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Wednesday, 22 Sep 2010
USD/JPY Declines Below 85 yen
The U.S. dollar continued to decline in early morning trading Wednesday, buying less than 85 Japanese yen after the U.S. Federal Reserve said it was ready to take further action to boost the economy.
USD - Dollar Falls Broadly on Fed's Comments
The U.S. dollar hit its lowest level in seven weeks against a basket of currencies, following the FOMC statement Tuesday night. Furthermore, the USD dropped below 85.00 yen, which in turn generated speculation that Japanese authorities may intervene to curb yen gains after the BoJ resumed intervention for the first time since 2004 last week.
The dollar fell about 1% against the euro on Tuesday, after the Federal Reserve said it would provide additional accommodation if needed to support the economy. The FOMC also said inflation is currently running below its target and sounded gloomier on its growth outlook, laying the groundwork for quantitative easing. Quantitative easing is considered by many economists as akin to printing money and therefore weakens a country's currency.
Against the Japanese yen the dollar fell to its weakest level since Japan intervened last week, fueling speculation further Japanese intervention in the marketplace. Some market players do not rule out another push by Japanese authorities to try and send the greenback above 86 yen. Many doubt they would let the dollar fall below 84.00. That being said, the prospect of quantitative easing from the Fed does not bode well for a bullish USD/JPY pair.
EUR - Euro Near 6 Week High vs. USD
The euro rose against the greenback on Tuesday, largely due to solid demand at sales of peripheral euro zone debt. At the same time, expectations that the U.S. Federal Reserve may debate more monetary easing kept investors away from the greenback. Irish, Greek and Spanish government debt auctions attracted decent demand, easing concerns about whether the euro zone's highly indebted countries can obtain the funding they need.
Analysts said that the fact that the auctions were relatively well-received helped the euro develop some bullish momentum and it has broken through resistance at $1.3120.
The euro rose as high as $1.3312 in overnight trading, up 0.4%, after climbing 1.5% on Tuesday. It climbed through its 200-day moving average on Tuesday and chartists have said the next target is its August high of $1.3334.
JPY - Yen Gains After Fed Statement
Japan's Nikkei average slipped 0.5 percent on Wednesday, as the yen edged higher after the Federal Reserve's latest statement on the U.S. economy intensified speculation that it would take more quantitative easing steps later this year. The yen rose above the 85 level vs. the greenback, with market players saying that uncertainty about the likelihood of more intervention was keeping investors sidelined, particularly ahead of a Thursday holiday in Japan.
Despite the gains made against the dollar, the yen continues to fall against the euro. The EUR/JPY pair has shot up some 85 pips since yesterday afternoon. Following the news of euro-zone debt, it appears that investors are willing to bet on the European currency vs. the safe haven yen.
Crude Oil - Oil Weakens before Inventories Report
Crude oil prices fell for the 5th time in six days on Tuesday, amid high oil inventories and the Federal Reserve's continued concern about the sluggish economic recovery. Oil prices failed to garner any support from a weak dollar, which can lift dollar-denominated crude oil prices because it makes the commodity less expensive in countries using currencies other than the greenback.
An analyst survey ahead of the API report had yielded a forecast for crude inventories to be down 1.9 million barrels last week because of lower imports from Canada. This is largely due to the Enbridge pipeline outage and the stormy weather that hindered oil tankers navigation. Oil traders are now waiting for the first glimpse of the prior week's crude inventories. The U.S. Energy Information Administration will release its oil inventory data on Wednesday at 14:30 GMT. An increase in inventories is expected, which if true, would likely pull prices further down.
Virtually all technical indicators are showing this pair in overbought territory. The Williams Percent Range on the 8-hour chart is currently at the -5 level. Typically anything above the -20 level is a sign that the pair could experience downward pressure. The Stochastic Slow on the daily chart has formed a bearish cross, meaning a correction could take place in the near future. Traders are advised to go short with tight stops today.
Most technical indicators are showing this pair in overbought territory, meaning the possibility of a downward correction is likely. The Williams Percent Range on the 4-hour chart is currently at -10, while the Relative Strength Index is approaching the upper resistance line. Traders may want to go short in their positions today.
Technical indicators are currently mixed for this pair. While the Stochastic Slow on the daily chart shows that a bearish cross has formed, the Williams Percent Range on the 8-hour chart shows the pair in the oversold region, meaning an upward correction could occur. Traders are advised to take a wait and see approach for this pair today.
Most technical indicators are showing this pair in the oversold region. The Williams Percent Range on the daily chart is at the -90 level, meaning upward pressure is likely. The Stochastic Slow on the 8-hour chart is showing a bullish cross forming right now. Traders are advised to go long with tight stops today, as an upward correction may occur.
The Wild Card
Technical indicators on the daily chart including the Stochastic Slow and Relative Strength Index show that silver is currently in overbought territory. The Williams Percent Range on the 8-hour chart confirms this theory. Forex traders may want to go short with tight stops today, as a downward correction is likely to occur.
|07:45||EUR||French Gov Budget Balance||-80.8B||-||-|
|07:45||EUR||French Trade Balance||-5.8B||-5.1B||-|
|08:00||CHF||Foreign Currency Reserves||434.7B||*||-|
|09:30||GBP||Consumer Inflation Expectations||3.2%||-||-|
|11:00||EUR||German Factory Orders||m/m||3.3%||-0.4%||-|
|13:30||USD||Non-Farm Employment Change||204K||180K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.1%||0.2%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|14:55||USD||Prelim UoM Consumer Sentiment||75.1||76.2||-|
|14:55||USD||Prelim UoM Inflation Expectations||2.9%||-||-|
|20:00||USD||FOMC Member Evans Speaks||*||*||*|