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Wednesday, 24 Jun 2009
US Federal Funds Rate to Drive the Market Today
The market is expected to be very volatile today, as the U.S. announces the Federal Funds Rate at 18:15 GMT, which specifies U.S. Interest rates. The other factor that which is set to affect both the USD and Crude Oil is the publication of the U.S. Crude Oil Inventories at 14:30 GMT. In order for traders to start making profits today, it is recommended that they open their USD and Crude Oil positions as the trading day gets under way.
USD - USD Under Pressure Ahead of Interest Rate Announcement
The U.S. Dollar went bearish against most major currencies on Tuesday, as uncertainty ahead of today's Federal Funds Rate announcement put the USD under strong selling pressure. The greenback fell the most in 2 weeks against the EUR as European Central Bank (ECB) council member Axel Weber said policy makers have already used up their room to cut borrowing costs, indicating the Euro-Zone's Benchmark Rate will stay higher than the equivalent U.S. rate
The Dollar did rise against the Yen, to finish trading at the 95.54 level. This was despite U.S. data showing sales of previously owned homes in the United States rose less than expected in May. However, the Yen's losses may have been extended in late trading due to mixed data from Japan's economy.
Today, the Federal Open Market Committee (FOMC) is widely expected to leave its fed funds Rate target in a range of 0% to 0.25%. Investors will be watching to see whether the Federal Reserve unveils any changes to its Treasury and mortgage asset-purchase program to further boost liquidity.
The U.S Dollar has come under pressure in recent weeks as more upbeat U.S. economic data fueled hopes that a global economic recovery was on track. The USD may extend its declines after this week's Federal policy meeting, according to analysts.
EUR - EUR Rises to a 2 Week High vs. the USD
The EUR rose 1.6% against the Dollar to $1.4075 in late afternoon trading yesterday, after hitting a session peak of $1.4109. It was the biggest one-day percentage gain since May 8. The EUR also gained 0.9% against the Japanese Yen to finish trading at the 134.61 level.
Investors were also buying the EUR ahead of the European Central Bank's (ECB) first-ever one-year refinancing operation on Wednesday, aimed at encouraging banks to lend again. The European currency also rose against the British Pound to 0.8557 yesterday by the most in almost 3 weeks after Bank of England (BoE) Chief Economist Spencer Dale said a weaker currency was a key channel to spur economic growth.
Markets will be watching for the Federal Reserve's outcome today, as low Interest Rates would hurt the Dollar, and any move to expand the Fed's $300 billion Treasury buying program to keep long rates low could raise inflation concerns, undermining foreign appetite for U.S. assets.
JPY - Yen Falls against the USD on Economic Concerns
The Japanese currency fell sharply on Tuesday, falling against most of its major currency pairs, tumbling from creeping doubts about the sustainability of any economic recovery. The JPY fell 0.3% vs. the greenback to 95.54 Yen. The JPY also slipped against the EUR by over 250 pips to 134.61 Yen, as investors continued to cut bets on low-yielding assets, and sold-off the Yen against other major currencies.
Traders were also cautious ahead of a U.S. Federal Reserve policy decision on Wednesday, and this week's record $104 billion sale of U.S. debt. This has meant that renewed concerns about the global economy have actually fed through more into a weaker Yen than a weaker Dollar, analysts said.
Crude Oil - Crude Oil Inventories Data to Drive Oil Trading Today
Crude Oil prices rose nearly 4% on Tuesday to $68.59, as the U.S Dollar weakened and disruptions from OPEC member Nigeria stoked supply concerns. Crude prices also rose on expectations that Crude Oil Inventories in the U.S., the world's biggest consumer of Oil have fallen. Oil rose yesterday as the U.S. currency slipped the most in 2 weeks against the EUR on speculation that the Federal Reserve will temper expectations of an Interest Rate increase this year.
Inventories expectations and the weak Dollar are helping Crude Oil, analysts said. Commodities' trading was choppy with all the news ahead, such as inventories and the Federal Reserve's decision later today. Analysts expect the data to show U.S. commercial Crude stocks dropped 1.2 million barrels, according to a survey of analysts. Traders are also awaiting the Federal Reserve's statement at the end of its two-day meeting later today.
The pair reached as high as the 1.4100 level today, before dropping down to the 1.4080 level. This recent bullishness may continue according to the weekly chart's MACD and RSI. However, the chart's hourly RSI and 4-hour Stochastic Slow signal that the pair may be overbought, and that a bearish correction may be under way anytime soon. It may be wise to enter the pair when the signals are clearer.
The GBP/USD pair has been very volatile lately. Nonetheless, the current upward trend may be under threat, as the chart's hourly MACD indicates that the pair is overbought. Additionally, the chart's hourly and daily RSI support a possible downward trend for today. Going short with tight stops may not be a bad choice at all today.
The pair's recent downward trend seems to have reversed since mid-trading yesterday, as the pair now eyes the 96.00 level. The hourly chart supports the pair going higher, as it approaches the upper barrier of the hourly chart's Bollinger bands. The hourly chart's MACD also supports further bullishness for the short-term. Going long with tight stops may be a wise choice today.
The pair's recent bearishness may be running out of steam, as weekly chart's Stochastic Slow signals that the pair is in oversold territory. A bullish move is supported by the chart's hourly RSI and weekly MACD. When the pair breaches the 1.0680 level, going long with tight stops may not be a bad bet at all.
The Wild Card
The recent downward trend of Crude Oil may have come to an end, as the black gold benefited from the weak USD in the forex market yesterday. The upward trend is supported by the weekly chart's Stochastic Slow. On the other hand, the chart's RSI and the daily chart's MACD indicate that there is much bearishness ahead for Crude. Entering Crude Oil before the downward breach occurs may be a wise choice today.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|