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Wednesday, 23 Sep 2009
U.S. Interest Rates on Tap
Following two relatively peaceful trading days, today is filled with news publications from the major economies. Starting at 06:45 and until 09:00 (GMT) traders are advised to follow the news events from the Euro-Zone. Later on, the Crude Oil Inventories will be published at 14:30 (GMT). This indicator tends to have an instant impact on Crude Oil prices, and traders should use it with their trading. Finally, at 18:15 (GMT), the Federal Reserve will announce the U.S Interest Rates for September. This promises to create hefty volatility in the market, which should provide various opportunities for traders to enlarge profits.
USD - The Dollar Falls before Federal Reserve Meeting
The U.S Dollar's weakness resumed, as global investors again embraced risks, reducing safe-haven demand for the U.S. currency, as traders took positions on the first day of the Federal Reserve monetary policy meeting. The U.S. Dollar also weakened on speculation that the Group of 20 leaders, meeting in Pittsburgh starting tomorrow, will call for a reduction in global trade imbalances that may cause further gains in the greenback's counterparts. The greenback traded at $1.4794 per EUR from $1.4790 yesterday, after declining to $1.4842 earlier on, the lowest level since September 22, 2008.
The hard-pressed Dollar had gained some ground Monday as equity markets weakened, with traders tying a decline in risk appetite to caution ahead of the Fed meeting, as well as the summit of Group of 20 leaders at the end of the week. But Tuesday's resumption of risk appetite may reflect views in the market that neither event is likely to produce meaningful changes analysts said.
Market sentiment toward the USD remains bearish. Analysts expect the Fed to signal its ultra-loose monetary policy will remain in place well into next year. Additionally, as the G20 to discusses rebalancing the global economy this will almost certainly further weaken the Dollar. The Federal Reserve is widely expected to leave Interest Rates unchanged. But markets will seek out clues on the Fed's asset purchases. Any sign that the Fed intends to continue its quantitative easing measures beyond this year could send the U.S Dollar to record lows.
EUR - Euro Hits $1.48 for the First Time in a Year!
The EUR traded at a 1 year high against a sliding Dollar on Wednesday, as traders took advantage of the U.S. currency's rise the previous day to resume selling ahead of a Federal Reserve monetary policy meeting. The European currency advanced as hopes for a global recovery prompted investors to shift money to higher-yielding currencies from the safe-haven greenback.
In late trading, the EUR was up 0.8% at $1.4796 after options-related demand and strong Asian buying pushed it above $1.48 for the first time since September 2008. European Central Bank (ECB) Governing Council member Axel Weber said on Tuesday recent moves in currency markets were surprising given the Euro-Zone's economic performance relative to other major economies. Traders expect the $1.4870 level may be the next target in EUR/USD cross, with many predicting an eventual move back to $1.50.
The British Pound also gained against the U.S Dollar for the first time in 4 days, as stocks rallied around the world on evidence that the global economic recovery is accelerating. The British currency advanced 1% to $1.6376. The GBP rose 0.2% against the EUR to 90.33 pence, ending a 6 day losing streak. Against the EUR, the British currency rebounded from near the lowest level in more than 5 months after Goldman Sachs Group Inc. recommended selling the common European currency against Sterling.
JPY - Yen Gains as USD Remains Under Pressure
The Japanese Yen extended its gains on Wednesday vs. the greenback as investors unloaded the U.S. currency ahead of meetings by the Federal Reserve and the G20 leaders this week. The currency gained for a 2nd day against the U.S Dollar on speculation world leaders will discuss policies to rebalance global economic growth at the G20 meeting this week. The JPY climbed to 90.82 Yen per Dollar from 91.10, and rose to 134.40 Yen per EUR from 134.76.
The Japanese currency is likely to strengthen further before new Finance Minister Hirohisa Fujii takes office this month; he said a strong Yen was generally good as it boosted the purchasing power of Japan's economy. Fujii subsequently backed away from that comment, but speculation will remain that after sweeping to power last month, the Democratic Party of Japan may try to shift the country away from its reliance on exports and its opposition to Yen strength.
Crude Oil - Crude Rebounds as Inventories are Expected to Decline
Crude Oil prices rose Tuesday to above $72 a barrel, as pressure on the Dollar and expectations for a further drop in U.S. Crude inventories boosted market sentiment. Weekly petroleum data is likely to show that stockpiles of Crude fell again last week, as imports remained low analysts said. Last week, the EIA said Crude Oil Inventories decreased by 4.7 million barrels in the week ending Sept. 11, as imports dropped 2.1% from a week ago.
The move in Crude Oil today is likely to be supported by a fresh wave of selling of the U.S. Dollar. Traders will be waiting for U.S. Crude inventory data from the American Petroleum Institute and the U.S. Energy Information Administration. Also of interest to commodities traders is leaders of the world's most powerful economies will convene in Pittsburgh later this week for the G20 Summit.
The pair continues with the bullish momentum and is now trading around the 1.4815 level. As both the MACD and the RSI on the 4-hour chart are pointing up, it looks that the bullish trend is likely to continue today. Going long might be the right choice today.
Ever since bottoming at the 1.6130 level, the cable saw a sharp uptrend, and has recently breached through the 1.6400 level. As a bullish cross is taking place on the 4-hour chart's Slow Stochastic, it seems that another bullish session might be impending.
There is a very distinct bearish channel formed on the daily chart, as the pair is now floating on the bottom of it. The next strong support level seems to be located at the 90.00 level. If the pair will drop below it, it might signal a long-lasting downtrend.
The pair continues with the bearish momentum, and is now approaching the 1.0200 level. As all oscillators on the daily chart are pointing down it seems that the bearish trend might continue today.
The Wild Card
The high volatility of Crude Oil continues, as yesterday a barrel of Oil was traded for over $71.50. However, a bearish cross on the 4-hour chart's Slow Stochastic suggests that a bearish correction might take place today. This might be a good opportunity for forex traders to catch the trend at its beginning.
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