 GMT.

JPY - JPY Down versus Rivals as Demand for Safe Assets Wanes

The JPY is little change Friday morning as the Bank of Japan on Friday kept interest rates unchanged at a range of zero to 0.1% and held off on easing monetary policy, as the Federal Reserve's bond buying plan did not trigger yen gains sharp enough to warrant an immediate policy response.

The Japanese currency was down for a 4th day as speculations the global economic recovery is gaining hold dampened demand of the safe haven asset. The yen fell to 114.78 per euro from 114.71 in New York yesterday, when it touched 115.42, the lowest level since Oct. 7. The currency is at 80.84 per dollar from 80.75 yesterday.

OIL - Crude Trades Near $87 a Barrel

Oil's rally continued Thursday, as the dollar dropped on the Federal Reserve's decision to expand quantitative easing to bolster the U.S. economy. Crude advanced to a seven-month high, approaching $87 a barrel after the Fed said Nov. 3 it will buy about $600 billion of Treasuries over the next 8 months. The low dollar boosted the appeal of commodities as an alternative investment.

Oil for December delivery climbed as much as 32 cents, or 0.4%, to $86.81 on the New York Mercantile Exchange. Spot crude is currently trading near $87 a barrel. Futures have gained 8.9% in the past year.

Technical News

EUR/USD

After yesterday's steep rise some downward correction may be seen for the pair today. The RSI for the pair is floating in the overbought territory on the 4 hour and 8 hour charts and a bearish cross is seen on the daily chart. Furthermore, a breach of the upper Bollinger Band is seen on the daily chart indicating an imminent downward move may be expected. Going short for the day may be advised.

GBP/USD

A breach of the upper Bollinger Band is seen on the daily chart, indicating an impending downward move. The pair's RSI is floating in the overbought territory on the daily and 4 hour charts while a bearish cross is seen on the 4 hour, 8 hour and daily charts' Slow Stochastic. Going short for the day may be advised.

USD/JPY

The pair seems to be range trading at the moment between $80.60 and $81.20, with most indicators in neutral territory. Waiting on a clearer direction for the pair may be advised for today.

USD/CHF

After a sharp decline the pair may be seeing some upward correction today. A breach of the lower Bollinger Band is seen on the 8 hour chart, indicating an imminent upward movement. Williams Percent Range on the 8 hour chart supports upward pressure. The RSI for the pair is floating in the oversold territory on the 2 hour, 4 hour and 8 hour charts with a bullish cross seen on the 4 hour and 8 hour charts' Slow Stochastic. Going long for the day may be a good option.

The Wild Card

AUD/CAD

A breach of the upper Bollinger Band is evident on the daily chart, indicating an impending downward move. The RSI for the pair is floating gin the overbought territory on the 4 hour chart while a bearish cross is seen on the 4 hour and daily charts' Slow Stochastic. Forex traders may be advised to go short for the day.

Current Time: 08/27 16:23 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
08/28
01:00AUD+ HIA New Home Sales1.2%*-1
EUR+ German Prelim CPI m/m0.3%0.0%-5
01:00EUR+ Italian 10-y Bond Auction2.60|1.5*-3
02:30AUD+ Private Capital Expenditure q/q-4.2%-0.8%-5
08:15CHF+ Employment Levely/y4.19M4.21M-3
08:55EUR+ German Unemployment Change -12K-6K-3
09:00EUR+ M3 Money Supply y/y1.5%1.5%-3
09:00EUR+ Private Loans y/y-1.7%-1.5%-3
09:00EUR+ Italian Retail Salesm/m-0.7%-0.2%-1
11:00GBP+ CBI Realized Sales2125-3
13:30CAD+ Current Account-12.4B-11.4B-3
13:30USD+ Prelim GDP q/q4.0%3.9%-5
13:30USD+ Unemployment Claims 298K299K-5
13:30USD+ Prelim GDP Price Index q/q2.0%2.0%-1
15:00USD+ Pending Home Salesm/m-1.1%0.6%-5
15:30USD+ Natural Gas Storage 88B79B-1
23:45NZD+ Building Consents m/m3.5%*-3
00:05GBP+ GfK Consumer Confidence-2-1-3
00:30JPY+ Household Spendingy/y-3.0%-2.7%-3
00:30JPY+ Tokyo Core CPI y/y2.8%2.7%-3
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