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Wednesday, 29 Apr 2009

Market's Focus on the Federal Reserve Rate Decision

Investors are looking to U.S. GDP data and the Federal Reserve to be released on Wednesday for further signs of recovery in the world's biggest economy. The Federal Reserve ends its 2 day meeting on Wednesday and while rates are already near zero, analysts will be looking for any extension of quantitative easing and for any comments supporting a theory of green shoots of recovery appearing in the U.S economy. The Fed is due to issue a statement around 1815 GMT.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupdownupup
Weekly Trenddownnodowndowndowndown
Resistance1.32251.474097.651.15150.71800.9045
1.32051.472097.451.14950.71600.9025
1.31751.469097.151.14650.71300.8995
Support1.31151.463096.551.14050.70700.8935
1.30851.460096.251.13750.70400.8905
1.30651.458096.051.13550.70200.8885

Economic News

USD - USD Consolidating towards Heavy Volatility

After Monday's sharp gains against the EUR, the U.S. Dollar experienced a steady depreciation against the 16-nation currency throughout Tuesday, declining back towards 1.3200 after seeing a weekly low of 1.2966. The USD also saw depreciation against almost all currency pairs, except the JPY.

Interesting to take note of is a few general trends in pairs, such as the GBP/USD and USD/CHF, which seem to be trading in a tightening range, indicating that there is an anxious anticipation for tomorrow's interest rate decision from the US Federal Reserve Board. With a decision on the US Federal Funds Rate expected tomorrow at 18:15 GMT, traders may witness some sharp volatility in these pairs directly after the announcement. With the exceedingly positive figure seen in the CB Consumer Confidence report yesterday, mixed with some other general indicators which also point up, is there a possibility that the Fed would consider increasing interest rates?

Today will indeed be an interesting day to keep tabs on the movement of the greenback. Considering the Advanced GDP report is due, along with Crude Oil Inventories, which has had a moderate impact lately, the USD is due for heavy volatility. Traders will definitely need to program reminders into their schedule telling them to login to their platforms today and capture some of the sharp movements that many are expecting.

EUR - EUR and GBP Riding Favorable Winds

So much positive economic data has been emerging in recent weeks that risk appetite seems to have made a moderate recovery. As a result, the EUR has posted steady gains over the past 24 hours. Building back up towards 1.3200 against the USD and 1.2700 against the JPY, the 16-nation currency appears to be on the receiving end of portfolio diversification and Euro-Zone confidence.

With a number of indicators showing a drastic increase in consumer confidence throughout the Euro-Zone's largest economies, it comes as no surprise that the EUR is trending upwards against all of its currency rivals. However, as there appears to be hardly any news coming from Europe today, the EUR may be put on the back-burner as the US economy leads the pack in economic indicators. The U.S. Federal Funds Rate decision will be released tomorrow and no doubt will be one of the primary driving forces in today's market.

While news regarding the EUR may be light this week, the British Pound will not go unnoticed. Much of the European news being released this week may show that the British economy is on track for recovery. It seems about time as Britain appeared to be one of the worst hit economies in this recent recession. If Britain is indeed recovering, the rest of Europe shouldn't be much further off. Watching the indicators emanating from the UK may help traders gauge the direction of the prevailing winds over Europe. So far, European trends appear to be pointing up.

JPY - JPY Set Back from Increased Risk Appetite

As world tourism faces a further set-back due to the outbreak of swine flu in 7 countries, the value of the JPY as a safe-haven from economic risks appears to have continued to drop. The rise in risk appetite, and a continuation of the negative outlook in Japan, has pushed the JPY lower against most of its currency rivals, save the USD. Dropping towards the 127.00 level against the EUR and the 141.00 level versus the Pound, the JPY appears like it may level off in the near future.

With a decision from a number of Pacific countries arriving this week on interest rates, traders have the potential to see a level of volatility in the JPY and NZD which is typically uncommon. Traders should look to the Reserve Bank of New Zealand (RBNZ) today, as it is set to announce a decision on its national interest rate. Most expectations are for a 50 basis point rate-cut. The Bank of Japan (BoJ) is also set to announce its latest monetary policy regarding interest rates on Thursday, although this decision will not likely carry much volatility as Japan has held its rates steady for some time now.

Crude Oil - Crude Oil Declines on Demand Concerns

Crude Oil prices fell for a second straight day on concerns that the outbreak of swine flu would delay an economic recovery and further dampen energy demand. Fears of pandemics have slowed the global economy in the past and officials with the World Health Organization, while raising alert levels yesterday, and warned against overreacting. The fear is that the outbreak could discourage people from traveling, lead to closed factories and further hurt the economy and oil consumption.


Oil prices rose sharply last month from $40 to above $54 taking their cue from a rally in equity markets. But a new sign of a prolonged recession which has crushed energy demand around the world is again pushing prices lower below the psychological price level of $50.

Technical News

EUR/USD

The pair is continuing to provide mixed results, and is now trading around the 1.3190 level. The daily chart demonstrates a flat line ever since yesterday. The4 hour chart's Slow Stochastic is showing no crosses, which indicate that the bullish trend may continue. Going long appears to be preferable today

GBP/USD

The typical range trading on the daily chart continues. Both the hourly RSI and Slow Stochastic are floating in neutral territory. However, the hourly chart's RSI is already floating in the oversold territory. It appears that the possible next move might be a bullish one. In that case traders are advised to swing in after the breach.

USD/JPY

The 4 hour chart shows the pair does not have a distinct direction, since the chart appears to be quite horizontal. However, the beginning of a bearish move can be detected on the hourly chart, and the Slow Stochastic shows that the bearish momentum still has more room. Going short with tight stops appears to be preferable

USD/CHF

The typical range trading on the daily chart continues. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. As well on the hourly charts the indicators are providing mixed signals with now specific direction. Good strategy might be to wait for a clearer sign before entering the market on this pair.

The Wild Card

Gold

There is still a bearish configuration on the daily chart, indicating that the momentum is still down. However, hourly chart's Slow Stochastic is about to enter an oversold territory, indicating that there might be a minor bullish correction before a broader bearish move resumes. forex traders can maximize profits by selling on highs and taking advantage of a general bearish trend.

Current Time: 09/15 08:51 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/15
10:00EUR+ Trade Balance13.8B15.9B12.2B1
13:30USD+ Empire State Manufacturing Index14.716.4-3
14:15USD+ Capacity Utilization Rate79.2%79.3%-3
14:15USD+ Industrial Production m/m0.4%0.4%-3
00:01GBP+ BoE Quarterly Bulletin***3
09/16
01:00AUD+ RBA Assist Gov Kent Speaks***3
02:30AUD+ Monetary Policy Meeting Minutes***5
06:30JPY+ BOJ Gov Kuroda Speaks***5
09:30GBP+ CPI y/y1.6%1.5%-5
09:30GBP+ PPI Input m/m-1.6%0.1%-3
09:30GBP+ RPIy/y2.5%2.5%-3
09:30GBP+ Core CPI y/y1.8%1.8%-1
09:30GBP+ HPI y/y10.2%10.6%-1
09:30GBP+ PPI Output-0.1%-0.1%-1
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