Month: March 2009

By GCI Fx Research

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The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2540 level and was capped around the $1.2675 level.  Federal Reserve Chairman Bernanke testified today and said the Obama budget plan is an “ambitious agenda.”  He also informed Congress that policymakers must decide between financial stability and fiscal stimulus in the medium-term.  U.S. equity markets opened to the high side and then faded back to the minus side during Bernanke’s question-and-answer session. Bernanke also referred to AIG as an “uncomfortable situation” in which an insurance company was essentially operating as a hedge fund.  Traders are already speculating that Friday’s U.S. February non-farm payrolls number is going to be horrendous.  The Fed also announced the launch of the Term Asset-Backed Securities Loan Facility (TALF), a component of the Consumer and Business Lending Initiative (CBLI).  For now, this facility will lend up to US$ 200 billion to certain owners of AAA-rated asset-backed securities.   U.S. Treasury Secretary testifies before the House later in the North American session.    Data released in the U.S. today saw the January pending home sales index off 7.7%. Boston Federal Reserve President Rosengren reported “I believe it would be desirable to move quickly to remove problem assets from bank balance sheets, so banks can once again focus on future prospects rather than past mistakes. Banks without troubled assets focus on avoiding further losses and further depleting capital.”  Policymakers are trying to avoid what the market is now calling “zombie banks” – banks that receive appreciable amounts of public liquidity injections, aren’t nationalized, and aren’t being restored to a healthy position.  In eurozone news, many traders expect the European Central Bank will ease interest rates by 50bps on Thursday.  European Union official Alumnia reported the EU will consider assembling a second fiscal stimulus for the region.  The French government warned its 2009 public deficit will exceed 5% of gross domestic product.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥98.15 level and was supported around the ¥97.00 figure.  The yen was given across the board as some risk appetite returned to the markets following significant losses in global equity markets yesterday.  There is ongoing speculation Japan may pursue a weaker yen in the coming months to counter its eroding trade balance, historically a major contributor to the country’s gross domestic product.  Bank of Japan Policy Board member Suda speaks overnight and may discuss the central bank’s plans to purchase additional market assets such as Japanese government bonds.  The Nikkei 225 stock index lost 0.69% to close at ¥7,229.72. U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested bids around the ¥124.25 level and was supported around the ¥121.70 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥138.60 level while the Swiss franc moved higher vis-à-vis the yen and tested bids around the ¥83.90 level.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8413 in the over-the-counter market, down from CNY 6.8438.  People’s Bank of China Vice Governor Su Ning reported China’s foreign reserves are only invested outside of China to avoid inflation the country’s money supply. Commerce Minister Chen said there is not a need for the yuan’s exchange rate to depreciate slightly now.

₤

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.3985 level and was capped around the $ 1.4155 level.  Traders are poised for another interest rate cut from Bank of England’s Monetary Policy Committee on Thursday.  More importantly, however, traders expect BoE will announce plans to conduct unstertilized asset purchases and expand its balance sheet.  This would be similar to the Fed’s massive credit easing and will be designed to steer market interest rates lower, especially in the asset-backed commercial paper market.  CBI today reported 60% of companies have seen the availability of credit worsen.  Also, it was reported that U.K. February construction PMI worsened to 27.8.  Cable bids are cited around the US$ 1.3340 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8995 level and was supported around the ₤0.8930 level.

Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Monica Hendrix

If you are new to trading and looking to learn currency trading basics and ways to make money, there are lots of different methods to choose from – we are going to show you a simple method that can make big profits and be at the heart of a successful forex trading strategy.

Trading is all about having a logical currency trading system you understand and can have confidence in. If you have confidence in your methodology, you can apply it with discipline and enjoy long term currency trading success.

If of course you don’t understand a method and have confidence in it you will never be able to follow it with discipline and have no method at all.

Breakout Methodology – Why It Works

This method is easy to understand, easy to apply and can and does make big profits.

The methodology we are going to look at here is trading breakouts.

This trading involves catching breaks of important highs or lows.

Fact:

Most major moves start from new market highs and lows and this method will catch them. Most traders make the mistake of trying to buy low and sell high and when prices breakout – they wait for a pullback – but these pullbacks never come and the trader is waiting to get on board, as the trade sails away over the horizon.

If you learn to trade these breaks you can make big profits – but how do you do it?

Let’s take a look.

Using Support and Resistance

You are looking for levels that are considered important by the market and you should look for at least 3 – 4 tests preferably in time frames that are wide apart.

Generally, the more times a level has been tested the more valid it is.

Confirming the Break

You can and do get false breakouts, so it’s important that any breakout on a forex chart is supported by rising and strengthening momentum.

How do you do this?

You need some momentum oscillators to help you – we don’t have time to discuss these in full detail here but you can simply look up our other articles.

If momentum supports the break, you have a forex trading signal you can execute.

Stop Loss

Your stop loss level is obvious – and is behind the breakout.

Why Most Traders Don’t use Breakouts

Most traders find a breakout method hard to follow because they think they have missed a bit of the move and wait for the pullback – but history shows the big breaks don’t come back, they carry on and the odds are in your favour.

Patience is the Key!

The key with breakout trading is only trade valid breaks of support and resistance and be patient until they come around. You don’t get paid for how often you trade in currencies – you get paid for being right with your forex trading strategy and that’s it.

A Simple Methodology Which Works

All the best forex trading methods are simple but don’t be deceived, that doesn’t mean you won’t make money with breakouts – you can. Most of the top traders in the world use breakout methodology to some degree in their trading.

When you learn currency trading basics, you need a methodology to base your currency trading system on, breakouts are ideal and can lead you to long term currency trading success.

About the Author

PROFESSIONAL FOREX TRADING COURSE and FREE ESSENTIAL TRADER PDFS For free 2 x trading Pdf’s with 90 of pages of essential info and an exclusive course for Currency Trading Success visit our website at: www.learncurrencytradingonline.com

Source: ForexYard

The USD rose to its highest level in 2 years against all of its major currency counterparts on speculation that the U.S. government would pour a further $30 billion into American International Group (AIG), fuelling safety buying of the USD. With recent gains, the USD has obtained a momentum that some say will last at least through the rest of March 2009.

Economic News

USD – USD Forecasted to Strengthen Through March

The USD rose to its highest level in 2 years against all of its major currency counterparts on speculation that the U.S. government would pour a further $30 billion into American International Group (AIG), fuelling safety buying of the USD. The Dollar was also held gains after a report showed U.S. consumer spending and personal income came in better than expected in January. The fact that the U.S. authorities seem to be taking swift actions to overcome the crisis in the financial system has supported the Dollar lately, which looks to be relatively less risky than the other currencies.

The Dollar was traded at 1.2574 per EUR yesterday, after climbing 0.7%, while against the JPY the Dollar was little changed, at 97.48 per Yen. The greenback has also strengthened versus the British Pound, falling below 1.4000 yesterday after data showed U.K. home prices dropped the most since 2001. Despite the fact that the U.S. economy is still very weak, it seems that the investors expect the U.S. to recover first from the global economic crisis. And the country’s potential to be the first economy to pull out from recession is confirmed by the improvements in the ISM manufacturing, personal income and personal spending data.

Meanwhile, the news from AIG, and worries about Eastern Europe has been of most market interest, which has been benefiting the Dollar. Today, investors should be closely looking to upcoming U.S data, especially the Pending Home Sales report, for more clues on the depth of the recession. With recent gains, the USD has obtained a momentum that some say will last at least through the rest of March 2009.

EUR – The EUR Cannot Withstand Strong Dollar Gains

The European currency slumped to its lowest in 3 months on Monday as traders anticipated another interest rate cut and a shift to quantitative easing from the European Central Bank (ECB) at its policy meeting Thursday. The European Central Bank expected to cut its main refinancing rate to a record low of 1.5% on March 5th to spur economic growth .The currency also came under pressure and fell 0.7% to 1.2579 against the Dollar as a summit of European Union (EU) leaders rejected a mass bailout of countries in Central and Eastern Europe.

Meanwhile, the GBP also slid 2.2% versus the USD to less than 1.4000 for the first time in more than a month. The GBP weakened after reports showed U.K. banks granted fewer mortgages in January than economists forecast and house prices declined an annual 10% last month, adding to evidence that the recession in Europe’s second-biggest economy is deepening.

The EUR was hit hard not only by the EU rejection of the bailout for Eastern Europe but also by a survey showing Euro-Zone manufacturers had their worst month in 12 years! Analysts said that if not for heavy selling of the British Pound against the EUR, the Euro-Zone currency might have been pushed toward the 1.2330 level against the greenback.

JPY – Is the Yen Still a Safe-Haven Contender?

The JPY was among the few currencies to climb against the USD on Monday, as the currency’s sharp rebound late last week from a weekly slide worried Japanese exporters and prompted them to sell the Dollar early to hedge their overseas earnings.

The Japanese currency rose slightly to 97.45 against its U.S counterpart after declining 9.6% last month. The Japanese currency has fallen nearly 11% against the Dollar since hitting a 13-year high of 87.10 Yen in January, with the slide worsening after poor GDP numbers and the resignation of the Japanese finance minister last month.

The Yen also rose against the Euro-Zone currency for a third day, climbing to 122.41 per EUR as stocks tumbled on concern that the global recession is deepening, prompting investors to buy the Japanese currency as a refuge. Analysts have said that the Yen’s sharp depreciation might be stalled at the resistance level of 98.89. Since the JPY has failed to break that level in the next two weeks, the Yen might rise to as high as 94.63 against the greenback.

Oil – Oil Prices Weaken; Will OPEC Cut Production Further?

Crude Oil prices continue to remain steady on Tuesday, hovering just above $40 a barrel. Crude Oil prices stabilized after previously dropping almost 10% on increased signs the deepening global recession will limit fuel demand. However, Crude Oil is likely to continue declining if the USD will strengthen further against its currencies of six major U.S. trading partners, thus reducing the appeal of commodities as an alternative investment. Market players await the U.S. inventory data being released on Tuesday, as the figures are likely to show the impact on demand from the world’s top energy consumer.

Crude Oil prices, which fell to a 5-year low of $33.87 a barrel on Dec. 19th, have rebounded recently as the Organization of Petroleum Exporting Countries (OPEC) restricted production further. Although OPEC officials gave conflicting signals on their intentions to further cut output in order to bolster prices when they meet in Vienna on March 15th, it created certain expectations in the mind of market participants. Investor sentiment is expecting OPEC to make another cut, but if the cartel decides not to lower crude production when it meets, analysts anticipate that Oil prices have much further to fall, perhaps below $30 a barrel.

Technical News

EUR/USD

The daily chart is showing mixed signals with its RSI fluctuating in neutral territory. However, the 4-hour chart’s RSI is already floating in the over-sold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be the preferable strategy.

GBP/USD

The typical range trading on the daily chart continues. Both the daily RSI and Slow Stochastic are floating in neutral territory. However, the pair currently sits near the bottom border of the 4-hour chart’s Bollinger Bands, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be the preferable strategy.

USD/JPY

The bullish trend is losing its steam and the pair seems to consolidate around the 97.00 level. The daily chart’s RSI is already floating in the over-bought territory suggesting that the recent upwards trend is losing steam and a bearish correction is impending. Going short with tight stops appears to be the preferable strategy.

USD/CHF

The daily chart is showing mixed signals with its Slow Stochastic fluctuating in the neutral territory. However, a fresh bullish cross on the hourly chart’s Slow Stochastic implies that an upwards correction might take place in the nearest time frame. When the upwards breach occurs, going long with tight stops may be a wise choice.

The Wild Card – Gold

Gold prices are once again dropping, and it is currently trading around $924.10 an ounce. At the moment, the daily chart’s Slow Stochastic is giving bullish signals, indicating that gold prices might go up in the near future. This might give forex traders a great opportunity to enter a very popular trend.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By GCI Fx Research

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The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2545 level and was capped around the $1.2635 level.  The common currency was pressured lower after it was reported the European Union rejected a specific Eastern European plan to stimulate economic growth in the troubled central and Eastern European regions.  Instead, EU leaders endorsed a plan to coordinate steps to ease credit strains across the entire bloc.  The Eastern European plan called for €190 billion in aid to benefit the region.  Traders are also talking about additional stories including Berkshire Hathaway’s worst investment year ever, HSBC’s weaker-than-expected capital position, and the possibility AIG will obtain US$ 30 billion in additional government aid.  Dealers are already looking ahead to Friday’s February non-farm payrolls number with most economists forecasting another bad print.  In U.S. news, January construction spending was off 3.3% m/m while the February ISM manufacturing survey improved slightly to 35.8.  Also, January personal consumption was up 0.6% m/m, up from December’s 1.0% decline, while personal income was up 0.4%, up from December’s 0.2% decline.  Notably, the personal savings rate printed at 5.0%, the highest level since March 1995.  Additionally, the personal consumption expenditures price index was up 0.2% in January from a 0.5% decline in December. The core PCE price index was up 0.1% m/m and 1.6% y/y in January from a 0.1% decline in December.  In eurozone news, the EMU-16 February manufacturing PMI survey declined to 33.5. Also, EMU-16 annualized inflation rose to 1.2% in February from 1.1% in January, ending six months of declines.  Euro bids are cited around the US$ 1.2475 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥97.90 level and was supported around the ¥96.90 level.  The yen was mostly strong across the board but weaker vis-à-vis the U.S. dollar.  The yen has given back some of the gains it made over the past few months.  U.S. officials are becoming increasingly concerned that Japan is going to pursue a weaker yen to help bolster its beleaguered export situation.  Japanese net trade data are quite weak and the unpopularity of the Aso government could see the government try to orchestrate a weaker yen.  Dealers expect Bank of Japan will expand its asset purchase program to steer market rates lower in an attempt to stimulate the asset backed commercial paper market.  The Nikkei 225 stock index shed 3.81% to close at ¥7,280.15.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥121.95 level and was capped around the ¥123.55 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥135.90 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.35 level.  The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8438 in the over-the-counter market, up from CNY 6.8405.

₤

The British pound came off sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.3955 level and was capped around the $ 1.4295 level.  The big news in the U.K. today was HSBC’s announcement that it may need to raise ₤12.5 billion to shore up its capital base through a rights offering.  Data released in the U.K. today saw the February PMI manufacturing survey print at 34.7, down from 35.8 in January.  Also, BoE reported January total U.K. consumer lending grew ₤1.1 billion in January, down from ₤2.1 billion in December and the weakest rate since 1993.  Most traders believe Bank of England will reduce its main interest rate to 0.50% on Thursday.  The bigger news, however, will be the expected announcement that the central bank will begin to aggressively conduct unsterilized asset purchases to expand its balance sheet.  BoE Deputy Governor Gieve retired on Friday and he indicated the key interest rate will need to be raised before it is “obvious on the street that the economy is getting better.” Cable bids are cited around the US$ 1.3340 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9010 level and was supported around the ₤0.8810 level.

Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

The Canadian Gross Domestic Product decreased in the fourth quarter of 2008 according to a report by Statistics Canada released today. Canadian GDP fell in the October to December quarter by an annualized 3.4 percent following a revised gain of 0.9 percent in the July to September quarter. The decline in fourth quarter GDP was the largest quarterly fall since the 1991. The fourth quarter’s GDP decline was better than market forecasts as predictions were for an annualized 3.5 percent decline.

Total GDP growth in Canada for all of 2008 was 0.5 percent following GDP growth of 2.7 percent for all of 2007.  GDP data for the month of December showed a decline of 1.0 percent following a 0.7 percent decrease in November.  The monthly decline surpassed economic forecasts predicting a fall of just 0.6 percent.

Contributing to the fourth quarter GDP decline was a decrease in the production of goods by 2.4 percent with the manufacturing industry showing a 4.3 percent drop.  Service-producing industries were also down in the fourth quarter with a 0.4 percent fall. Exports declined for the sixth straight quarter with a 4.7 percent dip while imports also fell at a 6.4 percent clip.  Personal spending decreased for the first time since 1995 in the fourth quarter as spending declined by 0.8 percent.

Canadian Dollar loses ground in Currency Trading.

The Canadian loonie dollar has been losing ground in the currency trading markets against most of the other major currencies today.

The U.S. dollar has advanced against the Canadian loonie as the USD/CAD trades at the exchange rate of 1.2935 at the end of the U.S. session at 4:57pm EST after opening the day at 1.2753 according to currency data by Oanda.

The euro has also gained against the loonie as the EUR/CAD trades at the 1.6262 level after opening the day at 1.6029. The loonie has declined versus the Japanese yen as the CAD/JPY has fallen to the 75.35 yen per loonie level after opening at 76.47.

The British pound has advanced versus the loonie as the GBP/CAD trades at 1.8163 after opening today at 1.8136.

The Australian and New Zealand dollars have gained against the Canadian loonie as the AUD/CAD trades at 0.8138 from 0.8068 while the NZD/CAD trades at 0.6365 after opening the day at the 0.6289 exchange rate.

CAD/JPY Chart – The Canadian dollar falling versus the Japanese Yen today in Currency Trading(4 Hour Chart).

By Sean Hyman

Back in early January, I wrote an article that focused on a bubble forming in the Treasury bond market. Back then I saw money getting ready to jump from one seemingly safe asset to another…gold. (I wrote about this on January 2nd. I’ll include the links to all of these stories at the bottom so you can check it out for yourself.)

This was my first “tip off” that money was about to start flowing elsewhere and gold was the next logical choice since it has held up fairly well in this bear market downdraft.

Watch our daily video at www.mywealth.com/blog

So when bubbles form, you have to ask yourself, “Where will this money go once it starts flowing out of U.S. treasuries?” Money was still in “defensive mode” and I knew that it still wanted to “run for cover” but was getting uncomfortable in being in the treasury bubble. Therefore, the next “stop off” that seemed stable to many investors would be gold. That’s how I came up with my thoughts for the January 2nd article.

Then on Jan 22nd-23rd, I wrote a “two part” article about why gold was going to break out to the upside soon. At the time, gold was trading at $853 an ounce. Yesterday, gold was $100 an ounce higher, piercing the $950 level.

In the second article, I provided a chart of gold before it broke out and gave some reasons why it would break out.

Aside from the bond bubble, I saw the money supply exploding and a stimulus package coming that would eventually flood the market with money (once the government got the Drain-o out and unplugged the banks). So that is a bullish thing for gold as huge sums of dollars are printed, it eventually dilutes the value of the dollar and boosts gold.

However, in the mean time, while we’re waiting on that to happen, I also see that “fear” was dominate in the markets as we had a new administration coming into office (with the uncertainties that it brings) and a bear market in stocks and a global slow down. All of this would take time to work itself out, and that is bullish for gold now…even before the eventual inflationary story kicks in.

South African mines – the icing on the cake!

Also, I noticed that South Africa (one of the biggest gold miners/exporters in the world) was having electricity problems that were causing a 14% slow down in gold production which hasn’t happened since the 1800s. That slow down in production was also bullish for gold (less supply, yet growing demand).

Then on top of this, we have U.S. interest rates which are right at zero. That will unleash its own inflationary effects at least by latter 2009 to early 2010.

Also, I noticed that gold has held up relatively well even though the dollar has rallied strongly in the previous months. I also noticed that gold has held up better than most other commodities out there. So there was quite a bit of “relative strength” that I saw with gold. Imagine what it will do when the dollar does actually start to crumble once again?

So what do smart investors do when they see all of this? They position themselves AHEAD of the move like a surfer that looks for his wave to come. Then the investors ride this fundamental wave for quite some time to come.

This is exactly what they did. The smart fundamental investors positioned themselves just ahead of the breakout while the technical investors (chart readers) bought in right after the break upward. Both are enjoying nice gains right now.

In fact, gold is one of the few investments out there breaking higher right now. Check out the chart below.

Gold consolidated “multi year” gains and then broke higher!

Here’s how you can get in on this gold rally?

For the investor: You can buy the gold ETF (GLD) through your stock brokerage account. I encourage the purchase of ETFs over the commodity contract because you can buy with cash, no margin and you don’t have to worry about expiring contracts this way either. There are other gold ETFs out there but most don’t have the volume that this one does and so they would have wider spreads to overcome and possibly may not have quite as good of fills on your orders due to there being less liquidity.

For the trader: You can use the double long ETN (symbol: DGP). Remember, that this will be much more volatile and therefore carries more risk. However, for a near term trader that wants to trade the newly formed uptrend, this could be one way to do it.

Also see Sean’s other Gold Articles:

Get Ready for the Transition from Bonds to Gold

http://www.mywealth.com/blog/post/get-ready-transition-bonds-gold

Gold will shine once again in 2009

http://www.mywealth.com/blog/post/gold-will-shine-once-again-2009

Gold will shine once again (part 2)

http://www.mywealth.com/blog/post/gold-will-shine-once-again-2009

About the Author

This post was provided by Sean Hyman, Head Instructor at mywealth.com. See his blog at http://www.mywealth.com/blog.

Source: ForexYard

The USD may continue to strengthen on global economic weakness. As equity markets maintain their bearish momentum, the Dollar has shown considerable strength. The trend of buying Dollars over other major pairs could continue into this week as the global economy continues to suffer and risk aversion remains high.

Economic News

USD – USD Gaining on Negative Fundamentals

After stock markets plummeted to a 12-year low this past week, the USD apparently responded with a strong appreciation in value. Against its primary currency rival – the EUR – the greenback gained almost 100 points in early trading hours, and is currently trading near the price of 1.2600. It made similar gains against the GBP as it started the day at 1.4314 and currently stands near 1.4260.

Lately the U.S. Dollar has been strengthening as a result of a weakening global economy. With talk of multiple bailouts, stimulus bills, and stipulations for domestic investment, many large hedge funds are beginning to bank on those currencies which benefit from protectionism. Economies which rely on exports typically suffer the most from protectionism, whereas those economies which import more possess the ability to regain lost momentum during times of international draw-back. The USD is benefiting from just such an action.

Many banks and large financial firms are pulling out of risky investments and into safe-haven currencies, the Dollar being the primary safe-haven among them. As a result, traders are seeing a reversal to typical economic outcomes. With more negative news coming from every economy, traders may actually expect the value of the primary global safe-havens – the USD and Gold – to continue their rally and gain levels of strength not seen in decades. The coming week will be no different considering a multitude of economic indicators are expected to be released, all of which are forecast to show a continuation of economic suffering across the boards.

EUR – EUR Weakness Evident as Investor Confidence Writhes in Anxiety

Losing value to the majority of its currency pairs these past few trading days has made the EUR look less and less appetizing for willful traders. Trading down against the USD, just under the 1.2600 price barrier, the pair has been gaining momentum on its downward slide. Against the British Pound, the EUR is also taking losses, trading close to the 0.8840 price level in today’s early trading hours.

Not helping this large regional currency was the fact that the European Union (EU) rejected recent calls for additional aid to Eastern European countries in need of financial assistance. What many analysts feared all along might just come true. The Euro-Zone is appearing to polarize into rival camps with the potential of instituting trade restrictions and protectionism within the region. Large economies, such as Germany, are pairing against the smaller, harder-hit economies of East Europe. Investors are bailing out of the 16-nation currency as a result.

After a series of economic data which has highlighted just how weak the Euro-Zone economy has become, the European Central Bank (ECB) appears poised to slash interest rates yet one more time to a record low of 1.50%. Britain may also be following this rising trend by cutting their rates by 50 basis points as well to 0.50% this Thursday. Traders have begun to price in these upcoming rate cuts and many investors believe this week will be one of the more interesting weeks in forex trading for 2009 thus far.

JPY – JPY Weakness Growing More Apparent

Those investors trading the JPY lately have taken note of the recent downward trend occurring with this island currency. When the global economic recession began, there was a rush to unwind carry trades when interest rates were being slashed. This helped strengthen the JPY. As economies posted continuous negative data the JPY became a safe-haven. However, nowadays the JPY is also showing signs of continued stress which has investors worried that the Japanese economy may not be able to withstand the rising tide.

Trading at record highs against its currency rivals in recent months, the JPY now stands to lose most of what it has gained. The foreboding of such a disastrous turn of events for Japan, this currency weakness will no doubt harm the island economy in ways which it may struggle to recover from. The JPY is currently trading at its lowest level in 2009, with a reading of 97.55 against the Dollar and 122.67 against the EUR. Traders won’t likely see this trend reverse anytime soon.

OIL – Oil Demand Continues to Fall; As Does the Price of Crude Oil

After climbing to a recent high of $45 a barrel last week, the price of Crude Oil has apparently continued its descent. It has decreased in price for two consecutive days and currently stands just under $44 a barrel. This coming directly after a short-lived increase after it dropped to $42.50 during late trading hours last Friday.

It has been said by many analysts the world over that the ongoing economic recession is responsible for the downward slide in oil prices. This continues to be the case as many forecasts for oil demand are being reduced even further for the 2009 fiscal year. As the specter of this recession looms over investors, there is likely to remain a downward pressure on energy prices despite OPEC’s recent production cut.

Technical News

EUR/USD

Since the opening of the trading week, the pair has dropped about 100 pips. The 4-hour chart shows that a bearish channel has been formed and that the pair is now testing the 1.2540 level. Traders should look for a breach of the support level, as it might trigger another bearish move.

GBP/USD

The cable has been range-trading within a restricted range for a few days, hovering around the 1.4270 level. Currently, a bearish cross on the 4-hour chart’s Slow Stochastic suggests that the pair may enter a mild downtrend with a potential of reaching the 1.4200 level.

USD/JPY

It appears that the pair might have limited it bullish trend after peaking at 97.65. A fascinating triple doji has been formed on the daily chart, indicating that a strong breach is imminent, and as all oscillators are pointing down, it appears that the momentum is quite bearish. A breach of the 96.80 level might validate the bearish trend.

USD/CHF

Ever since the pair bottomed at the 1.1460 level, it has reversed course, and is now trading around the 1.1700 level. As both the MACD and the Slow Stochastic on the 4-hour chart are giving bullish signals, it seems that another bullish session is impending. Going long appears to be the preferable choice today.

The Wild Card – USD/NOK

The pair has entered an extremely strong bullish trend lately, appreciating over 2,500 pips in a few days. The 4-hour chart shows a very clear bullish channel, with the potential of reaching even higher. This might be a great opportunity for forex traders to join a very popular trend.

Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

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