Month: February 2010

By Fast Brokers – The Cable managed to bounce a bit on Friday as the risk trade rallied with U.S. equities.  However, the Dollar is coming off its highs across the board with today’s economic calendar very quiet.  Meanwhile, EU and U.S. uncertainty is abating after the Fed clarified that a hike in the discount does not imply an increase in the fed funds rate while no news is good news in Greece.  However, the Euro is still in a fragile state as investors monitor whether Greece can successfully implement its proposed austerity measures.  Additionally, there is the possibly from another unexpected flare up in the other fiscally challenged PIIGS nations.  Therefore, investors should continue to monitor the EU news wires since we’ve seen how debt issues can impact the whole FX market.  The EUR/GBP is coming off its highs after the Pound sank in the wake of weak retail sales data.  That being said, investors will likely be paying closer attention to UK data releases as the surface.  Tomorrow the UK will release BBA Mortgage Approvals to go along with the Inflation Report Hearings.  Investors will be looking for any further insight in regards to the BoE’s inflation outlook.  However, it wouldn’t be surprising if the BoE sticks to its conclusion that last month’s pop in inflation was an abnormal occurrence.  The U.S. will also release CB Consumer Confidence and S&P HPI data.  Hence, activity could heat up again as tomorrow’s trading session progresses.

Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday highs and the highly psychological 1.55 level should it be reached.  As for the downside, the Cable has multiple uptrend lines serving as technical cushions (off screen) along with intraday and Friday lows.

Present Price: 1.5477

Resistances: 1.5486, 1.5503, 1.5524, 1.5543, 1.5582

Supports: 1.5458, 1.5430, 1.5407, 1.5379, 1.5355

Psychological: February lows, 1.55, 1.53

(click to enlarge)

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 is stabilizing after Friday’s solid pop in the wake of mixed EU PMI data.  Positive manufacturing from Germany gave investors a reason to hope that the EU can withstand the economic storm in the Mediterranean.  However, uncertainty remains as Greece works to prove that it can successfully implement its austerity plan while Spain, Portugal, and Italy battle with their own fiscal deficits.  Therefore, the EUR/USD does remain in a fragile state despite Friday’s positive movement.  Hence, investors should keep an eye on upcoming data, including tomorrow’s German Ifo Business Climate release.  Furthermore, there is potential for another unexpected development in the PIIGS countries.  That being said, investors should remain alter for we’ve seen how volatile FX markets can get amid debt concerns.  Meanwhile, the data wire is relatively quiet today, giving the risk trade an opportunity to cool and stabilize.  It will be interesting to see whether the EUR/USD can piece together a more convincing recovery from Friday’s lows.

Technically speaking, the EUR/USD faces multiple downtrend lines considering the extent of this year’s downturn in the currency pair.  The EUR/USD also has 2/17 and 2/19 highs serving as technical barriers should they be reached.  As for the downside, the EUR/USD now has several uptrend lines serving as technical cushions along with 2/12 and 2/18 lows.  Furthermore, the EUR/USD is back above its highly psychological 1.35 level, meaning the area could serve as a cushion as well.

Present Price: 1.3623

Resistances: 1.3630, 1.3645, 1.3670, 1.3695, 1.3713, 1.3741

Supports:  1.3612, 1.3587, 1.3564, 1.3546, 1.3532, 1.3511

Psychological: February lows, 1.35

(click to enlarge)

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 Editorial Staff

Over 100 banks are opening soon, buying junk bonds is gaining popularity and emerging markets are the trendy investment. Sound familiar? Europe appears to be returning to some bad investment habits.

The following is an excerpt from the February issue of Global Market Perspective. For a limited time, you can visit Elliott Wave International to download the rest of the 100+ page issue free.

Just as in 2007, huge bullishness in concert with no fear is cropping up. Central and Eastern European (CEE) debt markets, for example, are clearly back on investors’ radar. UniCredit of Italy plans to open 100 banks across the region, while Erste Bank of Austria is preparing 70 more in Romania. Raiffeisen International, also of Austria, is getting ready to launch an internet-based banking system to serve the region as well.

Likewise, the European junk bond market, which effectively died after the financial crisis, has bounced back to life along with the rally. At 70%, total returns on western European junk bonds were more than double those on the FTSE All Share Index in 2009. Moreover, the trend is accelerating. The week of January 11 was the second largest week ever seen in European junk bonds, according to the Financial Times, as companies sold $11.7 billion worth of high-yield debt. Predictably, bankers are ramping up their expectations for 2010. Experts forecast about €50 billion in new issuance in the coming year, a number that nearly doubles what the market has produced in its best years. Says one portfolio manager discussing the market: A “virtuous-circle effect” will take place in 2010. “There was a time when German companies, for example, would think it was a social insult to be a junk bond, but now you are seeing [them] use the market as a mainstream tool for financing.”

That’s on the corporate side. On the sovereign side, shaky debtors and giddy investors are also fully recommitted. For the first time ever, Moody’s upgraded JP Morgan’s Emerging Market Sovereign Bond Index from “junk” to “investment grade.” January’s upgrade occurred in spite of the sovereign default risk growing in countries like Greece, Spain, and Italy (see Secondary Markets), but that’s not stopping yield-starved investors from buying.

Barings Asset Management and HSBC are reportedly increasing their exposure to emerging markets. So is bond giant, Pimco, which calls emerging-market debt an “asset class on the upward path.” Its portrayal, however, merely describes the last 10 months of market action. The index shown on the previous page tracks emerging-market bond yields in their local currency. Just like trader sentiment numbers, yields are firmly back to pre-crisis levels. But extrapolating the last 10 months forward may be one of the most dangerous bets around. When the financial community recklessly returns to play with the loaded firearms from the prior mania, it’s a tell that a bear-market rally is ending. Most will again shoot themselves in the foot.

Read the rest of this issue now free! You’ll get 100+ pages of insights about:

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By Anton Eljwizat – In the last two weeks of trading, the CAD/JPY experienced much bullishness, and it stands now at 88.20. However, as I demonstrate below, it seems that the pair’s bullish run may have run out of steam and a bearish correction could be underway soon. 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.

• Below is the daily chart of the CAD/JPY currency pair.

• The technical indicators that are used are the William Percent Range, Relative Strength Index (RSI).

• Point 1: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.

• Point 2: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure.

• Point 3: The Slow Stochastic indicates an impending bearish cross, signaling that the next move may be in a downward direction.

CAD/JPY Daily 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

Last week’s trading was mostly characterized by the sharp change of trends in the market. The most notable trend reversal was of the Euro, which dropped during the beginning of the week, just to bounce back later on, due to speculations of a Greek rescue plan. The main question for this week’s trading is whether the Euro will continue to recover, or will the EUR/USD pair will reach a new low.

Economic News

USD – Dollar Advances on Positive U.S. Economic Data

The Dollar strengthened throughout most of last week. The Dollar reached a 9-month high against the Euro as the EUR/USD dropped to the 1.3445 level. The Dollar rose against the Pound and the Yen as well during last week’s trading session.

The Dollar continued to strengthen last week, mostly due to positive data from the U.S. economy. Several economic indicators that were published last week produced positive signs for the economy, helping to strengthen the Dollar. The Long-Term Purchases report showed that foreign investors have a strong faith in the U.S. economy. In addition, the Building Permits for January showed a continuous progress in the American housing sector. This holds an immense importance as the housing sector is what initially caused the financial crisis and recovering signs of it proves that the crisis is behind us.

However, the Consumer Price Index, which was published on Friday, showed a decreasing pace of inflation. The U.S. economy is still in fears from deflation, and thus the negative figures have an instant impact on the Dollar, which dropped slightly against the major currencies.

Looking ahead to this week, many interesting economic publications are expected from the U.S. The most impacting news events look to be the Consumer Confidence, the New Home Sales, the Durable Goods Orders indices and the Preliminary Gross Domestic Product. If the U.S. economy will continue to provide positive data this week as well, the Dollar is likely to continue to strengthen against the major currencies.

EUR – Speculations of Rescue Plan for Greece Boosts the Euro

The Euro began last week’s trading session with sharp losses against the major currencies. However, close to the weekend the Euro began to recover against the majors, and marked a sharp uptrend against the Pound and the Yen.

The Euro’s downfall at the beginning of the week came as a result of the Greek debt worries. The Euro-Zone’s leadership seemed reluctant to provide a bailout plan for the Greek economy, and investors have fears of its effect on the Euro-Zone. This has decreased risk appetite in the market, and turned investors to look for safer investments such as the Dollar and the Yen.

However, reports that the Euro-Zone is working on a quick bailout for Greece have boosted the Euro. It seems that Germany has prepared a plan in which the Euro-Zone’s nations will provide aid worth about 20 billion Euros for debt-laden Greece. These reports are yet to receive an official confirmation, but the speculations themselves were enough to boost the Euro. It seems that further positive indications regarding the Greek debt crisis are likely to support the Euro. However in case that a rescue plan will not be published soon, the optimism in the market could be erased, and the Euro will be damages as a result.

As for the week ahead, the most impacting data from the Euro-Zone appears to be the German Business Climate, which is scheduled for Tuesday. This is a survey which attempts to forecast the business conditions for the next 6 months. A positive result is likely to support the Euro. Traders should also look for any development regarding the Greek economy, as this seems to be the most influencing issue at the moment.

JPY – Yen Slides against the Majors

The Yen saw a bearish trend against most of the major currencies during last week’s trading session. The Yen’s most notable drop was against the Dollar as the USD/JPY pair rose in about 300 pips.

The Yen’s depreciation took place due to three main factors. The first factor to weaken the Yen this week was the rise in Japanese stocks. This has damped demand for the Yen as a safe-haven. In addition, the Bank of Japan (BoJ) decided to leave the Japanese Interest Rates at 0.10%, the lowest in the industrial world. The BoJ’s policy is to weaken the Yen in order to support the Japanese exports. This policy indeed weakened the Yen last week. The third reason for the Yen’s weakness are speculations regarding a Greece rescue plan. This has increased risk appetite and lowered demand for safer investments such as the Yen.

This week traders should focus on two main publications from the Japanese economy, the Trade Balance and the Retails Sales. The Trade Balance will provide further evidence regarding the Japanese exports, and a positive result is likely to support the Yen. The Retail Sales are a primary gauge of consumer activity, and the market tends to promptly react to this publication. Analysts are forecasting that the Japanese Retails Sales have dropped during January. If the end result will be similar, it is likely to weaken the Yen.

OIL – Oil is traded for over $80 a Barrel

Crude oil rose sharply during last week’s trading session. Crude oil rose from $73.00 a barrel on Monday to over $80 a barrel at the moment, completing a $7 rise in a week.

Crude oil rose during last week’s trading on speculations that energy demand will increase as the global economy seems to recover from the recession. Current assumptions of the Organization of the Petroleum Exporting Countries (OPEC) are that global consumption may climb by as much as 1.4 million barrels a day in the second half of the year. In addition, the drop of the Dollar during the end of last week also supported the price of oil. Crude oil is traded in Dollars, and thus when the Dollar drops against the major currencies, crude oil tends to rise in accordance.

As for the week ahead, traders should follow the major news events from the U.S. and the Euro-Zone, as this tends to affect the prices of oil the most. Traders should take under consideration that positive data is likely to create speculations for global economic recovery, and thus boost the prices of crude oil further. Traders should also follow the U.S. Crude Oil Inventories report on Wednesday as this report tends to have an immediate impact on the market.

Technical News

EUR/USD

There is a bearish cross forming on the 4-hour chart’s Slow Stochastic indicating a bearish correction might take place in the near future. The downward direction on the hourly chart’s Slow Stochastic also supports this notion. When the downward breach occurs, going short with tight stops appears to be preferable strategy.

GBP/USD

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the 4-hour chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.

USD/JPY

The USD/JPY cross has experienced a bullish trend for the past 2 weeks. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

USD/CHF

The typical range trading on the hourly chart continues. The daily chart’s RSI is floating in neutral territory. However, there is a bullish cross forming on the 4-hour chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

The Wild Card

Oil

Oil prices rose significantly in the last week and peaked at $80.30 per barrel. However, the daily charts’ RSI is floating in an overbought territory, suggesting that the recent upward trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

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.

Today’s trading still looks to be impacted from speculations surrounding the Greek rescue plan. At the beginning of the last week, the Euro dropped against the Dollar and the Yen due to fears that the Euro-Zone isn’t preparing a bailout plan for the Greece economy. Then later on, several reports have suggested that Germany is about to propose a 20 billion Euros rescue plan.

This has completely reversed trends in the market, and the Euro managed to erase losses against the Pound and the Yen, and to slightly recover against the Dollar. Nevertheless, it should be noted that no official comment was made on this issue till now.

The Greece debts issue is likely to continue to be the most influential event this week and traders are advised to look for official statements from the Euro-Zone as this will have an immediate impact on the market. Moreover, an official statement that confirms the Euro-Zone’s intention to bailout the Greece’s economy is likely to boost the Euro.

Today there aren’t any news events on the economic calendar that are likely to create volatility in the market. Therefore traders are advised to follow equity markets around the world, and to look for any developments regarding the Greek debt rescue plan.

USDCHF dropped sharply from 1.0898 last week, suggesting that a short term cycle top had been formed on 4-hour chart. Range trading between 1.0608 and 1.0898 is expected in a couple of days. However, the price action from 1.0794 is treated as consolidation of uptrend from 1.0132, one more rise towards 1.1000 is still possible. Key support is at 1.0608, below this level will indicate that the upward movement from 1.0132 has completed at 1.0898 already, then the following pullback could take price back to 1.0500 zone.

Daily Forex Analysis

The equity markets were able to build up momentum last week, allowing the S&P 500 Index to rally 33 points or 3.3% for the week.  The commodity market also joined the party, as the dollar traded mixed due to global uncertainty.

The week started off on a positive note for riskier assets due to positive news out of Japan.  The gloom is lifting slightly from the Japanese economy, as sharp growth from China and other Asian neighbors is lifting exports and spurring more capital spending by the nation’s manufacturers.  The Japanese economy grew at a faster pace than expected, expanding at a rate of 4.6% for the three months ended Dec. 31.  The economic figures also showed that the slight increase in domestic demand also helped lift Japan out of its worst recession. Private consumer spending, which accounted for about 58% of real gross domestic product, rose 0.7%, supported by government measures to encourage purchases of energy-efficient electrical appliances and cars. That was the third straight quarter of gains. The GDP deflator-an indicator that gives a broad reading of price trends-worsened to a record low of a 3% decline in October-December from the previous year, compared with a 0.6% decrease in the previous quarter. A fall in domestic prices pushed down the deflator, showing that the gap between supply and demand is still increasing.

On Tuesday the US equity markets rallied significantly and were greeted with robust news out of Australia.  RBA minutes from February showed that the central bank kept interest rates unchanged this month in a “finely balanced” decision, due to concerns that the European debt crisis could weaken the global economic recovery.  RBA noted, however, that “Members expected that if economic conditions continued to improve as expected, further increases in the cash rate were likely to be necessary.  But they did not regard that outlook as ring an increase at every meeting.”  In addition, “Members noted that many market participants expected a further increase in the cash rate at this meeting. They concluded that, on balance, the stronger case was to leave the cash rate unchanged for the time being.”  According to our market analysis, the markets are likely to take the RBA statement as more hawkish.

Over in Greece, the debt crisis remains a market focus with euro zone Finance Ministers still trying to decide which strategy to use.  The market has been left uncertain about how the EU would support Greece in its endeavors to shrink its budget deficit.  To date, it is still unclear whether the finance ministers will provide some form of aid to Greece.  Instead, the ministers, at the conclusion of last week’s meeting, urged Greece to be prepared to undertake additional steps at the March 16th review if insufficient progress has been made.  The impact has been felt in the bond markets where Greek bonds have been sold off further with the German/Greek 10-year spread widening by the most in three weeks.  The comparable German/Portuguese spread has also widened slightly, by 6 basis points.

Additionally, Manufacturing in the New York region expanded in February at the fastest pace in four months as company’s boosted payrolls in anticipation of accelerating orders and sales. The Federal Reserve Bank of New York’s general economic index rose to 24.9 this month, higher than anticipated, from 15.9 in January. Readings above zero in the so-called Empire State Index signal growth in the area covering New York and parts of New Jersey and Connecticut.

On Wednesday the FOMC minutes were released.  The Jan 27 FOMC minutes were largely superseded by Bernanke’s testimony last week, although the notes made clear that policy makers had differing views.  Hoenig, a voting member, was the only policy maker to dissent on use of the phrase “extended period.” The minutes showed he favored adopting a “modestly higher rate soon.”  Several members argued for shrinking assets sooner ,rather than later.  While all members agreed assets should be shrunk “over time”, several members did advocate shrinking assets in the “near future.”  Plosser, currently a non-voting FOMC member and speaking as the minutes were released, expressed this view.  This underscores a point.  Not all voting members are hawks.  Other FOMC members including Evans, who is currently a voting member, have advocated a more dovish approach in recent speeches arguing for expanding purchases if necessary.  Diverging views become a focus as policy begins to shift but in this case, the minutes have been superseded by Bernanke’s testimony where the Chairman laid out an exit strategy that included a discount rate hike to move the spread between the discount and Fed funds target toward a more normal spread (100 bp prior to the crisis). Furthermore, the Fed has hinted that Fed funds might become a less reliable indicator of the Fed’s policy stance “for a time” with the Fed instead using rates on reserve requirements to reflect policy.

On Thursday, the dollar continued to strengthen against the Euro and Pound, and the US equity markets continued to push higher.   US Producer Prices grew at a greater than expected 1.4% month on month for January 2010.  Ex-food and energy PPI grew at a 0.3% month over month rate.  Economists had expected a 0.8% and 0.1% increase, respectively.  Additionally, jobless claims increased by 31,000 in the past week.

Consumer prices in Canada were 1.9% above year ago levels last month, the highest since Nov 2008, representing a 0.3% increase on the month.  More importantly from a policy making point of view, the core rate rose to 2.0% from 1.5%.  The Bank of Canada has promised no rate hikes before mid-year.  The stickiness of core inflation warns of a risk of a BOC hike in Q3.

On Friday, the market needed to absorb a differing inflation data point.   U.S. consumer prices barely rose in January from the previous month and core inflation fell for the first time since 1982.  The seasonally-adjusted consumer price index rose 0.2% last month on the back of higher energy prices, according to the Labor Department.  Core consumer prices, which strip out volatile energy and food items and are more closely watched by the Fed, fell by a monthly 0.1% in January. The last time core consumer prices fell was in December 1982. In December 2009, the core CPI had risen by a monthly 0.1%.  Wall Street economists surveyed by Dow Jones Newswires were expecting an increase of 0.3% in the headline consumer price figure and of 0.1% in the core consumer price index number.

Forex

The pound traded weaker after disappointing economic data and reports, including jobs data that hit the board.  Given last week’s definitely dovish BoE Quarterly Inflation Report, one could have expected a couple of members to vote for an extension of the asset purchase program.  The majority of policy members argued that adding to the size of the Q/E program now might increase the chance of unwarranted increases in asset prices, which could have a negative effect on the economy. On the employment front, jobless claims figures rose 23.5k on the month vs. -10K expected and more than offsetting a -9.6k decline previously.  Additionally, December average earnings are running at just 0.8% 3mths y/y, vs. 0.9% expected and unchanged from November which should support the BoE’s view that gains in CPI are temporary. From a technical point of view the GBP/USD Crashed on Friday and dropped to support, one must note that horizontal support coincides with trend line support. A break of that level could lead to lower ground.

The euro cannot seem to get out of its own way.  After a brief period of calm, euro zone credibility issues have come back to haunt the euro.  Greek bonds are under pressure after Greece was ordered by EU Economic and Monetary Affairs Commissioner Rehn to hand over information on the swaps by Friday making the market nervous about the possibility of still concealed debt.  In addition, Greece will reportedly issue a new EUR 3 to 10 bln of bonds next week as part of its plans to raise a total of EUR54 bln in 2010 (of which about three-quarters still needs to be raised) putting additional pressure on bonds.    With the 50 day moving average recently crossing below the 200 day moving average, the technical pressure for the Euro is to the downside. Even though a bounce could be experienced around current levels, the trend is definitely bearish.

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.

By CountingPips.com

The U.S. dollar continued its gain versus the euro in the forex markets this week while the dollar’s overall performance was mixed against the other major currencies. The U.S. currency rose versus the euro, British pound, Japanese yen and the Swiss franc in the week that ended February 19th, according to currency data from Oanda. Meanwhile, the dollar fell against the Canadian, Australian and the New Zealand dollars for the second straight week.

The dollar’s rise versus the euro marked the first six week gain in almost a decade although the week’s 21 pip increase was the smallest of the last six weeks. The Greek debt crisis and the uncertainty surrounding a potential bailout helped keep the euro under pressure for most of the week. On Monday, European Union officials reiterated their support for the debt-ridden nation but also gave the country one month to formulate a plan to help cut its deficit. One of the euro’s original advocates, Robert Mundell, didn’t do the euro any favors on Tuesday when he stated that Italy, not Greece, was the biggest threat to the euro. See the video.

Futures bets against the euro increased to a record high for the third straight week as of February 16th, according to the Commitments of Traders (COT) data released on Friday by the Chicago Mercantile Exchange. Non-commercial futures positions, those taken by hedge funds and large speculators, were net short the euro against the U.S. dollar by 59,422 contracts after being net short the euro by 57,152 contracts the week before. Net short euro positions have increased for five consecutive weeks.

The COT report is published every Friday by the Chicago Mercantile Exchange and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity.

The largest gain for the dollar this week was against the British pound with a 229 pip increase followed by the 158 pip advance versus the Japanese yen (see chart). The dollar declined by over 100 pips against the Canadian dollar and the Australian dollar while showing a small 19 pip deficit to the New Zealand dollar.

Market news that helped push the dollar higher on Thursday was the Federal Reserve’s raising of the discount rate that the government charges for loans to banks. The discount rate was increased from 0.50 percent to 0.75 percent as the move was intended to spur a “further normalization of the Federal Reserve’s lending facilities.

According to the Fed statement, the change was “in light of continued improvement in financial market conditions” but cautioned against thinking this move was a change in monetary policy or a shift in stance on main interest rate. Despite the Fed’s word of caution, the move prompted speculation that this was a first step in the direction of an overall normalization of monetary policy and towards ending its special stimulus programs.

Next week’s economic calender highlights include the S&P/Case-Shiller Home Price Index and U.S. Consumer Confidence on Tuesday. The German Gross Domestic Product and U.S. New Home Sales are released on Wednesday. Thursday releases include Switzerland’s Employment Level, Germany’s Unemployment Change and U.S. Durable Goods Orders. Friday has the U.K. and U.S. Gross Domestic Product reports as well as U.S. Existing Home Sales and Canada’s Current Account data.

Have a great weekend!

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GBPUSD’s downtrend extends to as low as 1.5350 level. Further fall is still possible next week and next target would be at 1.5150 area. Key resistance is now located at 1.5815, as long as this level holds, downtrend from 1.6456 could be expected to continue. However, a break above 1.5815 will indicate that a cycle bottom has been formed on daily chart and the fall from 1.6456 has completed, then the following bounce could bring price back to test the resistance of the fall trend line from 1.6875 to 1.6456.

For long term analysis, GBPUSD is in bearish movement from 1.7042. Move to 1.5000 area is expected in next several weeks.

Weekly Forex Forecast