Month: October 2009

By CountingPips.com

The Bank of Canada held its interest rate today at the all-time low of 0.25 percent and said that the country’s currency rise hampers its economic recovery. Today’s rate decision was widely expected by economic forecasts and the bank reiterated its intention to hold the rate at this level through the second quarter of 2010, conditional on the inflation rate.

The BOC commented on the Canadian economy stating, “A recovery in economic activity is also under way in Canada. This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence.”

Although a recovery is underway, the BOC stated that the Canadian loonie’s rise is hurting its economic growth saying that the “current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.”  The higher Canadian currency makes its exports more expensive to the U.S. which buys roughly 80 percent of Canada’s exports.

The Canadian loonie has risen against the dollar steadily from earlier in the year as broad-based U.S. dollar weakness has pushed the loonie towards parity.  The dollar exchange rate was as high as 1.3000 loonie per USD in early March before a steady decline has brought the exchange rate down to as low as 1.0270 loonie per USD on October 15th.

The BOC projects that the Canadian economy will be a little better in the second half of the year than previously expected and the contraction for 2009 will register 2.4 percent. Going forward the BOC expects the economy to grow by 3.0 percent in 2010 and by 3.3 percent in 2011.

Today, the U.S. dollar has increased versus the loonie in forex trading after the rate decision in the North American trading session.  The USD/CAD opened the day trading at the 1.0287 and has increased to trading above the 1.5000 exchange level for the first time since October 9th at 3:36pm EDT.

USD/CAD Hourly Chart

By Fast Brokers – The USD/JPY is bouncing after touching the psychological 90 level and what is now our 2nd tier uptrend line.  The USD/JPY has been under selling pressure since topping at our 1st tier downtrend line.  The BoJ’s minutes revealed the central bank is encouraged by recent performance of the Japanese economy, and is less inclined to add more liquidity to the monetary system.  In fact, the BoJ all but reaffirmed its new hawkish stance towards the Yen with the DPJ looking to install a more conservative fiscal policy supportive of a stronger currency.  The BoJ’s minutes helped temper the USD/JPY’s present run despite another solid performance from the S&P futures.  Impressive Q3 earnings indicate the global economic recovery is coming along nicely, encouraging the BoJ that U.S. unemployment will decline and consumption increase.  Therefore, the central bank may believe it is unwise to act now since an increase in U.S. consumption would likely weaken the Yen and help the USD/JPY stabilize naturally.  However, the USD/JPY is still under a considerable amount of long-term downward pressure.

The USD/JPY presently faces multiple downtrend lines while the currency pair continues to have trouble leaving the psychological 90 level behind.  In addition to the downtrend lines, the USD/JPY also needs to overcome previous October highs.  Our 1st downtrend line serves as the first important obstacle since it represents a test of 9/21 highs and the concept of a more substantial near-term uptrend.  As for the downside, the USD/JPY does have a few uptrend lines we can piece together and the psychological 90 level is now working the currency pair’s favor.  However, the USD/JPY is still awfully close to critical levels and is not in the clear yet.  We are in the midst of a debilitating downtrend, meaning the USD/JPY likely needs a violent reversal to break free of its funk.

Present Price: 90.42

Resistances: 90.46, 90.63, 90.79, 90.98, 91.14, 91.35

Supports:  90.15, 89.92, 89.70, 89.57, 89.37, 89.15

Psychological: 90

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable is climbing towards our important 3rd tier downtrend line and the psychological 1.65 level after earnings from U.S. bellweathers surpassed analyst expectations.  The combination of impressive earnings and recent positive GBP data has given investors enough incentive to continue the Cable’s amazing run.  The currency pair is now facing our important 3rd downtrend line which we highlighted in our previous commentary.  Our 3rd tier runs through September highs, meaning its demise could signal another bull run for the Pound.  Additionally, our new 4th tier downtrend line isn’t too far above.  The 4th tier runs through August highs, showing the Cable is ultimately knocking on the door of a potential run towards the psychological 1.70 level.  Despite the Cable’s present strength, we’ve seen runs like this before only top out just below their critical downside technicals, only to revert to their previous trend.  Hence, we are reserving our optimism until the GBP/USD can break through these aforementioned technical walls.  Regardless of topside barriers, the Cable has quickly established quite a few technical cushions during its present run, beginning with our 2nd-4th uptrend lines and 10/19 lows.

It is a bit ironic that BoE Governor King will be addressing the general public this afternoon EST.  We’re certain King is fully aware of the important near-term technical position of the Cable at present.  As we’ve seen before, King is not afraid to play psychological games with investors to influence the near-term value of the Pound.  Hence, we would not be surprised to see Governor King attempt to subdue investors by quelling hopes of a reversal from his notoriously dovish monetary stance.  Therefore, King may be a bit aggressive during his public address, meaning investors should be wary of higher volatility.  Disappointing PPI data from both the U.S. and Germany today could further motivate for King to stick to his guns.  Another incentive to keep psychology contained is the wave of economic data flowing from China late Wednesday EST.  We suspect China will top forecasts once again, providing further motivation for investors to head for the riskier investment vehicles.  Therefore, King has more than enough reasons to keep the Cable bulls in check.  After all, British data has only recently turned positive, and the BoE likely wants more confirmation concerning the recovery in the nation’s service sector and unemployment.  On the other hand, now would be an opportune time for the BoE to support the idea of a stronger monetary policy, so we will have to see how the news pans out.

Meanwhile, investors should keep a close eye on the interaction of the Cable with our 3rd and 4th tier downtrend lines along with the psychological 1.65 level.  The GBP/USD is on the cusp of a more substantial breakout, and it will likely be up to Governor King whether to play ball or not.

Present Price: 1.6465

Resistances: 1.6486, 1.6515, 1.6547, 1.6570, 1.6590, 1.6625

Supports: 1.6431. 1.6395, 1.6372, 1.6348, 1.6323, 1.6266

Psychological: 1.65

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The EUR/USD has failed to top 1.50 once again and the level is having as much psychological influence as we anticipated.  1.50 separates the EUR/USD from consolidation and exciting near-term gains.  The currency pair has toppled the rest of our foreseeable near-term obstacles, leaving 1.50 as the final test for the bulls.  Meanwhile, the Cable has approached 1.65 and is a close downtrend line away from making another run itself.  Furthermore, the S&P futures are battling 1100 while crude stares down $80/bbl.  Not to mention the USD/JPY is trading just around its highly psychological 90 level.  Hence, we are clearly at a critical juncture in terms of the longevity of the present bull market.  Technicals are pointing in favor of a continuation of the uptrend, while fundamentals are sending mixed signals.  German and U.S. PPI data came in below analyst expectations, indicating the massive injections of liquidity have not triggered inflation yet.  Therefore, the ECB, BoE, and the Fed have less incentive to drain their QE packages despite mounting political pressure.

Trichet and the ECB reiterated their desire for a stronger Dollar, and are hoping the Fed will do its part to counter the Dollar’s demise.  If not, the ECB may be inspired to take a more hawkish monetary stance in order to defend the interests of its critical manufacturing hub.  Hence, psychological forces are beginning to work against the EUR/USD’s uptrend.  However, the ECB is all talk for right now, and the EUR/USD may be allowed to head towards 1.55 before the central bank is inclined to take more definitive action.

Meanwhile, Q3 earnings are printing better than expected, confirming the belief that the global economy is stabilizing.  The EU will be quiet on the data-front until Thursday’s Current Account Balance release.  The EU’s Current Account turned positive last month for the first time since April 2008.  Investors will be looking for another optimistic release of 4.3 Billion.  However, the more important EU releases will be the Friday’s wave of PMI data.  For the time being, investors will be paying particularly close attention to BoE Governor King’s public address this afternoon along with and important set of China econ data Wednesday night EST.  China’s upcoming data releases could be the make or break in regards to the continuation of the EUR/USD’s uptrend.  Positive China econ data would likely further encourage investors to put their money into higher risk trades such as the EUR/USD and AUD/USD.  Since we are expecting China to outperform, the EUR/USD may very well experience another leg up barring any hawkish commentary from the ECB.

Technically speaking, recent behavior of the EUR/USD and its correlations is more supportive of further movements to the topside than the downside.  However, tides can change quickly, so investors should be on their toes since we are at a critical juncture across the board.  The EUR/USD’s current topside obstacles are the psychological 1.50 level and our three downtrend lines.  As for the downside, the currency pair has multiple uptrend lines serving as technical cushions along with 10/19 and 10/13 lows.

Present Price: 1.4970

Resistances: 1.4981, 1.5013, 1.5052, 1.5086, 1.5127, 1.5146

Supports: 1.4942, 1.4921, 1.4880, 1.4860, 1.4834, 1.4800

Psychological: 1.50

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Adam Hewison – There’s no question about it, the markets can be very difficult at times. On the other hand, you can laugh all the way to the bank if you approach the markets in a systematic way.

I was looking once again at the S&P 500 and many people have said the market has gone up, not on the fundamentals, but on the perception that things are going to be better. Perception is one of the most powerful elements of the market. I would say that perception trumps both the fundamental and technical.

So what’s going to happen to the S&P 500? Is it going to continue going higher for the rest of the year, or are we close to a turning point?

In my new short video, I outline several key areas that this market is fast approaching. These levels could be the Achilles heel for this market and potentially set the direction for the rest of the year.

Watch the New Video Here…

As always, the videos are free to watch and there is no need to register.

Enjoy the video, all the best.

Adam Hewison
President, INO.com
Co-founder, MarketClub

By Rita Ruvinski

The precious metal gained for a 3rd day in Tuesday trading as a weaker U.S dollar fueled demand for the metal as an alternative investment. Gold rose closer to last week’s record highs above $1,070 an ounce as the USD fell to a 14-month low against a basket of six major currencies, helping bullion maintain its appeal as an alternative to currencies.

While the Dollar’s weakness made it almost certain Gold would hit new records in coming days, some analysts said a lack of momentum in commodity’s rise despite the Dollar’s renewed decline on Tuesday suggests there is slight wariness about the risk of U.S. interest rates rising sooner than many think. Near-term resistance is seen around $1,068, a level it took time to break through when it hit a record high of $1.070.40 on October 14. And a support level is seen at $1,055.43, the 10-day moving average.

Forex 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.

Source: ForexYard

The forex market awaits crucial U.S. data today in the PPI and Building Permits figures at 12:30 GMT. These publications are set to drive the pace of the forex market throughout the trading day. It is also recommended that you pay close attention to unexpected news announcements by President Obama as this is likely to increase market volatility. As for now, open your positions in the majors, whilst the trading day gets under way.

Economic News

USD – Dollar Tumbles on Ben Bernanke Speech

The U.S. Dollar tumbled in yesterday’s trading following comments made by U.S. Federal Reserve Chairman Ben Bernanke in a speech in which he hinted at keeping a loose U.S. monetary policy for at least the short-medium term future. The USD also fell as a flurry of higher corporate earnings and optimism about a continued global economic recovery led to an equity rally, which led to a slump in demand for the USD. Thus traders bought-up higher-yielding assets, such as the Australian Dollar, Crude Oil and Gold. The Dollar Index, which is used to track the USD against its 6 main trading partners, slipped 0.3% to 75.363.

The Dollar extended the recent downward trend against the GBP, as the GBP/USD cross ascended by 65 pips to the 1.6403 level. This comes as the British Pound recovers from its downtrend against the USD from over a week ago. The EUR/USD cross also went significantly higher on Monday by 85 pips to the 1.4964 level. The greenback also made some significant declines vs. the Canadian Dollar and Swiss Franc. This behavior was apparent throughout Monday’s trading due to the varied factors weighing down on the Dollar.

Today is the publication of the PPI and the Building Permits data at 12:30 GMT. Optimistic results will likely help push the Dollar lower. Looking at the bigger picture, the greenback may extend its losses as the global economic recovery will lead investors to go short on U.S. assets. This may come about due to the large budget deficit and an extended period of near zero Interest Rates employed by the Federal Reserve. A divestment away from the USD may be a natural process, as the global monetary system seeks to rebalance itself.

EUR – EUR Rallies against Dollar and Yen

The EUR rallied against the Dollar and Yen in Monday’s trading. This comes about as the EUR/USD cross seeks to approach the 1.5000 level. Both the Euro-Zone and Britain recorded an impressive equity market rally, which was sparked by that of the U.S. However, the global equity market rally was initiated by better corporate earnings from the U.S. The EUR and GBP also benefited, as both the Euro-Zone and Britain were on the backburner of economic news yesterday. However, it should be noted that the EUR was the main benefactor on Monday.

The EUR/USD pair went 85 pips higher to the 1.4964 level. The GBP/USD cross climbed by 65 pips to 1.6403. Meanwhile, the EUR/GBP cross went marginally higher, and the EUR made some inroads into the JPY. On the other hand, the British currency fell vs. the CHF, despite rising over the previous several sessions. When we aren’t speaking about the Dollar, it does get a bit harder to predict future trends for the EUR and GBP’s main crosses. However, stronger economies will likely benefit these 2 currencies.

Looking ahead to today, there is set to be much vital data coming out of both Britain and the Euro-Zone. From Britain, there is the Public Sector Net Borrowing at 20:30 GMT, and the crucial speech by Bank of England (BoE) Governor Mervyn King. From the Euro-Zone, there is the expected German PPI at 06:00 GMT. The results of today’s economic news are likely to set the expectations for both the GBP and EUR for mid-week trading. Additionally, these 2 respective currencies will be strong affected by developments from the U.S.

JPY – Yen Goes Mixed against the Majors

The Yen recorded some mixed results vs. its major currency pairs. The Japanese Yen rose by nearly 20 pips to the 90.69 level against the USD. Versus the GBP, the Yen lost 15 pips, as the pair failed to find a clear direction in Monday’s trading. With regards to the EUR/JPY cross, the Yen lost nearly 60 pips, as the pair approaches the 135.80 level. The JPY seems to be losing out, due to being on the backburner of global economic news. Moreover, Japan’s new government has been unclear on which direction it wants to take the Yen.

The Yen will be one of the key currencies to watch today. This is as mid-week trading approaches, and global investors seek to find more clues about the future direction of Japanese monetary policy. The Japanese Central Bank has yet to announce a full cut back in assisting industry. This decision is likely to be prolonged, as long as the economic situation continues to be unstable. This is likely to continue to destabilize the Japanese currency for the weeks to come.

OIL – Crude Oil Hits $80 a Barrel!

The price of Crude Oil hit $80.04 a barrel in Monday’s trading, a 1-year high. This occurred as a rally in global equities drove investor confidence higher. This was due to expectations that a continued economic recovery will push fuel consumption higher. Crude has now gone higher for its 8th consecutive day, the longest time in 2 years. This comes as additional cash is added to the global economic system, and the USD has continued to decline. As a result, this has boosted demand for commodities such as Crude Oil.

As long as the USD is bearish and global equities are bullish, then Crude is likely to be a wise investment according to many economists. At the moment at least, this does seem to be correct, as Crude has been a profitable investment recently. If data from the U.S. today proves to be positive, then Crude’s upward trend may continue for a 9th consecutive day. In the meantime, Oil traders should open their positions in the black gold as the trading day unfolds.

Technical News

EUR/USD

The Bollinger Bands on the 4-hour chart appear to be tightening, indicating a violent breach may occur in the future. The direction may be distinguished by the signals on the hourly chart which displays a bearish cross on the Slow Stochastic, indicating that a downward correction might take place. The hourly chart also shows the pair trading at the upper border of its Bollinger Bands, which indicates that the pair may fall to its lower border. Going short may be the right move

GBP/USD

There appears to be a bearish cross forming on the 4H chart’s Slow Stochastic, signaling an impending downward correction. As other oscillators are showing the price floating in neutral territory, and the Bollinger Bands tightening on this chart, there is a possibility of a volatile bearish movement in the making. Going short with tight stops might be a good strategy today

USD/JPY

After yesterday’s moderate downward movement, this pair now appears to be leveling off as all oscillators and indicators are displaying neutrality. It’s possible a trend-reversal is in the making, but traders may want to wait for a clearer signal before going short on this pair today.

USD/CHF

This pair’s recent drop has pushed the price into the over-sold territory on the RSI of both the hourly and 4-hour charts, signaling an upward correction could be in the making. With a bullish cross recently occurring on the 4-hour chart’s Slow Stochastic, this move may indeed be imminent. Going long might be a good choice

The Wild Card – Gold

The price of this commodity appears to be floating in the over-bought territory on the RSI of the daily and 4 hour charts, indicating a bearish correction to the recent upward movement may occur later today. The imminent bearish cross on the hourly chart supports this notion. As the price of this commodity has discovered a new range to trade in, forex traders can benefit greatly from selling on highs and buying on lows within this price zone.

Forex 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.

Market Movers of the Day

Asia-Pacific

BoJ Minuets

Tertiary Industry Index rises 0.3% MoM against 0.1% expected.

Americas

Fed Chairman Bernanke speech

Foreign Investment in Canadian securities rises to $5.08B in August substantially better than expected.

Canadian investment in foreign securities at $0.11B

The Overall Sentiment

Sentiment was strongly bullish as better than expected earnings results and weaker Dollar pushed equity’ and commodity’ prices north with most benchmark indexes in the money. In the Tokyo session comments from the Bank of Japan that the Japanese economy is slowly improving but is still in its worst state in more than 50 years. The BoJ also added that credit markets have improved although the recovery in the various regions of Japan varies with some regions still facing very harsh economic conditions. The Nikkei reacted rather negatively to the news which added to the negative headwinds already caused by the Yen’s appreciation. The Nikkei ended the day lower by around -0.2% and the JPY was slightly higher but close to flat trading around 90.6 versus the Dollar and 136 against the Euro. .However the broader sentiment in Asia was strongly positive as expectations of better than expected earnings mainly in Wall Street continued to mount. The positive sentiment continued through the London and the New York sessions with the FTSE up by 1.76%, the S&P higher by 0.94% and the NASDAQ gaining 0.91%.

As risk appetite was elevated investors sentiment for the dollar continued to be bearish with the Fed’s statement later in the day only providing that small spark needed for another Dollar selloff. The Fed outlined it will keep rates at record lows for the near future. With that statement coming in the midst of a large equities rally the Dollar easily moved to lower levels trading just 20 pips short of the 1.5 mark versus the euro and reaching a record lows for the year against the Aussie trading close to 0.93 in what was a broad Aussie rally. The Aussie rallied rather strongly against most majors, largely in reaction to strong commodities’ gain and comments from RBA officials stating rates in Australia are likely to continue rising.

In the Commodities’ arena Oil was at the forefront reaching 80$ a barrel close to the end of the US session marking a 140% rise from the beginning of the year. Natural gas traded close to 5$ and in the Metals play Gold regained strength after mobbing to the 1050$ zone and moved above 1060$ aiming to retest the 1070$ record. Silver moved higher around 60 cents as investors look for a retest of 18$.

The Day Ahead

Sentiment will continue to be fueled by the earning releases which continue to surprise for the upside including Apple which managed to surprise investors even though high expectations were already in place for the company’s earnings. Economic data will include the Japanese leading economic index, the UK M4 level which will reflect the status of the UK credit market, PPI figures in Germany and the US will reflect on inflationary pressuring coming from the producers , the API data will reflect on Oil supply and the ABC/Washington consumer confidence will gather attention as always. The Canadian economy is expected to gather some attention towards mid day with the BoC rate decision. Although economic conditions have improved for Canada and commodities exports have somewhat recovered  raising the possibility for a rate increase in Canada, the strong Lonnie and the weak demand from the US the largest trading partner of Canada could postpone the monetary tightening. All in all equities will continue to steer markets’ direction once again with sentiment moving in divergence to earnings.

Technical Analysis

AUD/JPY

In recent weeks the pair has been trading in the range of 76 to 80.5 level in a sideway trend gaining bullish momentum slowly but confidently. The break of the 80.5 area upwards is substantial in the pair’s long run north as it confirms the pair’s run towards a test of the 90 level and maybe 100 in the future. Although the stochastic indicators suggest some profit taking could take place, for now it seems the bullish momentum is firm.

Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

© 2009 eToro Blog.

Source: ForexYard

Following a week that predominately delivered remarkable record highs for gold, in addition to new lows for the Dollar; the main question is whether this trend will extend. Perhaps not and we’ll witness a change in trends this week. Federal Reserve Board Chairmen Ben Bernanke is due to deliver a speech today which might set the tone for the major currencies, and may just help to clarify the picture of today’s market.

Economic News

USD – Dollar Drops to a Year Low against the Euro

Last week the Dollar saw mainly downtrends against the major currencies. The USD dropped to a 14-month low against the EUR, as the EUR/USD pair reached the 1.4965 level. The Dollar weakened against the Pound as well, hitting as low as 1.6395.

It appears that the Dollar dropped due to some positive data from the U.S economy. The Core Retail Sales rose by 0.5% in September, beating expectations for a 0.3% rise. The core report measures the change in the total value of sales at the retail level, excluding automobiles and airplanes, due to their large volatility. The Core Consumer Price Index rose by 0.2%. This was the 9th consecutive time that this crucial indicator rose, and is one of the strongest signs that the American economy is recovering.

Last week’s trading session proved once again that positive data from the U.S economy is continuing to only drives investors into riskier investments, and not yet into the Dollar. Furthermore, it seems that positive publications from the U.S help support the Euro, as the European nations rely greatly on U.S consumption.

As for the week ahead, many influencing news events are expected from the U.S economy. The housing data seems to be the most intriguing data this week as the Building Permits are expected on Tuesday and the Existing Home Sales on Friday. Many analysts share the assumption that the real-estate bubble has caused this recession, and thus only the housing sector can pull the economy out of recession. This means that the results of these reports should have a large impact on the market, and traders should use it as best they can in their trading tactics.

EUR – Euro Rises despite Negative Data

The Euro rose against most of its major counterparts during last week’s trading session. The EUR rose to a 14-month high against the Dollar as the EUR/USD pair reached the 1.4965 level. The Euro also saw a bullish trend against the Yen.

The Euro rose last week despite some relatively negative data published from the Euro-Zone. The most crucial publication was the German ZEW Economic Sentiment, which is a survey of about 350 institutional investors and analysts who are asked to rate the next 6-month outlook for Germany. The survey dropped to 56.0 from 57.7 on September, failing to reach expectations of a 58.6 reading. The European Core Consumer Price Index for September dropped by 0.3%. This marked the 4th drop in a row. Consumer prices account for a majority of overall inflation, and thus a repeatedly negative results show that maybe the European economies aren’t recovering as quickly as expected.

Nevertheless, despite some unfortunate figures from the Euro-Zone, the Euro appreciated against most of the major currencies. It seems that the main reason for this turn of events is the weak Dollar, which boosted the Euro. As long as the Dollar continues to fall against the majors, the Euro is likely to continue appreciating.

Looking ahead to this week, many interesting data releases are expected from the Euro-Zone. The most impacting publication is likely to be the German Ifo Business Climate report. This report is a survey of about 7,000 business who are asked to rate the current business conditions and expectations for the next 6 months. If this report will also fail to reach expectations it has the potential to reverse the Euro’s currently bullish trend.

JPY – Yen Drops against the Majors

The Yen saw an extremely bearish session during last week’s trading. The Yen dropped against the Dollar, the Euro and the Pound. This was the most remarkable drop the Yen has experienced against the Pound, as the GBP/JPY pair rose by about 600 pips and is currently traded at the 148.40 level.

The Bank of Japan (BoJ) chose to leave the Japanese Interest Rates at the 0.10% level, the lowest in the industrial world. The BoJ’s policy is quite clear. Its purpose is to keep the Yen as low as possible in order to help the Japanese exporters. The objective behind it is that the BoJ believes that raising exports will be the greatest aid to the troubled Japanese economy, and thus chooses to have the lowest rates in the world as a tool to reach this target. For the time being it seems that the BoJ’s plan is working, and the Yen is indeed weakening.

As for this week, a batch of data is expected from the Japanese economy. However the most impacting economic publication looks to be the Trade Balance, expected on Wednesday. The Trade Balance measures the difference in value between imported and exported goods and services during September. Due to the high dependence of the Japanese economy on its export, this report tends to have a large impact on the Yen. If the end result will reach expectations for a 0.38T rise, the Yen is likely to be supported as a result.

Crude Oil – Crude Oil Almost Reaches $80 a Barrel!

Crude Oil continued to rise during last week. Crude Oil saw a very strong and coherent bullish trend during almost all of last week’s trading sessions. By the end of the week a barrel of oil had risen in price by $6 and is currently trading near $79.

The most significant reason for the rally of crude oil is the sliding Dollar. Because Crude Oil is traded in Dollars, the usual affect of the weakening Dollar is the strengthening of oil.

Furthermore, in a week that the USD saw a 1-year low against the Euro, and the EUR/USD pair almost reaches the 1.50 level, crude oil prices are likely to appreciate. In addition, the batch of positive data from the U.S economy last week has reinforced the sensation that the global economy is indeed recovering. Investors assume that this means that oil demand will increase as a result, and thus the price of crude oil rose.

Looking ahead to this week, traders are advised to follow the major publications from the U.S and the Euro-Zone as they will have an immense effect on the value of oil. In addition, traders should also follow the Crude Oil Inventories weekly report, which is expected on Wednesday. This report tends to have an immediate impact on crude oil, and traders should take advantage of it.

Technical News

EUR/USD

The indicators on this pair’s daily chart appear to be showing strong downward signals today. A fresh bearish cross on the daily Slow Stochastic, followed by a downward cascading movement suggests that today may see downward mobility. The price also appears to have turned downwards and begun exiting the over-bought territory on the daily RSI, which suggests very strong downward pressure. Going short may be a wise choice today.

GBP/USD

The price appears to be floating in the over-bought territory on the 4-hour RSI, and has turned downwards, which suggests moderate downward pressure. The fresh bearish cross on the daily Slow Stochastic supports the downward notion. Going short appears to be today’s preferable tactic.

USD/JPY

There appears to be a fresh bearish cross on the 4-hour MACD, indicating a downward correction is imminent. The price is also floating in the over-bought territory on the 4-hour RSI, which supports this notion. Going short on this pair may not be a bad idea.

USD/CHF

The fresh bullish crosses on the daily Slow Stochastic and 4-hour MACD both suggest that this pair is due for an upward correction in the immediate future. As the price has just left the over-sold territory on the daily RSI, it appears as if the move may be muted somewhat. Going long with tight stops may be preferable today.

The Wild Card – CHF/JPY

This pair is beginning to show very strong signs of an impending downward movement today. The daily chart’s Slow Stochastic shows 3 consecutive bearish crosses, and the 4-hour MACD shows 2 bearish crosses. This suggests very strong downward pressure and forex traders can take advantage of this knowledge by entering short positions on this pair, and at a great entry price!

Forex 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.

Stocks Climb on Earnings, Currency Pairs Present Surprising Movements

Global equity markets soared last week, after strong earnings releases in the United States led the benchmark S&P 500 index to new highs for 2009.  The S&P 500 rose 16 points or 1.5% during the week, while the Dow Industrial index broke the psychological 10,000 level.  European indices such as the DAX and the FTSE made new highs for 2009, while Asian equity markets posted solid weeks after previously retracing from high level.

The markets started on a positive note on Monday, following the prior week’s rally in the equity markets.  The market leveled off on Tuesday prior to a wave of global economic releases and numerous earning releases from large caps. On Wednesday the markets shifted into high gear, after strong earnings numbers from Intel and JP Morgan (Tuesday evening and Wednesday morning respectively).

The markets also welcomed strong Retail sales on Wednesday which, excluding sales of autos and food sales, increased 0.5%. It was a welcome sign of consumer activity especially after one of the deepest downturns in history.  The headline number fell 1.5% in September with the end of the “cash for clunkers” program, but consumer spending rose in many categories, lifting hopes that the economic recovery is gaining momentum at the start of the holiday shopping season.

Global Economic Data Continues to Show Improvement

Also on Wednesday, Japan’s central bank held fast on interest rates, in an effort to spur lending and bolster the corporate-debt market. The ‘no change’ statement came despite recent improvement in the world’s second largest economy.  BOJ Governor Masaaki Shirakawa indicated that the central bank is still leaning towards stopping the purchasing of corporate debt as scheduled at the end of the year, though no formal decision was announced on the issue after a two-day policy board meeting.

In the United Kingdom, the number of people claiming unemployment benefits hit its highest level for more than 12 years in September, but the monthly rise was smaller than expected, hinting that the labor market may have seen the worst.  The number of people claiming Jobseeker’s Allowance benefit in September totaled 1.63 million, the highest level since April 1997, the Office for National Statistics said.

The euro zone saw its fourth straight monthly increase in industrial output in August, providing further confirmation that the region’s severe recession ended around the middle of 2009.  Industrial output in the 16 countries that have adopted the euro currency swelled 0.9% in August from July. The production data eased worries that the euro zone might slide back into contraction later this year or next, though some economists warned that growth would likely slow once government stimulus programs run their course.

The Pound Climbs Higher, USD/CAD at major Support

It was an interesting week for the sterling, climbing dramatically higher against the U.S Dollar. The Bank of England had a positive effect on the Sterling last week as Paul Fisher released an optimistic view on the UK’s situation, sending the GBP/USD six big figures higher for the week. Fisher said that the central bank may pause in its QE (quantitative easing) program and mentioned that he has confidence that the program is working as hoped. This came after a positive surprise in the jobless numbers. Even though the fundamentals for the pound are still negative, with interest rate differentials favoring other currencies, investors preferred the undervalued currency driving it up for the week. Next week’s Bank of England’s minute may ruin the party as analysts are expecting the bank to lay low for the moment and let its recent policy leak through the system.

From a technical point of view the GBP/USD bounced off trend line support and has now headed into range. Even though a minor trend line lies ahead, one could expect consolidation on this pair around current levels.

Similar to the British pound, the Japanese yen reversed during the course of last week.  The BoJ’s upgrade of the economy this week (the government assessment was more pessimistic) does not alter the view that BoJ rates will remain extremely accommodative for an extended period making the yen a primary funding currency.  The USD/JPY broke above its downtrend line (around ¥89.90) drawn off the dollar’s Aug peak, after establishing a base around ¥88.00 causing the 5 and 20 day moving averages to cross to the upside.  Yen losses are likely to shake out momentum traders that took advantage of the yen’s August and September rally.  With the yen uptrend abating, momentum traders, who pay to be long yen against higher yielding currencies, are likely to trim positions triggering further yen losses.  A break above ¥91.70 could present a long position to ¥92.90.

The Bank of Canada is scheduled to meet this week and is expected to stick to its previous statement; leaving rates unchanged thru mid-2010.  Concerns about C$ strength are unlikely to lead to an intervention, especially given limited potential for intervention success. Even though the chart is trading on weekly support, further Dollar weakness together with rising oil prices could lead this pair lower in the long term, to test support level 2.

The Week Ahead

Economic data will continue to have an effect on the intraday sessions this week. In the U.S the market will be watching construction output in the EMU and US NAHB housing index, two events that could cause movement.  Tuesday will also be an interesting day as the Bank of Canada will announce their interest rate decision.  With Australia paving the way, recently raising rates, the markets could be in for a surprise.

Furthermore, the second half of the week should be exiting as the US beige book, UK retail sales and Canadian retail sales are all expected to be released.  Friday’s session will be influenced by the big man’s comments (Ben Bernanke), mentioning the Fed’s outlook.

Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

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