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Wednesday, 24 Feb 2010

USD Furthers Gains on EUR ahead of Bernanke Testimony

The U.S. Dollar saw some major gains on the Euro last night. The pair went as low as 1.3500 before rebounding to its current level of about 1.3540. Today, Fed Chairman Ben Bernanke is scheduled to testify before the U.S. Congress, an event likely to create heavy market volatility throughout his testimony and in the minutes after.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownupdowndown
Weekly Trenddowndowndownupdowndown
Resistance1.36401.555591.251.09200.90000.8850
1.36001.551590.851.08850.89750.8825
1.35651.548090.501.08500.89500.8800
Support1.35001.540589.751.07950.89000.8735
1.34701.538089.401.07500.88750.8700
1.34301.533589.051.07150.88500.8675

Economic News

USD - Significant U.S. News Could Lead to USD Volatility

With the most significant economic indicators being released today revolving around the U.S. economy, the Dollar is likely to see some heavy volatility, especially against the Euro and Yen. Yesterday, the greenback was able to maintain its bearish trend against the EUR, reaching the 1.3500 level.

Although the pair has bounced back slightly, most analysts are not predicting any significant upward movement in the near future. Conversely, the USD dropped against the Yen as investors flocked to the safe haven status of the Japanese currency in trading yesterday. The USD/JPY fell over 60 pips before leveling out at its current level of around 90.20.

Today, investors will want to pay careful attention to the testimony set to be given by Fed Chairman Ben Bernanke. After last week's surprise interest rate hike for emergency bank loans, anticipation is high for any new news regarding the state of the U.S. economy. Positive sentiment will likely lead to major gains for the greenback.

Additionally, the American New Home Sales Report is set to be released later today. If the figure comes in as predicted, traders can predict big things happening for the Dollar. On the other hand, the housing market has been lagging for the last few months. Negative news may temper investor confidence in the Dollar, leading to big gains for the Yen.

EUR - Negative European News Leads to Losses for Euro

After a series of European economic indicators came in below expectations yesterday, the EUR saw losses across the board. The EUR/GBP dropped over 80 pips before leveling out in overnight trading. EUR/JPY dropped from 124.45 yesterday, to its current level 122.25.

Investors have yet to show much confidence in the Greek bailout plan, and following yesterday's disappointing news, all signs appear to be bearish for the ailing currency.

Today, traders will want to pay attention to the Industrial New Orders report, set to be released at 10:00 GMT. The report is a leading indicator of production, and could provide a clear look at the current state of the Euro-Zone economies.

The Euro is not forecasted to break out of its current slump today. With most analysts predicting a decrease in European industrial production from last month, the single currency will have a hard time attracting any risk taking among investors.

JPY - Risk Aversion Leads to Yen Gains

Yesterday saw several economic indicators in both Europe and the U.S. come in below expectations. This resulted in a loss of investor risk appetite, leading to major gains for the safe-haven Yen. The JPY increased significantly against the Dollar, Euro and British Pound, and is currently in position to continue on that course today.

Depending on the outcome of the testimony today by the U.S. Federal Reserve Board Chairman, Ben Bernanke, the Yen could take advantage of a volatile situation and increase its profits. Yen traders will want to pay careful attention to the testimony. Any indication that the U.S. economic recovery is slowing down would be good news for JPY. That being said, if the statement comes in positive for the U.S. economy, risk sentiment could return causing the Yen to lose in afternoon trading.

Crude Oil - Crude Oil Inventories on Tap Today

Following a report that U.S. oil stockpiles declined over the last month, the price of crude increased as investors rushed to buy up the commodity. Currently, crude is trading around the 79.19 level, an increase from 78.57 reached last night.

Today, traders will want to pay attention to the U.S. Crude Oil Inventories report, set to be released at 15:30 GMT. If this release is near the forecasted decrease in inventories, it may further drive up prices. Additionally, depending on the direction the Dollar takes following Fed Chairman Bernanke's statements today, crude prices could rise or fall. Good news for the Dollar would likely lead to a drop in oil prices, with bad news likely to drive up prices for the commodity.

Technical News

EUR/USD

This pair continues to trade within its bearish channel instigated in mid-January, although there are signs that it is beginning to flatten out. After yesterday's downtick in late trading, the pair now seems poised to correct itself back upwards once more. A fresh bullish cross on the 4-hour Stochastic (slow) supports this notion. Going long through today's early hours may be a wise move.

GBP/USD

The Bollinger Bands on both the hourly and 4-hour charts are beginning to tighten building up towards what appears to be a volatile movement. The hourly Stochastic (slow) shows a bearish cross right on the 80 line of the indicator, suggesting a downturn. Other indicators, however, show no signs of direction. Waiting for the volatile breach and then joining the move may be a smart tactic today.

USD/JPY

A fresh bullish cross appears to have just formed on the 4-hour Stochastic (slow), suggesting an upward movement may be getting priced-in during the nearest time-frame. The price also floats in the over-sold territory on the 4-hour RSI, which supports this notion. Going long with tight stops may be today's preferable strategy.

USD/CHF

This pair has entered a distinct bullish channel lately and appears to be showing signals that it will continue. After a very short down-tick, the hourly Stochastic (slow) is showing a bullish cross. However, the 4-hour Stochastic (slow) is showing a bearish cross. These may appear to contradict each other, but they do not. They merely express a continuation of the bullish channel with distinct highs and lows. Buying on lows and selling on highs within this trend could be a good idea in today's trading.

The Wild Card

USD/MXN

After a volatile breach of the upper border of the Bollinger Bands on the hourly chart, this pair now appears positioned for a steady downward correction. Bouncing from the lower border to the upper border in the 4-hour Bollinger Bands supports this notion. Forex traders can also see that the price is currently floating in the over-bought territory on the 4-hour RSI, and a fresh bearish cross has recently formed on the 4-hour Stochastic (slow). Going short on the Dollar against the Mexican Peso in today's trading may not be a bad idea.

Current Time: 09/01 07:01 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/01
07:30AUD+ Commodity Prices y/y-12.1%--1
08:15EUR+ Spanish Manufacturing PMI53.9--3
08:30CHF+ SVME PMI54.3--1
08:45EUR+ Italian Manufacturing PMI51.9--3
09:00EUR+ Final Manufacturing PMI50.8--1
09:30GBP+ Manufacturing PMI55.4--5
09:30GBP+ Net Lending to Individualsm/m2.5B--3
09:30GBP+ M4 Money Supplym/m0.1%--1
09:30GBP+ Mortgage Approvals67K--1
00:50JPY+ Monetary Base y/y42.7%--1
09/02
02:00NZD+ ANZ Commodity Pricesm/m-2.4%--1
02:30AUD+ Building Approvals m/m-5.0%--5
02:30AUD+ Current Account-5.7B--3
02:30JPY+ Average Cash Earningsy/y1.0%--3
04:45JPY+ 10-y Bond Auction0.52|4.3*-1
05:30AUD+ Cash Rate2.50%2.50%-5
05:30AUD+ RBA Rate Statement***5
06:45CHF+ GDPq/q0.5%--1
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