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Wednesday, 1 Oct 2008

U.S. Consumer Confidence Beat Forcast Further Boosting the USD.

All eyes look to the U.S. Congress for the approval of the $700 billion U.S. bailout package proposed by Treasury Secretary Paulson and Federal Reserve Chairmen Bernanke to clean up bad mortgage assets.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownupupdowndown
Weekly Trenddowndowndownupdowndown
Resistance1.42051.7910106.701.12550.80600.7995
1.41851.7890106.501.12350.80400.7975
1.41551.7860106.201.12050.80100.7945
Support1.40951.7800105.601.11450.79500.7885
1.40651.7770105.301.11150.79200.7855
1.40451.7750105.101.10950.79000.7825

Economic News

USD - U.S. ADP Non-Farm Employment Change on Tap.

The U.S. financial crisis shows no signs of weakening with the recent bank failure of Washington Mutual. WaMu is the countries largest bank failure and shows just how difficult of a time the U.S. financial system faces. All eyes look to the U.S. Congress for the approval of the $700 billion U.S. bailout package proposed by Treasury Secretary Paulson and Federal Reserve Chairmen Bernanke to clean up bad mortgage assets. Worries persist if a solution will provide a meaningful impact and help to provide breathing room to a strangled credit market.

Liquidity is at an all time low and many traders have kept very conservative trading strategies to weather the storm. Also due to the perception that the rescue package will be stalled in congressional debates, traders have priced-in added risk to owning the dollar and have pushed the USD lower against the EUR and the JPY.

For the past week markets have been ignoring fundamental data and focusing solely on the U.S. market bailout. Despite the well know Euro-Zone economic weakness, the Dollar has continually dropped against the EUR.

Due to be released today is the ADP Non-Farm Employment Change figure. The indicator can provide insight as to where the U.S. Non-Farm Payrolls report may land. Traders may look past this measurement, relying on improving news from the U.S. government surrounding the financial crisis in the States.

EUR - Will ECB President's Speech Help to Boost the EUR?

The risk of a recession looms over Europe as the EUR remains mixed against its peers. The European economy contracted in the second quarter and three leading indicators of European business confidence released worse-than-forecasted results. Tightening credit has been constricting growth and inflation is on the rise. These negative indicators may provide a bearish outlook for the EUR.

This difficult combination of slowing growth and rising inflation has some analysts predicating that the European Central Bank (ECB) will keep its benchmark interest rate steady at 4.25%. This is unlikely to ease credit concerns and the toil it is taking on the European economy.

A word that has been associated more and more with the Euro-Zone economy is stagflation. This phenomenon may occur when an economy suffers from both slowing growth rates and increased inflation. This was the case in the U.S. during the 1970s when a spike in oil prices triggered massive inflation rates with an economy in recession.

JPY - Foreign Influence Over the Yen will Likely Continue Today.

The new Prime Minister of Japan, Taro Aso, has signaled his willingness to stimulate the economy through increased government spending and has also appointed a new finance minister to implement his economic programs. This is a reverse of the previous Japanese government policy of balancing the world's second largest budget by 2011. This may slow efforts to reduce the national debt which is the worst among its peers of industrialized nations.

The Japanese economy tightened in the second quarter, the worst result in seven years. A drop in exports along with slowing capital spending could spell a decline in the JPY against the USD in the long run.

Oil - Oil is Up on U.S Bailout Plan Announcement.

Throughout history, Crude Oil prices have gone trough various price movements that have shaped the current rate. Only a few traders today were active in the market when Crude Oil was selling for under $30 a barrel, and even fewer remember prices as low as $3. However, those who have recollection of those prices did experience one of the most bizarre movements to take place since 1973 when the world experienced its first Oil Shock. Following 9/11, Crude Oil prices spiked from lower than 30$ to a record high at mid 2008 of nearly 150$ per barrel. Basically, a series of events throughout the years amplified the price growth to set the current rate. Those price movements reshaped the global economy, and the instability of Crude Oil prices, to what we are seeing today.

The main factors that impact the price of Crude Oil are supply and demand, embargos, natural disasters and war. To be successful in Oil trading, investors need to be aware of the impact each of these factors plays on commodity prices, as well as understanding that commodities such as Gold and Oil are bought when strong currencies, like the USD, become weaker. Commodities then play the role of a safety net for investors running from the losses they are taking in the currency market. In addition, speculation by investors is by far more important in commodities than in currencies as the will of large, influential investors can reshape the prices in the market when they take bold stances on a specific trading position in order to capture a corner on the market.

Technical News

EUR/USD

The pair is in the middle of a downtrend that was initiated at the 1.4860 level. Both the RSI and the momentum are indicating that this pair should continue its bearish rampage. Going short might be the right choice today.

GBP/USD

After peaking at the 1.8670 level, the cable has resumed its bearish trend with full momentum. And now, all oscillators show that the falling move still holds some fuel in it, and further depreciation might take place. Going short seems to be preferable

USD/JPY

The pair is trading in range for almost two weeks now. The local momentum appears to be bearish but the daily trend is a very strong bullish one. Traders should look for a significant breach before considering an entry position, as the range might continue before one occurs

USD/CHF

There is a very distinct bullish channel forming on the daily chart, as the pair is now floating in the middle of it. Currently, all oscillators on the daily chart are pointing up, suggesting that the bullish movement might continue. Going long could be a good strategy.

The Wild Card

NZD/USD

An "M" formation is being slowly established on the 4 hour chart, as the pair is currently galloping downwards. The daily chart is also giving bearish signals, supporting that notion. This might be a great opportunity for forex traders to join a very promising trend.

Current Time: 11/24 11:16 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/24
14:00EUR+ Belgian NBB Business Climate-6.8-5.3-1
14:45USD+ Flash Services PMI57.157.31
11/25
00:50JPY+ Monetary Policy Meeting Minutes---3
02:00JPY+ BOJ Gov Kuroda Speaks---5
03:00NZD+ Inflation Expectationsq/q2.2%--1
08:00EUR+ German Final GDP q/q0.1%0.1%-1
10:00EUR+ Italian Retail Salesm/m-0.1%0.2%-1
10:05AUD+ RBA Deputy Gov Lowe Speaks---2
10:30GBP+ BBA Mortgage Approvals 39.3K38.5K-3
11:00GBP+ Inflation Report Hearings---5
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