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Tuesday, 12 Apr 2011

US Dollar Gains after FOMC Statements Monday

The greenback's latest reprieve may be partially explained by a relaxation in demand for commodity-linked currencies, like the Aussie and Canadian dollars. Moreover, a series of dovish statements from members of the Federal Open Market Committee (FOMC) have actually helped boost the dollar as the Fed's monetary policy appeared relatively more stable than recent policy moves in Europe have suggested.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownnodownno
Weekly Trendupupupdownupno
Resistance1.44801.637084.700.91201.05050.8915
1.44601.635084.500.91001.04850.8895
1.44301.632084.200.90701.04550.8865
Support1.43701.626083.600.90101.03950.8805
1.43401.623083.300.89801.03650.8775
1.43201.621083.100.89601.03450.8755

Economic News

USD - USD Positive as FOMC Members Make Dovish Statements

The US dollar climbed against a number of its currency rivals in today's trading. The EUR/USD fell from its recent high of 1.4484 to as low as 1.4399 in yesterday's trading, while the GBP/USD moved from its latest peak of 1.6427 to 1.6303.

The greenback's latest reprieve may be partially explained by a relaxation in demand for commodity-linked currencies, like the Aussie and Canadian dollars. Moreover, a series of dovish statements from members of the Federal Open Market Committee (FOMC) have actually helped boost the dollar as the Fed's monetary policy appeared relatively more stable than recent policy moves in Europe have suggested.

As long as news out of the American economy remains stable, or better, the greenback may continue to see support from market fundamentals. Today's economic calendar may just provide the stability needed for such movement. The US trade balance data is expected to publish a minor decline in the US trade deficit and import prices may have grown 2.1% over the past month.

EUR - German ZEW Data May Drive EUR Lower

The euro fared poorly in today's trading as investors appeared to be fleeing the riskier assets and moving into safer investments, like the USD and JPY. The 17-nation single currency moved almost 90 pips lower versus the US dollar, ending the day at 1.4399. The EUR/JPY also shifted into a bearish posture, moving from as high as 123.32 to this morning's low of 120.95.

The downturn appears to be connected to a recent shift away from commodity-linked currencies and poor fundamental data out of Europe and Asia. The American economy appears to be outperforming its Atlantic neighbors and a string of reports on today's calendar may verify the greenback's recent strength.

The EUR is relatively absent from today's calendar with only one significant event being published at 10:00 GMT. The ZEW reports from Germany and the euro zone, however, are not expected to help the region's currency strength as both are forecast to drop from last month's reading. If that is indeed the case, the euro may continue its recent bearishness at least through today's trading hours and into tomorrow.

JPY - Japanese Yen Benefits from Shift into Safe Havens

The Japanese yen has benefited lately from a shift into safe haven assets. Traders have viewed the dovish statements from the Federal Reserve yesterday, and the recent decline in European fundamentals, as a sign of economic retreat and moved their investments accordingly.

Technical buy-ins on the yen also appears to have been triggered following the European Central Bank's (ECB) rate hike last week. These combined technical and fundamental factors have helped lift the yen in today's early trading hours. Traders should not allow themselves to be duped by these value shifts, however, since Japan's economic strength remains under question. As long as the EUR moves bearish, it appears safe to buy into the yen, but be wary of the inevitable swing.

Crude Oil - Oil Prices Meeting Resistance as USD Finds Strength

The price of Crude Oil has begun to undergo a downturn as market fundamentals turn in favor of currencies not linked to commodities. A general risk flight has also helped lift the US dollar, driving commodity prices lower in the short-term.

Traders should be wary of the market today as multiple news events out of Great Britain and the United States are expected to generate a significant level of volatility in the value of the Majors and commodities. Oil prices are coming under pressure after surging beyond $112 a barrel last week. If the USD continues its downturn, traders may want to expect the price of oil to do the same.

Technical News

EUR/USD

The EUR/USD has gone increasingly bearish yesterday, and currently stands at the 1.4400 level. The daily chart's Slow Stochastic supports this currency cross to fall further today. However, the 2-hour chart's Stochastic Slow signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.

GBP/USD

The pair has been range-trading for a while now, with no specific direction. The 8-hour chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

USD/JPY

The price of this pair appears to be floating in the over-sold territory on the 8-hour chart's RSI indicating an upward correction may be imminent. The upward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/CHF

The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the 4-hour chart's RSI. Going long with tight stops may turn out to pay off today.

The Wild Card

CHF/JPY

This pair's sustained upward movement has finally pushed its price into the over-bought territory on the daily chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Current Time: 10/01 05:17 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/01
07:30AUD+ Commodity Prices y/y-11.5%*-1
08:15EUR+ Spanish Manufacturing PMI52.852.3-3
08:30CHF+ SVME PMI52.952.1-1
08:45EUR+ Italian Manufacturing PMI49.849.4-3
09:00EUR+ Final Manufacturing PMI50.550.5-1
09:30GBP+ Manufacturing PMI52.552.6-5
10:00EUR+ Final GDP q/q---1
13:15USD+ ADP Non-Farm Employment Change204K206K-5
14:45USD+ Final Manufacturing PMI57.958.0-1
15:00USD+ ISM Manufacturing PMI58.056.8-5
15:00USD+ Construction Spending m/m1.8%0.5%-1
15:00USD+ ISM Manufacturing Prices58.058.6-5
15:30USD+ Crude Oil Inventories-4.3M--3
00:50JPY+ Monetary Base y/y40.5%38.9%-1
10/02
01:00NZD+ ANZ Commodity Pricesm/m-3.3%*-1
01:00AUD+ HIA New Home Salesm/m-5.7%*-1
01:00EUR+ Spanish 10-y Bond Auction2.27|1.8*-1
01:00EUR+ French 10-y Bond Auction1.32|2.8*-1
02:30AUD+ Building Approvals m/m2.5%1.1%-5
02:30AUD+ Trade Balance-1.36B-0.78B-5
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