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Tuesday, 25 Nov 2008

The U.S. Dollar is Expected to Slide Further against Major Currencies

The Citigroup bailout plan helped correct the price of the Dollar against other major currencies as traders are keen in the short-term to make gains in more volatile currencies, such as the EUR and JPY. This has put downward pressure on the greenback in recent days as investors are seeking riskier day trades in other major currencies, rather than the safe haven U.S. Dollar.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupdownupup
Weekly Trendupupupdownupup
Resistance1.29451.517897.881.21400.65180.8600
1.29001.515297.361.21150.64770.8571
1.28651.511596.811.20700.64400.8533
Support1.27881.504895.901.20000.63700.8468
1.27421.500095.461.19660.63400.8433
1.27101.497695.001.19300.63000.8400

Economic News

USD - The release of Preliminary GDP Figures Today is expected to Add Downward Pressure to the Dollar

Forex traders anticipate the U.S. Dollar to continue to drop vs. the EUR in response to the Citigroup bailout plan. Traders have boosted their money into more volatile currencies, such as the EUR and JPY as they see the safe haven Dollar less attractive.

The Dollar extended its losses for a second day against the EUR and a basket of major currencies as Forex traders are anticipating a drop in the U.S. Preliminary GDP figures that will be released today at 1.30pm GMT time. On Monday the USD traded at $1.2953 per EUR at 4pm GMT time. This helped push the Dollar to the largest 2 day decline in a month of nearly 3%.

The Citigroup bailout plan helped correct the price of the Dollar against other major currencies as traders are keen in the short-term to make gains in more volatile currencies, such as the EUR and JPY. This has put downward pressure on the greenback in recent days as investors are seeking riskier day trades in other major currencies, rather than the safe haven U.S. Dollar.

The release of the U.S. Existing Home Sales Report yesterday also added to downward pressure of the USD. The report showed that sales of U.S. existing homes fell by 3.1% in October to a 4.98 million-unit annual rate. This data confirms that the U.S. housing market is still weak, and is consistent with the U.S. Federal Reserve's recent assessment that the U.S. housing market is not expected to finish contracting until 2010.

Analysts anticipate the Dollar to slip further and to correct against the major currencies in the short-medium term as many Forex traders believe that the USD is overvalued.

Traders may well expect the USD to drop by at least another 1.5 % today as they weigh in on the expected drop in the U.S. Preliminary GDP Rates, which will be released later today. This is likely point to signs of further weaknesses in the U.S. economy.

EUR - The European Currency is Expected to Make Further Inroads into the U.S. Dollar

Analysts expect the EUR to continue its rally against the Dollar today, as the U.S. government's pledge to help Citigroup has in recent days drawn investors away from the safe haven USD. This is in order to make short-term gains in more volatile currencies, such as the EUR and JPY.


The EUR rose 2.8% against the U.S. dollar to a 2 week high of $1.2929 on Monday. This was despite the release of a report in Germany on yesterday that showed business confidence slumping to its lowest level in almost 16 years in November. Analysts expect the negative data release to add additional pressure on the European Central Bank (ECB) to make another Interest Rate cut of at least 50 basis points in the near future. This may affect the EUR in the long-term, but in the short-term Forex traders are taking advantage of the EUR to make gains on the high yield currency.

It is likely that the EUR will make more gains throughout today against the USD. This is as Forex traders foresee the European Currency to strengthen as traders react by going short on the USD as U.S. Consumer Confidence is set to remain unchanged. Thus investors are evaluating that inflation in Europe is higher than the United States. As a result, this is likely to make the EUR more attractive to investors than the Dollar. Additionally, day traders are likely to take advantage of the weak USD before the Thanksgiving Holidays in the United States on Thursday.

JPY - JPY Reacts Positively to Citigroup Bailout Plan

The Japanese currency added to recent gains as investors continued to sell-off risky assets in response to the U.S. government bailout plan for Citigroup did little to convince the market that the end of the financial crisis is near. In the short-term the JPY continued to increase against the USD as Japan's Equities and Commodities markets acted positively to the Citigroup bailout plan.


The Yen trimmed two days of losses against the Dollar and the EUR as investors took advantage of riskier currencies, reducing demand for carry trades. The JPY rose 0.6% yesterday to 96.88 Yen against the USD, as investors continued to flock to the low-yielding Japanese currency after discarding positions in higher-yielding currencies in an ongoing reversal of the carry trade. The JPY also strengthened to 124.94 per EUR from 126.08 yesterday. Analysts say that this is in response to the weak reading of the German business climate, which underlined weaknesses in the German economy. This in turn kept expectations high for cuts in Euro-Zone Interest Rates. Analysts believe that worries among investors about a deep and prolonged global recession will likely continue to support the Yen over the coming months.

OIL - Oil Soars as U.S. Dollar Slips and Global Equities Rise

Crude Oil rose 9% to over $54 a barrel on Monday in response to the positive effects that the U.S. government bailout plan of Citigroup had on global markets. Oil has recently dived from a record high of $147 per barrel in July to a year low of $48.25 on Friday. The dive was in response to a deepening recession in the developed countries. Organization of the Petroleum Exporting Countries (OPEC) policy makers stated that a further output cut of more than 1 million barrels of oil per day would be necessary to support the Oil market in its current state.

The dollar's decline against a basket of major currencies added to the rise in Oil prices yesterday. Analysts expect the dollar's weakness to increase the appeal of Oil and other commodities as attractive investments. OPEC Oil ministers are due to meet for informal talks in Cairo on November 29, though a cut in output is not expected to be announced until the next full policy meeting in December. Nevertheless, the recent gain in Crude Oil seems to be more of a simple correction than a steady momentum. Its rally seems to be unsustainable in the face of falling fuel demand and global economic recession.

Technical News

EUR/USD

There is a very distinct bearish channel forming on the daily chart, as the pair now floats around the 1.2830 level. A bearish cross on the 4 hour chart's Slow Stochastic suggests that a bearish move is quite imminent. Going short with tight stops might be the right choice today.

GBP/USD

It seems that the cable has limited its bullish reversal after peaking at 1.5133. A bearish cross on the 4 hour chart's Slow Stochastic indicates that the pair could resume its bearish trend once again. Going short with tight stops might be the right strategy today.

USD/JPY

Lately, this pair has been going through a relatively choppy trading session and seems to be unable to pick up a sustained trend. The daily chart's Bollinger Bands are widened and its RSI flows in a neutral territory. Forex traders are advised to wait for a clearer signal before entering the market n this pair.

USD/CHF

The pair traded around the 1.20 levels during yesterday trading session, without making any significant breach. Now however, a bearish cross on the daily chart's Slow Stochastic indicates that a bearish move is forthcoming and the hourly chart supports that notion as well. Going short appears to be a right choice today.

The Wild Card

OIL

There is a very distinct upward channel forming on the 4-hour charts. A fresh bullish cross on the daily chart's Slow Stochastic implies that the bullish correction is quite imminent. The RSI is floating in an oversold territory supporting the notion that there is still more room for the upwards correction. forex traders can maximize profits by buying on lows and taking advantage of a currently bullish trend.

Current Time: 11/28 05:56 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/28
06:00JPY+ Housing Startsy/y-14.3%-14.5%-1
08:00EUR+ German Retail Salesm/m-3.2%1.7%-3
08:00GBP+ Nationwide HPIm/m0.5%0.4%-3
08:45EUR+ French Consumer Spending m/m-0.8%0.2%-3
09:00CHF+ KOF Economic Barometer99.8100.1-3
10:00EUR+ Italian Monthly Unemployment Rate12.6%12.6%-1
10:00EUR+ Italian Quarterly Unemployment Rate12.5%12.4%-1
11:00EUR+ CPI Flash Estimate y/y0.4%0.3%-3
11:00EUR+ Unemployment Rate11.5%11.5%-3
11:00EUR+ Italian Prelim CPI m/m0.1%-0.3%-1
14:30CAD+ GDPm/m-0.1%0.4%-5
14:30CAD+ RMPIm/m-1.8%1.5%-3
14:30CAD+ IPPI m/m-0.4%0.3%-1
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