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Wednesday, 11 Nov 2009

The Dollar Up Slightly but Still Vulnerable

The U.S Dollar bounced off a 15-month low yesterday and the EUR dipped below $1.50 as investors paused to assess whether the global outlook justifies a recent rally in higher-yielding currencies and assets. The British Pound in particular struggled on Tuesday after Fitch ratings agency told Reuters that Britain was the major economy most at risk of losing its top AAA credit rating.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupdowndowndowndownup
Weekly Trendnonodownnoupup
Resistance1.50801.681590.201.01750.94000.9060
1.50451.678589.901.01400.93650.9025
1.50151.675589.581.01100.93350.8995
Support1.49541.669089.001.00450.92700.8930
1.49251.666088.721.00150.92400.8900
1.48951.663088.400.99850.92100.8870

Economic News

USD - Dollar Recovers modestly off 15-mth Lows

The U.S Dollar edged up on Tuesday, reversing some of its recent losses but staying close to a 15-month low against a currency basket, as concerns over the UK's sovereign rating prompted some demand for the safe haven of the U.S. unit.

The Dollar may extend its advance from a 15-month low against the currencies of major U.S. trading partners on speculation waning demand for riskier assets will force investors to exit bets against the greenback. The USD gained 0.1% to $1.4980 per EUR yesterday. It touched $1.4626 on Nov. 3, the strongest level in almost a month.

Analysts said investors lacked any catalyst to take the U.S Dollar much lower after its recent sharp falls, but added that the trend towards Dollar weakness remained in place.
Expectations that U.S. interest rates will stay near zero well into next year have encouraged investors to use the U.S Dollar to fund carry trades in higher-yielding assets, particularly when equity markets rally.

EUR - The Euro Rises vs. Pound on Stocks

The EUR advanced against the British Pound as European stocks rebounded and Fitch Ratings said the U.K.'s credit rating is most at risk among top-rated nations. The EUR traded at 89.86 U.K. pence, from 89.49 pence yesterday. The single European currency, which fell against the Yen and the U.S Dollar after a report showed German investor confidence declined in November by more than economists estimated, erased losses as stocks rise.

The GBP dropped against all but one of the 16 major currencies, after a warning on the UK from ratings agency Fitch. The currency sold off sharply during the European session after David Riley, Fitch Ratings' co-head of global sovereign ratings, said in an interview Tuesday that the U.K. has the highest risk of major economies of losing its AAA status.

The Sterling slipped as far as $1.67 well below a 3 month high of $1.6844 reached on Monday. Despite the Pound's recent strength, and also the relatively positive rate decision, the British economy is still in trouble, and the bearish sentiment may hold on.

JPY - Yen Extends Gains vs. U.S Dollar

The Japanese Yen gained broadly after the orders for Japanese machinery report rose more than twice the pace economists estimated, signaling that a recovery in the world's second-largest economy may be sustained. The Yen climbed to 89.61 per Dollar from 89.76 before the report was published, building on the currency's 7% advance in the past three months.

Reports today showed the recovery in China, Japan's largest market, is gathering steam providing more support for the Yen. Also figuring in the foreign-exchange action, Japan's current-account surplus unexpectedly rose 0.2% in September compared to the same month last year, government data showed.

Crude Oil - Oil Trades near $79 After Falling on Stockpiles

Crude Oil prices briefly traded above $80 a barrel Tuesday, but turned lower as U.S. stocks fell and the Dollar strengthened, pressuring Dollar denominated Oil prices. Oil sank further in late trading, slipping below $79 a barrel, after the American Petroleum Institute said U.S. Crude Oil stocks rose more than anticipated.

Oil declined 0.5% yesterday after the American Petroleum Institute said Crude inventories increased 1.22 million barrels last week to 337.5 million. The U.S. government will report supply figures tomorrow. The weekly EIA inventory report will be released a day late on Thursday due to the U.S. Veteran's Day holiday.

Technical News

EUR/USD

A bearish cross is evident on the daily Slow Stochastic, as well as the 4 hour MACD with the pair's RSI floating in neutral territory. Going short on the day with tight stops may be advised.

GBP/USD

The pair is currently range trading with most indicators floating in neutral territory. The daily chart, however, shows a fresh bearish cross on the Slow Stochastic with the RSI floating in the over bought territory. Going short with tight stops may be advised for the day.

USD/JPY

A fresh bullish cross is evident on the hourly and 2 hour Slow Stochastic. A breach of the lower Bollinger Band is evident on the 2 hour chart. Furthermore, the RSI is floating in the oversold territory on the hourly and 4 hour charts. Going long on the day may be a good choice.

USD/CHF

A fresh bullish cross is forming on the hourly and 4 hour MACD. A bullish cross is also evident on the daily Slow Stochastic. Going long for today might be a good strategy.

The Wild Card

USD/MXN

After it recent bearish streak a correction may be imminent. A fresh bullish cross is evident on the hourly and 2 hour Slow Stochastic with the RSI floating in the oversold territory on the hourly and 4 hour charts. Forex traders have an opportunity to take advantage of the impending correction.

Current Time: 12/19 19:14 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
12/21
21:00NZD+ Westpac Consumer Sentiment116.7--1
12/22
05:00JPY+ BoJ Monthly Report---1
15:00EUR+ Consumer Confidence-12-11-1
15:00USD+ Existing Home Sales5.26M5.21M-3
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