Month: February 2010

By Greg Holden – The EUR has been under pressure lately from the sovereign debt concerns in Greece. The rumor about a possible bailout of Greece has helped the EUR gain strength, but some are doubtful of this recent movement and think that a bailout will result in a printing of more money in the Euro-Zone which, obviously, will be a move that intentionally weakens the 16-nation currency.

Tech Analysis
– The chart below is the 4-hour chart of the EUR/JPY pair by ForexYard.

– The technical indicators used are the Relative Strength Index (RSI) and the Stochastic (slow).

– Point 1: As can be seen on the chart, there is a clear bearish channel on this pair and the price has reached the upper border of this trend, signaling a significant resistance level.

– A doji candlestick has also recently formed at this resistance line, suggesting a downward correction should take place in the immediate future.

– Point 2: The RSI is showing that the pair recently entered the over-bought territory, and the indicator has just turned into a bearish posture, highlighting an increased level of downward pressure.

– Point 3: The Stochastic (slow) is approaching the 80 level which suggests that it may cross over into this over-bought territory and create a bearish cross. If that does indeed take place, then downward movement may be expected in the medium-term.

EUR/JPY – 4-Hour Chart

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 Euro made slight gains against its major counterparts in overnight trading today. Still, investors remain apprehensive about investing in the Euro, especially ahead of a key European Union meeting which could shed light on a possible bailout for Greece.

Economic News

USD – Bernanke Speech Gives USD a Boost

The U.S. Dollar received a fairly significant boost on Wednesday following reports that the U.S. Federal Reserve (FED) would soon raise discount lending rates. FED Chairman Ben Bernanke made the announcement, leading investors to believe that U.S. economic policy would tighten at a quicker rate then its major counterparts. The Dollar index rose to 80.80 as a direct result of the announcement. Currently the greenback is up against both the Euro and British Pound with the pairs trading at 1.3779 and 1.5631 respectively.

The Dollar is forecasted to continue its uptrend today, especially against the Euro. Investors are largely keeping their distance from the ailing European currency, especially ahead of a key European Union policy meeting. With the single currency plagued by record high deficits in several of its countries, risk aversion seems to be the prevailing trend among investors. USD has been benefiting greatly from this, and it appears that it will continue to do so.

In the only significant Dollar news event today, the weekly American unemployment claims are set to be released at 13:30 GMT. With the number of Americans who filed for first time unemployment insurance forecasted to drop, traders can expect the greenback to receive a boost in afternoon trading. Of course, should the figure come in above the predicted 460K, the Dollar may take some losses later today.

EUR – Risk Aversion Causing Euro to Slide

The Euro remains down overall ahead of a key EU economic summit today which will likely determine if and how a Greek bailout will be initiated. Greece, plagued by record high debts, is only one of the EU’s problematic countries. Both Spain and Portugal are dealing with above average deficits, a fact that will likely continue to weigh down on the Euro. Furthermore, analysts are now saying that any EU bailout for Greece will likely only help the Euro in the short term.

Currently, the Euro is slightly up from the lows reached yesterday. EUR/USD is trading around the 1.3780 level and EUR/GBP is at 0.8812. Despite these modest gains, analysts do not forecast the Euro to remain up for long. With American unemployment figures forecasted to show an improved American economy, as well as the recent FED announcement regarding bank lending rates, USD will likely increase its gains against the Euro in trading today.

JPY – JPY Makes Gains Due to Risk Aversion

While there were no major Japanese news events on Wednesday, the Yen still managed to make gains as investors turned to risk aversion in their trading strategies. Uncertainties regarding the fate of the Euro caused safe haven currencies like the Yen to move up. Currently GBP/JPY is trading at around the 140.65 level, down from around 141.00 yesterday morning.

With no Japanese economic news events scheduled today, Yen levels will likely be determined by the results of the EU summit. If the summit manages to boost investor confidence in the Euro, the Yen will likely go down as a result. On the other hand, if investors are still uncomfortable with the Euro-zone economies, the Yen’s safe-haven status could bring it some profits in trading today.

Crude Oil – Oil Prices Rise Based on Increased Demand

Crude oil prices continued to rise for the 4th day straight, following a report from the U.S. Energy Department saying that global demand will likely increase in 2010. Several other factors, including a possible EU bailout for Greece and fresh U.S. sanctions on Iran, helped drive prices up. Currently crude is trading around the 74.80 level.

Today, traders can expect the rise in oil prices to continue, especially following the results of the EU summit. Any positive American economic indicator, such as the upcoming unemployment data, could also cause prices to rise. Finally, the recent batch of heavy winter weather in the United States has driven up demand for oil, leading to an increase in crude prices.

Technical News

EUR/USD

In the short-term, this pair has pushed a few indicators, such as the hourly RSI, into the over-bought territory, indicating some immediate downward pressure. However, longer-term indicators, such as the 4-hour and daily RSI and Stochastic (slow), still indicate room to grow. Traders could see some early morning corrections, but it appears as if the overall trend today is bullish.

GBP/USD

After reaching its lowest level since May of last year, this pair has leveled off into a flat range-trading pattern between 1.56 and 1.57. After this morning’s upturn, there appears to be a bearish cross on the hourly Stochastic (slow), indicating an impending downward correction. The 4-hour Stochastic (slow) shows a bullish cross, however, suggesting that the range-trading behavior will likely continue today. Buying on lows and selling on highs may be a wise tactic today.

USD/JPY

This pair has been trading within a narrow bullish channel with only minor distances between highs and lows. Mid-term indicators, such as the 4-hour Stochastic (slow), are showing signals of a bearish correction today. The fresh bearish cross on this indicator suggests that this turn may come following the opening of European markets. Going short with tight stops appears to be today’s preferable strategy.

USD/CHF

The hourly and 4-hour RSI show this pair floating in the over-sold territory, highlighting a possible bullish correction later today. A bullish cross on the hourly Stochastic (slow) supports this notion. Going long might not be a bad idea today.

The Wild Card

Crude Oil

Short- and mid-term indicators on Crude Oil seem to be giving off bearish signals this morning. Both the hourly and 4-hour Stochastic (slow) appear to be showing a bearish cross. The RSI on both charts also appears to be floating in the over-bought territory. These indications may give forex traders a chance to capture a healthy dose of profits in today’s early trading hours by going short on this commodity.

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.

Euro Dollar trade is currently steady at the 1.37-1.38$ range ahead of the EU conference which will take place today. Market focus on EU events will be rather intensive as EU members are expected to try and conclude an emergency funding package to Greece. Although the woes over the Greek swelling debt problem are flouting around for some time, several weeks ago investors focus over the issue has taken a dangerous twist with spreads and Yields over Greek sovereign debt spinning out of control hammering the Euro vigorously against the Dollar and the Yen. Fears over the Greek debt issue have eased a bit in recent days but nervousness is still very much present. Today at the EU convention investors will be eager to see if the EU will be able to sort out a solution for the Greek issue. Yesterday talks have resulted with no decision placing pressure on the Euro and today’s session is considered crucial. The Eurozone has a few members with a swelling debt problem besides Greece among them Portugal, Spain and Ireland. Therefore investors see the upcoming convention as an indicator wither the Eurozone as a whole can reign in on the deficit problem and bring its growing deficit back on curse. A failure might spur fears that the EU is having problem to control deficits and with markets extra-sensitive to risk this could result in another downturn in the Euro debt story with the Euro under pressure and EU members such as Greece Spain and Portugal having difficulty in future funding.

EU GDP just ahead- The EU GDP is also due this week and will be published on Friday. Consensus bets expect a growth of 0.3% QoQ for Q4 against a growth of 0.4%QoQ is Q3.Overall consensus pulls see risk to the downside as the effect of the stimulus has faded in Q4 and Industrial output slowed. Germany the largest economy in the EU and the largest exporter in Europe will gather most of the attention after pulls showed German industrial output fell -2.6%. Investors expect German growth to be rather dented with a pace of 0.2%QoQ. Considering the context of today’s convention a disappointment in German GDP can affect the euro rather strongly. The main issue discussed under the convention today is granting Greece’s sovereign debt, a surprise drop in German GDP will raise the entire debt to GDP ratio prospect for the euro zone and therefore raise the risk for the Euro. Germany is at the forefront of the securitization process of the Greek debt and with Portugal’s and Spain’s debt rescue on the horizon more debt on the German nation might shake the balanced image of the German debt structure, a process which will further impact on the deteriorating fiscal position of the Eurozone.

Latest Euro Daily chart:

Daily Forex 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.

USDCAD’s fall from 1.0779 extends to as low as 1.0579 level, suggesting that a short term cycle top has been formed at 1.0779 on 4-hour chart. Deeper decline to test 1.0545 key support would more likely be seen later today, a breakdown below this level will indicate that the uptrend from 1.0224 has completed at 1.0779 already, then pullback to 1.0450 area could be expected to follow. However, as long as 1.0545 support holds, the price action in the trading range between 1.0545 and 1.0779 is treated as consolidation of uptrend, one more rise to 1.1200is still possible after consolidation.

Written by ForexCycle.com

By CountingPips.com

The United States trade deficit increased for the second straight month in December as imports rose at a faster pace than exports, according to a release by the Commerce Department today. The U.S. trade deficit rose by $3.8 billion to a total deficit of $40.2 billion in December following a deficit of $36.4 billion in November. The December deficit surpassed the market forecasts that were expecting the deficit would rise to approximately $35.8 billion for the month.

Contributing to the increased deficit level was a rise in December imports by $8.4 billion to a total of $182.9 billion. This was the fourth straight monthly rise in imports. U.S. exports also rose for the month to a total of $142.7 billion which was an increase of $4.6 billion from November’s total.

The U.S. trade deficit with China fell in December, despite the overall deficit increase. The deficit with China fell to $18.1 billion in December from a deficit of $20.2 billion in November while other notable U.S. trade deficits were with the European Union at $6.4 billion, Japan at $4.6 billion, Mexico at $5.2 billion, OPEC at $6.8 billion and Canada at $3.0 billion.

U.S. trade surpluses with other countries for December included Australia at $1.1 billion, Hong Kong at $2.0 billion, Singapore at $0.8 billion and Egypt at $0.2 billion.

US Dollar trades higher in Forex Trading

The U.S. dollar has been trading higher today against most of the other major currencies in the spot forex market. The dollar has been stronger versus the euro, British pound, Australian dollar, Swiss franc, New Zealand dollar and the Japanese yen, according to currency data by Oanda. The American currency has fallen today versus the Canadian dollar.

Meanwhile, the U.S. stock markets traded lower today with the Dow Jones falling by 20 points to the 10,038 level while the Nasdaq decreased by 3 points to the 2,147.87 level.  The S&P500 declined by 2.39 points to trade at the 1,068.13 level.  Gold declined today by approximately $0.90 to trading around the $1,075.80 per ounce level while oil edged up by $0.70 to trade at $74.46 per barrel.

EUR/USD Chart – The Euro has been falling today versus the US Dollar in forex trading after rising in yesterday’s trading. The EUR/USD has fallen under the 1.3750 level while traders await the next developments in the Greece debt situation and the possible EU bailout. On a technical basis, the 50-period simple moving average (in red) has become a dynamic resistance level on the 4-hour chart below for this pair.

By Nico Isaac – In case you were hiding out Tiger Woods’ style far away from the mainstream media during the past month, let me be the first to say: January saw an abrupt end to the U.S. stock market’s record-setting winning streak. Last count, the Dow Jones Industrial Average plummeted 4% in its worst monthly loss in a year.

And, according to one Feb. 1, 2010, MarketWatch story, “The time to consider an exit strategy” has officially arrived. Here, the article captures the public’s astonishment turned acceptance of the Dow’s boom-to-gloom shift:

“The Dow has shocked the bulls out of their complacency. After all, analysts were looking for the bull market to last until at least the second half of the year. Investors were not prepared for such a sharp decline and now at least some of the chatter has gone from ‘how high will the market go?’ to ‘how low will it fall?’ [emphasis added]“
Let me get this straight. The powers that be say it’s time to “consider an exit strategy” — AFTER the Dow has already plunged 700-plus points to land at its lowest level in two months. That’s about as helpful as building a life raft AFTER your ship has begun to sink.

Let me get this straight. The powers that be say it’s time to “consider an exit strategy” — AFTER the Dow has already plunged 700-plus points to land at its lowest level in two months. That’s about as helpful as building a life raft AFTER your ship has begun to sink.

Get a FREE 10-Lesson Tutorial on the Basics of the Wave Principle
The Wave Principle is a powerful tool when used properly. This free tutorial gives you the foundation you need to put the power of Elliott to work for you. Learn more, and get your free 10-lesson tutorial here.

Then, those same sources go on to say investors were “not prepared” for the degree and depth of the stock market’s decline. This is only partly true. On Main Street, the early January flood of bull-is-back-type headlines gushed in and washed all the bears away.

Yet, on our “Elliott wave” Street, preparation for a “sharp” decline in the Dow was fast in place. One week before the market turned down from its Jan. 19 high, Elliott Wave International’s Short TermUpdate went on high bearish alert with this commanding insight:

“The Dow’s diagonal remains in tact and its form is clear. We will afford the pattern a bit of leeway over the next one-two days… but the structure is very late in development. That means a trend reversal is fast approaching. A potential stopping range is 10,725-10,740. A close beneath [critical support] will confirm that the diagonal is over and the market has started a down phase that should draw prices significantly lower. Once a diagonal is complete, prices swiftly retrace to near its origin, which in this case is 10,263.90, the very first downside target.” (Jan. 13 Short Term Update)

Soon after, the Dow peaked within four ticks of our cited upside target; next, it went on to fulfill the second part of its Elliott wave script with a staggering triple-digit slide to “near the origin” of the diagonal triangle pattern, and then some.

That leaves one question: Are the bears now ready to relinquish control of stocks? Don’t wait for the market action to “shock” you.

Get a FREE 10-Lesson Tutorial on the Basics of the Wave Principle
The first thing you should know is that the Wave Principle is not a black-box trading system. Elliott waves provide a context for past and present price action. Once you identify to the most likely structure of the pattern unfolding, you can then formulate a forecast for the future. The Wave Principle is a powerful tool when used properly. This free tutorial gives you the foundation you need to put the power of Elliott to work for you. Learn more, and get your free 10-lesson tutorial here.

By Adam Hewison – In today’s short video we examine the crash of 1929 and the similarities to today’s Dow. This video is not meant to scare anyone, but to educate investors and traders of the possibilities that may exist in today’s market.

We could be, repeat, could be very close to a tipping point similar to that of 1930 when the Dow had ended a 50% correction to the upside. I invite you to watch my latest video and see what makes sense to you.

As always our videos are free to watch and there are no registration requirements. If you agree or disagree with this video please feel free to comment on our blog.

Watch the New Video Here…

Every success,
Adam Hewison
President, INO.com
Co-creator, MarketClub

By Russell Glaser – Despite prior tough talk from the German government and European Central Bank (ECB) that there would be no bailout for its fellow European Union member, Greece, Germany decided to swoop in, announcing a plan to rescue the fiscally challenged EU member state. The announcement propelled the EUR/USD yesterday, but the end result of the rescue may turn out to be bearish for the euro.

Both officials from Germany’s Finance Ministry and ECB President Jean-Claude Trichet took a firm stance against lending a hand to Greece. However, a consensus was reached between Brussels and Frankfurt to bailout Greece in order to limit the fallout to only one nation rather than to allow a crisis to engulf the entire European Union. While the details of the bailout have yet to be confirmed, the fallout could be tremendous.

Now that Germany has offered a lifeline to Greece, Germany may be obligated to do the same for fellow EU members Portugal and Spain.

Yesterday’s announcement sparked a rally of more than 1% in the EUR/USD, but the long term implications could be negative for the euro. The move by Germany may help to conserve both the European Union and the European Monetary Union from crumbling, but perhaps at a hefty cost to the euro’s valuation.

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 Dollar continued to drop against the Euro yesterday, mainly due to speculations regarding a possible rescue plan for Greece. As a result, crude oil and precious metal rose as well. However, today at 15:00 GMT Fed Chairman Bernanke is expected to deliver a speech, on which he will most likely refer to the Fed’s intentions regarding U.S. monetary policy. Harsh volatility is expected to take place during his speech, and traders are advised to be prepared.

Economic News

USD – Dollar Slides as Risk Appetite Grows

The Dollar dropped against most of the major currencies during yesterday’s trading session. The Dollar fell sharply vs. the Euro and the Pound, and the EUR/USD pair reached a weekly high of 1.3838.

Two main reasons led to the Dollar’s depreciation today. The first reason was ongoing speculations that Greece’s economy will be rescued. This has helped to correct some of the Euro’s recent losses, and as a result it has weakened the Dollar. In addition, this optimism also boosted risk appetite, turning investors to look for higher yielding assets such as the Euro and the Pound. The second reason was a lower than expected Economic Optimism survey figures. The survey showed that U.S. citizens are pessimistic regarding their personal financial outlook and have less confidence in federal economic policies.

Looking ahead to today, many interesting economic publications are expected from the U.S. On 13:30 GMT the Trade Balance for December will be published. This report measured the difference in value between imported and exported goods and services during December. Analysts forecast the U.S. trade deficit has reduced from 36.4B to 35.8B during December. If this will indeed be the actual result, it is likely to strengthen the Dollar. Also today, at 15:00 GMT the Federal Reserve Chairman Ben Bernanke will testify before the House Financial Services Committee in Washington DC. Bernanke is intended to discuss the U.S. future monetary plans, and the market is likely to have an immediate response to his speech.

EUR – Euro Rallies on Possible Greece Rescue

The Euro rose sharply yesterday against most of the major currencies. The Euro gained over 150 pips against the Dollar, and over 200 pips against the Yen. The Euro also saw a mild rising trend against the Pound.

The Euro was boosted on prospects that the Euro-Zone will aid Greece to restrain their budget crisis. Speculations regarding a possible bail-out plan have ignited demand for higher-yielding assets and strengthened the Euro, particularly against safe-haven assets such as the Dollar and the Yen. Current estimations consider a possibility that Germany will step up with a plan to support the Greek economy. As long as the optimism regarding the Greek economy will continue, higher-yielding assets, such as the Euro and the Pound, are likely to be supported.

As for today, traders are advised to continue looking for further indications regarding the Greek economy, as this seems to have the largest impact on the Euro at the moment. In addition, traders should follow the French Industrial Production report, which is scheduled for 07:45 GMT. This report measures the change in the total value of output produced by French manufacturers. Current expectations are that the French Industrial Production rose by 0.6% during December. If the end result will be similar, it looks to support the Euro.

JPY – Yen Drops against the Majors

The Yen’s bullishness was halted yesterday, as the Yen dropped against all the major currencies. The Yen fell 80 pips against the Dollar, over 200 pips against the Euro and about 250 pips against the Pound.

Recent speculations regarding a Euro-Zone rescue plan for Greece have reduced demand for the Yen. Optimism regarding a potential Greece rescue have revived demand for higher-yielding assets, and weakened the Yen. In addition, a Chinese stock rally has helped to reduce risk aversion, driving investors to buy back riskier currencies such as the Euro and the Pound. It currently seems that as long as the Euro continues to strengthen due to optimism regarding the Greek economy, the Yen is likely to drop further.

Today, Japanese banks will be closed in observance of National Foundation Day, and low liquidity is likely to take place. Traders are advised to follow the leading publications from the U.S, especially Bernanke’s speech, as this is likely to impact the market the most today.

OIL – Spot Crude Oil Prices Reach $74

Crude oil prices rose significantly yesterday. A barrel of crude oil was traded for $71.50 as yesterday’s session began, however as the trading day progressed, crude oil rose further and further, ultimately reaching $74.05 a barrel.

Two main reasons led to the bullish trend of crude oil yesterday. The first reason is the increased risk appetite which was observed in the market today. Speculations regarding a possible rescue plan for Greece have turned investors to look for higher-yielding assets, such as crude oil. The second reason was the slide of the Dollar. Crude oil is valued in USD, and as such, when the Dollar drops sharply, crude oil tends to rise in accordance.

Looking ahead to today, traders are advised to follow the U.S. Crude Oil Inventories report, scheduled for 15:30 GMT. This report measures the change in the number of barrels of crude oil held in inventory by commercial firms during the past week. If the end result will fail to reach expectations for 1.4M barrels, crude oil is likely to be supported.

Technical News

EUR/USD

The pair is currently being traded near the support line of 1.3777 and after yesterday’s rally the daily chart shows signs of a correction in the bearish trend. The MACD histogram has breached above the 0 line, indicating the potential for the price to move higher. This move is supported by the 7-day Relative Strength Indicator that has moved into the oversold region and has since broken above the 30 line. Traders may want to scale back their bullish positions or go long on the pair today to catch the potential correction.

GBP/USD

The bullish correction in the pair may have left the price oversold on the 4-hour chart.
A bearish cross has formed on the Slow Stochastic Oscillator, indicating the potential for the price to move lower in the near term. Also the 7-day RSI has moved into the oversold region, forming what looks to be one top in a double top pattern. Traders may want to wait for the RSI line to break below the 70 level to go short. This could be a good opportunity for traders to get back into the market with the long term downward trend.

USD/JPY

The daily chart shows the pair has broken its downward sloping trend line that began on January 7th. The correction is measured at 2.7% of the previous trend. Further signs of a bullish correction appear on the MACD. The histogram is on the verge of breaking the 0 line, along with a potential bullish cross forming, indicating a potential rise in the price. Traders may want to wait for the correction to measure above 3% on a closing basis and then go long on the pair with a take profit level at 90.70.

USD/CHF

The price of this pair appears to be floating in the over-bought territory on the daily chart’s RSI, indicating a downward correction may be imminent. The downward direction on the weekly chart’s momentum oscillator also supports this notion. When the downward breach occurs, going short with tight stops appears to be the preferable strategy.

The Wild Card

AUD/USD

The pair has recorded a bullish behavior yesterday. However, the technical data indicates that this trend may reverse anytime soon. For example, the 4- hour chart’s Slow Stochastic shows signals that a bearish reversal is imminent. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

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.

The U.S stock market presented another volatile session yesterday, as investors were left bamboozled, debating whether European Union leaders intend to save Greece from its debt crisis or not.

Throughout the trading day rumors hit headlines, stating that Germany could lead the pack and provide support to the battered Eastern economy. The market rallied on the rumors but was quickly stopped in its tracks as Germany’s government opposed the comments, stating that these are only rumors and no conclusive decision has been made regarding a bailout. One must note that any kind of bail-out from European leaders will have a dramatic affect on their fiscal situation.

While there is a high probability of a bail-out, no official steps have been released as officials are still considering different methods. In addition larger economies now fear that a bail-out could lead to additional requests from other economies such as Spain and Portugal, whom are also dealing with a dramatic downspin.

Despite the confusion, stocks pushed higher for the day retracing some of the prior losses. The S&P500 finished the session with a 1.30% gain, while the Nasdaq closed higher by 1.17%. Materials and Energy were the two leading sectors of the day, closing higher by 2.43% and 2.1%, respectively.

From at technical point of view the S&P500 created its second inverted hammer, after presenting a reversal on Friday. Only a break of the current secondary trend line will provide confirmation regarding a bounce to the upside.

Forex

On the Forex market the Dollar index dropped lower after touching its upper trend line resistance level. A positive session on Wall-Street and rumors that there could be a bail-out on the way for Greece lifted sentiment, sending counter parts higher. The Dollar index seems to be tipping over, but is still within its uptrend. In addition when analyzing the chart more carefully one can see that the 50 day moving average is on the verge of crossing over the 200 day moving average. This is normally classed as a bullish sign, meaning that any Dollar retraced in the Dollar could be short-lived.

On individual pairs, the EUR/USD climbed higher after being battered severely last week. The bounce was required and formed around support of $1.3725. Further positive equity sessions could lead this strongly correlated pair to higher ground. Despite that fact, one must note that yesterday’s session was classed as a ‘one-off’, meaning that further confirmation is still required to take this bounce higher.

The AUD/USD also presented a turnaround session after dropping to its 200 day moving average. To date the chart is located at a critical level above trend and its 200 day support. A break of its 200 day moving average to the downside could cause a landslide, forcing this pair to lower ground. A Technical chart has been attached below for your convenience.

The Day Ahead

On the data front, the BOE inflation report and the Fed’s statement will be released today. According to recent data inflation in the U.K will 20% by the third quarter of 2011 and could even exceed the banks comfort zone by the fourth. Recent comments from the BOE governor king have shown his concerns, as he mentioned that inflation could be even higher than predicted. Today should also be an interesting day in the U.S as many investors are expecting comments about some kind of exiting plan. Even though many still believe it is too early to raise rate, other methods could be used to reduce the amount of cash in the system.

Daily Forex 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.