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Wednesday, 12 Aug 2009

JPY This Week's Lead Investment; US Federal Funds Rate Today!

During yesterday's trading, the Yen continued to be the dominant currency in the forex market. Whilst most of the major currencies tended to fluctuate without marking a sustained trend, the JPY strengthened on all fronts, and currently looks to be this week's top investment. During today's trading, the most fascinating data will come at 18:15 GMT, as the Federal Funds Rate for August will be announced. The main question is whether the Fed will hike rates in light of recent positive economic data. Such a turn of events could create mayhem in the market, and traders are advised to be prepared.

Daily Trenddownnodownnodowndown
Weekly Trenddowndowndownupdownup

Economic News

USD - USD Sees Mixed Trading Ahead of FOMC Statement

The Dollar experienced a mixed trading day Tuesday ahead of today's FOMC meeting, continuing its rally against its commodity based counterparts while slipping slightly against the EUR and dropping sharply against the Yen. The Dollar traded at 95.80 Yen early this morning, from 95.99 yesterday, after falling 1.2%. The U.S. currency was at $1.4161 per EUR from $1.4149 yesterday.

The highly anticipated FOMC meeting statement is due to be released today at 18:15 GMT. Breaking with its trend throughout the recession, the Dollar unexpectedly rose Friday following a surprisingly strong U.S employment data release. This was seen as a signal that the recession is coming to an end and the Dollar might start benefiting from positive U.S data. This statement will be the first test of whether this trend will persist and the Dollar's strength can be maintained on positive economic data.

While no interest rate changes are expected, any clues as to the progress or end of the quantitative easing program will likely cause great market volatility. The statement is expected to provide an assessment of the current economic condition in the world's largest economy and more importantly provide an economic outlook, therefore, likely setting short-term direction for the USD.

EUR - EUR Continues its Decline against the Yen

The EUR continues to decline versus the Yen pushing its loss to 1.9%. The decline was exacerbated after consumer prices in Germany posted their first annual decline in more than 22 years in July, boosting speculations the European Central Bank (ECB) will keep interest rates at a record low. The EUR was at $1.4154 from $1.4142 late Monday and was at 135.74 yen, down from 137.32.

The Pound continues its decline against the Dollar, reaching a low of $1.6476. Pushing down on the Pound was a worse then expected trade balance as well as falling stock markets, prompted by declines in financial stocks. With the financial sector being the largest sector in the British economy, equity market movements tend to have major affects on the GBP's value. Furthermore, investors are staying cautious ahead of today's BOE inflation statement.

A heavy news day is expected today from the U.K which will likely set the direction for the Pound for the rest of the week with the Claimant Count Change to be released at 8:30 GMT along with the Average Earnings Index and the BOE Inflation statement. at 9:30 GMT. These will provide an assessment of the current economic conditions in the U.K as well as provide an outlook on the prospects of recovery. The Euro-Zone Industrial Production report is also due to be released at 9:00 GMT, worse than expected results will likely put further downward pressure on the EUR.

JPY - The JPY Gains against all Major Currencies

The JPY traded at its highest level in a week against the EUR yesterday on concern the improvement in financial companies' earnings will stall. The Yen traded at 135.82 per EUR early today, following a 1.1% gain yesterday. Japan's currency traded at 95.96 per USD and 158.17 against the Pound, both up from yesterday's figures.

Disappointing Chinese economic data and dropping stock prices on global exchanges soured risk appetite. Expectations that the Japanese economy will pull out of the recession ahead of the U.S have also helped push up the JPY against the greenback as investors turned to Japanese assets.

With no major news releases from Japan today, the Yen's short term direction will likely be set by the news coming from the U.S and Europe, mainly the FOMC statement minutes.

Crude Oil - Crude Falls below $70 a Barrel

Light Sweet Crude for September delivery settled down $1.15, or 1.6%, at $69.45 a barrel on the New York Mercantile Exchange (NYMEX) yesterday as U.S. equities dropped ahead of a government report forecasting an increase in crude supplies in the biggest energy consuming nation. This was the lowest settlement since July 31. It was the fourth straight daily decline and the first time oil settled below $70 this month.

While global economic recovery is impending, demand is still contracting sharply, collapsing faster than anyone expected. Traders should follow today's release of U.S Crude Oil inventories as any bearish number could prompt a further decline in prices.

Technical News


The pair continues its range-trading activity, and is now traded around the 1.4150 level. Currently, a bullish cross is taking place at the 4-hour chart's MACD, suggesting that a trend reversal might be impending. It seems that a breach of the 1.4220 level will further indicate a bullish reversal.


The pair's volatility continues, as the cable is now traded around 1.6480. After dropping close to 600 pips, the pair seems to be stabilizing at its current level. However, as a bearish cross is taking place at the daily chart's MACD, the pair might continue the bearish trend, with the next target price located near 1.6375.


Ever since peaking at the 97.75 level, the pair has been constantly dropping and is currently trading around the 95.50 price range. As all oscillators on the 4-hour chart are pointing down, it seems that the pair's downtrend could extend today.


The pair continues to show mixed results, without marking a sustained trend. A triple doji pattern, formed at the 4-hour chart indicates that a sharp movement is impending. As the daily chart's Slow Stochastic shows a bearish cross, it seems that the next move might be downward.

The Wild Card

Crude Oil

Crude Oil's downtrend continues, as a barrel of crude oil is now traded for less then $70. As all oscillators on the daily chart are pointing down, it seems that another drop in prices might happen today. This might be a great opportunity for forex trader to join a very popular trend.

Current Time: 11/30 23:58 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
22:45NZD+ Overseas Trade Index q/q1.3%-2.5%-1
23:30AUD+ AIG Manufacturing Index50.2--1
USD+ Total Vehicle Sales18.2M 18.0M-1
00:50JPY+ Capital Spending y/y5.6%2.3%-1
01:30AUD+ Building Approvals m/m2.2%-2.4%-3
01:30AUD+ Current Account-19.0B-16.6B-3
02:35JPY+ Final Manufacturing PMI52.852.8-1
04:30AUD+ Cash Rate2.00%2.00%-5
04:30AUD+ RBA Rate Statement---5
04:45JPY+ 10-y Bond Auction0.32|2.8--1
06:30AUD+ Commodity Prices y/y-19.8%--1
07:45CHF+ GDPq/q0.2%--1
08:00GBP+ Bank Stress Test Results---5
08:00GBP+ BoE Financial Stability Report---3
08:00GBP+ FPI ---1
08:30CHF+ Employment Level4.24M4.24M-3
09:15CHF+ Retail Sales y/y0.2%0.4%-3
09:15EUR+ Spanish Manufacturing PMI51.351.9-3
09:30CHF+ Manufacturing PMI50.750.8-1
09:45EUR+ Italian Manufacturing PMI54.154.3-1
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