Source: ForexYard
As most investors eye Wednesday’s monetary policy meeting by the US Federal Reserve, the possibility exists for the Fed to view the latest string of economic reports, particularly from the housing market, as a signal to release a hawkish assessment of the American economy. Consumer confidence has also risen lately and traders appear to be anticipating an uptick by the greenback against its Atlantic rival this week.
The US dollar has found itself in a position to rebound strongly in the days ahead if this week’s policy meeting by the Federal Reserve produces a hawkish assessment. Most reports released at the end of last week had begun to call for a fast-paced injection of trading volume, deemed almost certainly to go towards the euro instead of the buck.
However, the beleaguered currency seems to have caught a break with China delaying its monetary revaluation and with a minor shift in fundamentals. Considering the series of negative reports to have piled atop the greenback over the past month-and-a-half, much of the bearish pressure has likely already been priced-in by investors. As such, the Fed should see numerous reasons to be optimistic moving ahead, though the national deficit remains an appalling concern.
As for today’s trading, the global economy exits its holiday break and reenters the market full bore. This liquidity injection should make trading interesting today as the weekend’s flat trading period gets reevaluated by well rested eyes. The Conference Board (CB) will be publishing its consumer confidence report today at 15:00 GMT, with an expectation to rise somewhat from last month – adding weight to the potential for hawkishness from the Fed. Traders may want to anticipate the bull run on the USD should fundamentals shift as expected.
The euro has been experiencing relatively flat results against most of its currency rivals as the region was on holiday in observance of Easter. The EUR/USD has held relatively stable as of Friday and did not appear to have momentum in either direction until this morning. Traders have viewed the return of liquidity with optimism as markets should provide clearer direction this week, though not necessarily as expected from Friday.
The euro zone continues to grapple with its sovereign debt woes, but some movement in risk appetite has helped push the EUR mildly higher by the start of this week against most of its currency rivals. The speculation of a move by China to revalue its currency had also convinced many that a broad sell-off in the USD would take place early this week, but rumors are spreading that this move may get delayed, helping the USD hold its ground against losses.
As most investors eye Wednesday’s monetary policy meeting by the US Federal Reserve, the possibility exists for the Fed to view the latest string of economic reports, particularly from the housing market, as a signal to release a hawkish assessment of the American economy. Consumer confidence has also risen lately and traders appear to be anticipating an uptick by the greenback against its Atlantic rival this week.
As for today’s trading, the euro zone may have returned to actively engaging the market, but no reports are expected today, meaning the USD may actually take the reins and guide the market. Traders will want to pay attention to the 15:00 GMT release of the CB Consumer Confidence report out of the US as it is the most impactful event on today’s calendar.
The Japanese yen slumped against its major counterparts in early Asian deals on Monday as US bond yields rose ahead of today’s auction of $35 billion in two-year debt. Investor concern that the recent S&P downgrade of US debt outlook will push up borrowing costs likely played into this sell-off in JPY, but this week’s monetary policy meeting by the Bank of Japan (BOJ) also influenced much of the recent movements.
Growing concerns regarding Japan have driven the JPY lower recently amid deteriorating fundamentals out of the island economy. However, yesterday’s all industries index experienced a 0.7% rise, beating out forecasts and helping add to the recent atmosphere of market optimism. For today traders will want to look to the USD for market direction but the JPY’s current momentum shift appears to be dominant. This means going short on the yen may continue to remain appealing in the short-term.
The price for a barrel of Crude Oil took a dip yesterday after the CEO of Aramco, Khalid al-Falih, stated his concern for the impact high oil prices would have on the global economy. His remarks came during an industry gathering in South Korea and the impact of such a sentiment rippled across the oil market rapidly with prices slipping below $112 a barrel on Tuesday morning.
Soaring oil price gains have been remarked upon by the Organization of Petroleum Exporting Countries (OPEC), US President Barack Obama and now by a leading oil producer and exporter Aramco, all of whom have stated that the current price is an aberration from current levels of supply and demand and may carry detrimental effects onto the world’s economic recovery. Whether such warnings will come soon enough to push prices back down is yet to be seen, but these latest remarks appear to have made an impact, no matter how small it may have been.
Ever since the EUR/USD pair peaked at the 1.4650 level it has begun slightly correcting downwards, and is currently trading near the 1.4530 level. On the 4-hour chart, both the Slow Stochastic and the MACD are providing bearish crosses, suggesting that the bearish correction may proceed today. Going short with tight stops seems to be the right strategy today.
The GBP/USD pair is currently in the midst of a bearish correction and has fallen about 150 pips during the past few days. In addition, as all oscillators on the 4-hour chart are providing bearish indications, it seems that the cable might slide further, with potential to reach the 1.6350 level.
There is a very accurate bearish channel formed on the 4-hour chart, as the pair is currently floating in the middle of it. The MACD and the RSI on both the 4-hour and the 1-day charts are suggesting that the bearish move has more room to go. Going short appears to be the right choice today.
The USD/CHF continues to slide and is now trading near the 0.8840 level. Nevertheless, as a bullish cross takes place on both the 4-hour chart’s Slow Stochastic and MACD, it seems that a bullish correction might take place today, with a key-target level of 0.8920.
After breaking an all-time record high of $1,518 an ounce, it appears that a technical correction has been initiated, and gold is currently trading near the $1,500 level. In addition, as all the oscillators on the 4-hour chart are pointing down, it seems that another bearish session might take place today, providing a great opportunity for forex traders to join a very popular trend.
Forex Market Analysis provided by ForexYard.
© 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.