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Wednesday, 20 Oct 2010

Will the USD Be Able to Maintain Yesterday's Gains?‎

Following yesterday's volatile trading session, in which the US dollar gained around ‎‎300 pips against the euro, analysts are questioning whether the dollar gains were a ‎temporary occurrence or the beginning of a larger trend. Today, news out of the UK ‎and Canada will likely determine which direction the market moves.‎

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownupdowndown
Weekly Trendupupdowndownupup
Resistance1.40001.587082.250.97850.99000.8840
1.39401.582581.950.97550.98400.8820
1.38551.577581.650.97200.98000.8795
Support1.37001.567581.100.96500.96650.8740
1.36451.562080.900.96150.96150.8705
1.35601.557080.700.95750.95400.8690

Economic News

USD - USD Gains Big Following Surprise Chinese Rate Hike

Yesterday, the dollar saw significant gains against virtually all of its main currency ‎rivals, following a surprise Chinese interest rate hike that led to increased risk aversion ‎among investors. The dollar was able to gain approximately 300 pips against both the ‎euro and UK pound. Currently the EUR/USD pair is trading around the 1.3755 level, ‎while the GPB/USD pair stands at 1.5715. While the greenback initially made gains ‎vs. the fellow safe-haven yen, the USD/JPY pair has since fallen and is currently ‎around the 81.30 level.‎

Analysts are unsure regarding how long the USD will be able to maintain these gains. ‎Any future moves by China to tighten economic policy will likely benefit the ‎greenback, as investors are likely to revert to safe-haven currencies as a result. That ‎being said, with the Fed set to unveil its latest quantitative easing measures as early as ‎next month, investor confidence in the US economy is quite low. As long as the US ‎continues to release negative economic indicators, investors are likely to keep opening ‎short positions for the greenback.‎

Today, a lack of significant economic indicators out of the US means that dollar ‎values will likely be determined by news from the UK and Canada. Traders are ‎advised to pay attention to the UK Spending Review and the Canadian BOC Press ‎Conference, scheduled for 11:30 and 15:15 GMT respectively. Both sterling and the ‎loonie took losses against the dollar yesterday. Positive news today will likely help ‎either currency recoup its losses. ‎

EUR - EUR Set to Reverse Yesterday's Losses

In addition to the 300 pip drop the EUR/USD took yesterday, the safe-haven yen was ‎able to record significant gains against the 16-nation single currency. EUR/JPY ‎plummeted some 210 pips yesterday before staging a minor recovery in the overnight ‎session. Currently the pair is trading around the 111.90 level. Analysts attribute the ‎drop to a decrease in risk taking following China's surprise interest rate hike ‎announcement. ‎

Whether or not this trend will continue today is unknown, but traders will want to pay ‎careful attention to any major announcements out of China just in case. In addition, ‎news out of the UK is likely to influence the euro today. The EUR/GBP pair dropped ‎close to 100 pips yesterday. Today's UK Spending Review is expected to reveal that ‎the Bank of England is set to inject a significant amount of capital into the economy, ‎while keeping interest rates at their record low. If so, investor confidence in the UK ‎economy will likely remain low, and could lead to significant gains for the euro in ‎afternoon trading. Traders may want to jump on this impending trend before it is too ‎late. ‎

JPY - Yen Manages to Gain on USD in Overnight Trading

After losing close to 60 pips against the US dollar in yesterday's trading, the yen has ‎managed to correct itself and is currently trading around the 81.40 level. ‎Additionally, the Japanese currency has gained some 130 pips against the UK pound, ‎and 75 pips against the Swiss franc. Analysts attribute the yen's gains to a return to ‎risk aversion following the surprise announcement out of China yesterday. Whether ‎or not these gains are temporary depends on a number of factors.‎

First, today's UK Spending Review is unlikely to help generate investor confidence in ‎the British economy. Should the Bank of England announce a new stimulus plan, as ‎predicted, the safe-haven yen is likely to see more gains. At the same time, traders ‎always want to pay attention to any moves the Bank of Japan may make in order to ‎devalue its currency. The yen's recent gains have not been good for Japan's export ‎industry, and a move by the BoJ is not out of the question. ‎

Crude Oil - Oil Prices Tumble As the USD Moves Up

Crude oil prices fell close to 400 pips in trading yesterday, as investors abandoned the ‎commodity in favor of the safe-haven dollar. While oil managed to stage a slight ‎correction in overnight trading, the trend is still very much down. Currently prices ‎stand at $80.55 a barrel. Crude oil is typically viewed as an alternative investment to ‎the US dollar. It appears for as long as the dollar is making gains, oil has the potential ‎to drop down further.‎

Today, in addition to the direction the USD takes, traders will want to pay attention ‎to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Analysts are ‎forecasting an increase in inventories this week. Should the figure come in at its ‎forecasted level of 1.5M, crude has the potential continue its bearish trend. Typically, ‎an increase in inventories signals a decrease in demand which causes oil to fall, at least ‎in the short term. ‎

Technical News

EUR/USD

Following yesterday's downward spiral, the Williams Percent Range on the 8-hour ‎chart indicates this pair is in oversold territory. This theory is supported by the ‎Stochastic Slow on the 4-hour chart, which has formed a bullish cross. Traders are ‎advised to long with tight stops today.‎

GBP/USD

The Relative Strength Index on the 8-hour chart indicates that this pair is in oversold ‎territory and may see an upward correction. In addition, the Stochastic Slow on the ‎same chart shows that a bullish cross has formed. Now may be a good time for ‎traders to open up some long positions in order to jump on the impending upward ‎trend.‎

USD/JPY

Virtually every technical indicator shows this pair trading in neutral territory at the ‎moment. Usually this means that a clear direction has not yet presented itself for the ‎day. Traders may want to take a wait and see approach in order to better judge which ‎way the pair is moving. ‎

USD/CHF

The Relative Strength Index on the 8-hour chart shows this pair entering overbought ‎territory, meaning that a downward correction could occur today. Traders may want ‎to go short with tight stops today, as a bearish correction may take place.‎

The Wild Card

Platinum

After tumbling in trading yesterday, technical indicators are showing that the ‎commodity may be due for an upward correction. The Slow Stochastic on the 8-hour ‎chart has formed a bullish cross, while the Relative Strength Index on the 4-hour chart ‎is in oversold territory. Forex traders may want to go long with tight stops for some ‎potentially serious profits today.

Current Time: 11/24 15:14 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/24
14:45USD+ Flash Services PMI57.157.356.31
11/25
00:50JPY+ Monetary Policy Meeting Minutes---3
02:00JPY+ BOJ Gov Kuroda Speaks---5
03:00NZD+ Inflation Expectationsq/q2.2%--1
08:00EUR+ German Final GDP q/q0.1%0.1%-1
10:00EUR+ Italian Retail Salesm/m-0.1%0.2%-1
10:05AUD+ RBA Deputy Gov Lowe Speaks---2
10:30GBP+ BBA Mortgage Approvals 39.3K38.5K-3
11:00GBP+ Inflation Report Hearings---5
14:30CAD+ NZD Core Retail Sales m/m-0.3%0.4%-5
14:30CAD+ Retail Sales m/m-0.3%0.6%-3
14:30CAD+ Corporate Profits2.6%--1
14:30USD+ Prelim GDP q/q3.5%3.3%-5
14:30USD+ Prelim GDP Price Index q/q1.3%1.3%-1
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