InvestMacro FX

Source: ForexYard

The U.S. Dollar anticipates the release of U.S. Core CPI at 12:30 GMT. The reason this publication is so important is due to it being a leading measure of U.S. economic growth and inflation. A positive figure is likely to help the USD gain strength throughout today’s trading. The USD will also be affected by its yesterday’s bearishness, as there may be a slight correction in the greenback. Traders should open their USD positions now in order to make maximum profits from end-of-week trading.

Economic News

USD – USD Slides on Poor Economic Data

During yesterday’s trading, the Dollar dropped against all the major currencies. The Dollar dropped as much as 100 pips at one point against the EUR on Thursday, and saw bearish trends against the Pound and the Yen as well.

The Dollar weakened yesterday as a result of series of negative economic data releases. The U.S Retails Sales unexpectedly dropped by 0.1% in July, failing to reach expectations to rise by 1.8%. The U.S Core Retails Sales dropped by 0.6% in July too. The difference between the two reports is that the core report measures the change in the total value of sales at the retail level, excluding automobiles, due to the high volatility of automobile sales. The fact that both indices showed negative figures proves that American consumers are still cautious regarding their expenses, lacking the confidence that the worst of the recession is behind us

The other important release that helped push down the Dollar on Thursday was the weekly Unemployment Claims report which showed that 558,000 individuals filed for unemployment insurance for the first time during the past week. Both the negative Retails Sales data and the poor employment figures showed that the U.S economy is yet to pull out of recession, and thus the Dollar weakened as the trading day progressed.

Looking ahead to today, the leading data seems to be the Consumer Price Indices (CPI). The CPI measures the change in price of goods and services purchased by consumers, and thus act as a leading inflation gauge. Traders are advised to focus their attention on the Core CPI report, which excludes food and energy prices, as it tends to deliver a more reliable figure. Current forecasts suggest that prices have stayed quite stable during July. It appears that if the actual result will be similar or slightly better, it may correct some of yesterday’s losses for the Dollar. However, in case of a worse-than-expected result, the Dollar is likely to continue tumbling.

EUR – EUR Soars on Positive GDP Figures

The EUR saw a volatile trading session yesterday. The EUR rose significantly higher against the Dollar, as the EUR/USD reached the 1.4300 level. However, the EUR saw mixed results against both the Yen and the Pound.

It appears that the EUR’s appreciation came as a result of the better-than-expected economic data. The German Preliminary Gross Domestic Product (GDP) unexpectedly rose by 0.3% in the 2nd quarter. The GDP report measures the change in the inflation-adjusted value of all goods and services produced by the economy. The positive result generated speculations that the German economy is recovering sooner then expected, as many analysts wrongly forecast that the German economy will only pull out of recession by the middle of 2010.

Later on in Thursday’s trading day, the European Flash GDP was released, showing that the Euro-Zone’s GDP dropped by 0.1% during the 2nd quarter, beating expectations for a 0.5% slide. The better-than-expected figures created the sensation that the Euro-Zone economy is following the U.S optimism which we have seen in the past 2 months that the recession will end sooner than expected. As a result, this has strengthened the EUR.

As for today, a batch of data is expected from the European economies. The French Preliminary Non-Farm Payrolls will be released, and analysts forecast that 0.7% people have lost their jobs during the previous quarter in France. The European Consumer Prices Indices are also expected today, and are predicted to deliver mixed results. It currently seems that if the actual results will be similar to forecasts, the EUR may drop slightly due to the overall negative figures.

JPY – Yen Rises on Asian Equity Rally

The JPY started yesterday’s trading with bullish trends against all the major currencies. The Yen continued to rise against the Dollar, yet later on lost gains against the EUR and the Pound. The Yen soared against the major pairs as a rally in Asian stocks spurred demand for higher-yielding assets. The Bank of Japan stated yesterday that Japan’s economic conditions have stopped worsening, and are likely to turn upward over time. This created positive sentiment which was reflected in Asian stock markets, and was followed by a strengthening Yen.

Yesterday, the Tertiary Industry Activity report showed that the total value of services purchased by business rose by 0.1% in June. This is another indication that Japanese consumers feel safer to enlarge their expenses, which means that the general sentiment is that the economy is doing better. Looking ahead to today, no significant data is expected from the Japanese economy. Traders should mainly focus on the major data releases from the U.S economy, as this is likely set the tone for today’s trading.

Crude Oil – Crude Oil Eyes $73 a Barrel

Crude Oil continued to rise yesterday, marking the second consecutive day of rising prices. A barrel of Crude Oil rose to over $72 during yesterday’s trading session, and now eyes $73 a barrel. Crude was helped by a weak USD Dollar, as the commodity is valued in Dollars, and thus a drop of the Dollar against the major currencies is usually followed by a rise in commodities prices, especially Oil.

The rise in Crude Oil and the weak USD was largely due U.S equities rallying to a 10-month high, and the German and French economies delivering better than expected data. What seems to be an early recovery for the leading western economies has sparked optimism for a rebound in fuel demand. It currently seems that every positive economic figure from the U.S or the Euro-Zone may spark an appreciation in Oil prices, as expectations for higher fuel demand are constantly growing.

Technical News

EUR/USD

The EUR/USD cross has risen significantly in the past 2 days, and currently stands at the 1.4258 level. The chart’s 4-hour RSI supports a bearish trend for today. However, the hourly and daily charts support a more accurate picture. The daily chart’s Stochastic Slow supports the recent upward trend to continue. This is also backed up by the Stochastic Slow of the hourly chart. Going long with tight stops may turn out to pay off today.

GBP/USD

The pair has plummeted significantly in the previous week. However, yesterday saw the GBP/USD pair rise to as high as the 1.6665 level. The chart’s oscillators seem to be showing mixed signals. On one hand, the daily chart’s Stochastic Slow and chart’s 4-hour MACD supports a bullish trend for today. On the other hand, the daily chart’s RSI and the weekly chart’s RSI support a bearish correction today. Entering the pair when the signals are clearer seems to be the preferred choice for today.

USD/JPY

The cross has experienced much bearishness in the past week, and currently stands at the 95.21 level. There is much evidence in the chart’s oscillators that supports a possible bullish correction today. This is supported by the chart’s 4-hour Stochastic Slow and MACD. This upward behavior today is also backed by the daily chart’s Stochastic Slow. Going long with tight stops may turn out to bring big profits today.

USD/CHF

The USD/CHF pair peaked about a weak ago. However, it is now officially experiencing a 3 day losing streak. The chart’s 4-hour Stochastic Slow indicates that there will be a bullish reversal today. However, most of the other technical indicators signal that a bearish move will continue for the pair today. This is supported by the weekly chart, the chart’s daily Stochastic slow, and the chart’s 4-hour MACD. Going short on this pair may turn out to pay off in today’s trading.

The Wild Card – Crude Oil

Crude Oil has again returned to the forefront as one of the most profitable commodities. The black gold has continued to rise in the past 2 days, and it could hit the $73 mark anytime soon. The daily chart’s Bollinger Bands signal that there may be some steam left in this upwards trend. However, the RSI of the hourly, 4-hour, daily, and weekly charts support a bearish correction to occur today. Entering the trend at an early stage may turn out to bring in big money for forex traders today.

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.

By GCI Fx Research

€

The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4325 level and was supported around the $1.4180 level.  The common currency improved on weaker-than-expected U.S. July retail sales data that saw a 0.1% decline, down sharply from a revised reading of +0.8%, while the ex-autos component was off 0.6%, down from the revised June reading of 0.5%.  Also, the July import price index was off 0.7% m/m, down significantly from the 2.6% prior reading, and off 19.3% y/y.   Other data saw weekly initial jobless claims print at 558,000, up 4,000, whole continuing jobless claims were off 141,000 to 6.202 million.  Other data saw June business inventories off 1.1%.  July consumer price inflation will be released tomorrow.  The euro was also supported by stronger than expected eurozone economic data that saw EMU-16 gross domestic product fall a mere 0.1% in the second quarter, up dramatically from a 2.5% decline in the first quarter.  Notably, both the German and French economies notched growth of 0.3%, suggesting the two largest eurozone economies are no longer in a technical recession.  These data may prompt the European Central Bank to begin unwinding its expansionary monetary policy measures earlier than previously believed.  Eonia interest rate futures are now predicting a 25bps interest rate hike to 1.25% by May 2010, while overnight index swaps indicated the ECB will raise its benchmark rate in February 2010.  Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥95.05 level and was capped around the ¥96.50 level.  The yen moved higher as the U.S. dollar was given across the board on increasing risk appetite and a positive day for U.S. equities markets.  Yesterday, Bank of Japan Governor Shirakawa reported a “built-in mechanism” is required to end the central bank’s unconventional monetary policy and ensure smooth functioning of markets.  He specifically reported “It would be important to have an appropriate built-in exit mechanism which reduces the incentive to use the (unconventional fund provision) facility as market functioning recovers,” so that market players don’t become reliant on those steps and hurt the market’s functioning.”  The central bank, like other central banks, continues to discuss an exit strategy from its significant amount of monetary stimuli.  Shirakawa was in the news again today for criticizing economists’ suggestion that the central bank should establish an inflation target to overcome deflation.  The central bank’s monthly report of recent economic and financial developments was released yesterday in which the BoJ reported “economic conditions have stopped worsening” but noted “business fixed investment has declined substantially” and “private consumption has remained generally weak.”  The Nikkei 225 stock index climbed 0.79% to close at ¥10,517.91.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥135.55 level and was capped around the ¥137.85 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥157.35 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.95 level. In Chinese news, the U.S. dollar lost ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8306 in the over-the-counter market, down from CNY 6.8321.

Daily Market Commentary provided by GCI Financial Ltd.

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

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

By CountingPips.com

U.S. Retail Sales fell in July after increasing for two straight months according to a report by the U.S. Commerce Department released today. Advance estimates of July retail sales showed that sales fell by 0.1 percent to $342.3 billion following a revised 0.8 percent increase in June. On an annual basis, retail sales are 8.3 percent below the July 2008 level after a June annual decline of 8.9 percent. Today’s data was worse than the market forecasts were expecting at an approximately 0.8 percent monthly sales gain.

Retail sales, minus automobiles, decreased by 0.6 percent in July after a revised 0.5 percent revised gain in June. This data also fell below expectations of a 0.1 percent gain for the month. On an annual basis, sales minus autos is 8.5 percent lower than the July 2008 level following June’s annual decline of 7.8 percent.

Contributing to July’s decreased retail sales were declines in gasoline station sales and building material & garden eq. & supplies dealers with declines of 2.1 percent each. Also contibuting to the decline in retail sales for July was a 0.9 percent decrease in furniture & home furnishings stores, a 1.4 percent fall in electronics & appliance stores and a 1.4 percent decrease in sporting goods, hobby, book & music stores. The largest positive contributor to the retail sales data was a 2.4 percent increase in motor vehicle & parts dealers.

Weekly Jobless Claims rise.

A separate government release by the U.S. Labor Department showed that weekly U.S. jobless claims increased in the week that ended on August 8th. New jobless claims grew to a total of 558,000 unemployed workers, an increase over the prior week by 4,000 workers. A 4-week moving average of unemployed workers rose by 8,500 from the prior week to a total of 565,000.

Meanwhile, workers seeking continuing claims for unemployment benefits for the week ending August 1st fell by 141,000 workers to a total of 6,202,000 unemployed workers. A four week moving average of continuing claims declined by 27,750 to 6,259,250.

Dollar is lower in Fx Trade Today.

The U.S. dollar has been lower today against the other major currencies in forex trading for the second day in a row.  The dollar has been weaker versus the euro, British pound, Australian dollar, Japanese yen, Swiss franc and New Zealand dollar while trading almost unchanged versus the Canadian dollar at 2:18 pm ET in the US trading session.

EUR/USD Chart – The Euro rises for the second straight day today versus the US Dollar in forex trading and advances to its highest level since August 7th.

By Fast Brokers – The EUR/USD is being denied by our 2nd tier downtrend line after U.S. retail sales and weekly unemployment claims all came in weaker than analysts anticipated.  Today’s U.S. data is deflating Wednesday’s rally in reaction to a more upbeat speech from Bernanke following the Fed’s monetary policy meeting.  Investors were reassured by Bernanke and ignored weaker than expected industrial production data from the EU.  The Dollar’s negative correlation with U.S. equities locked back in after deviating the last few sessions.  Investors made an assertive return to risk, yet the EUR/USD didn’t register comparable volume to the upside as it did to the downside last Friday.  However, the Euro is exerting some relative strength today after German and French GDP surprised investors by printing positive growth.  The EU’s Flash GDP reiterated the improvement by coming in at -0.1% vs. -0.5% expected.  Therefore, it appears the EU’s manufacturing hubs, Germany and France, are recovering well despite recent depreciation of the Euro against the Dollar.  We believe the improvement in the EU’s economy may be a result of demand from emerging countries such as China, India, and Brazil.  Additionally, economic problems in Eastern Europe don’t seem to be having as negative of an impact on the EU region as one might expect.

Today’s GDP news from the EU should be enough to buoy the EUR/USD until tomorrow’s CPI data.  An improvement in EU prices couple with stability in the S&P futures would help the EUR/USD hold its ground.  Meanwhile, investors should keep an eye on buy-side volume to see whether recent sell-side volume can be countered.  Our 2nd tier downtrend line should continue to serve as a reliable immediate-term barrier until we receive more data on Thursday.  While the positive correlation between the EUR/USD and the S&P futures seems to be back in place, today’s negative data from the U.S. makes us doubt a serious rally in equities today.

The EUR/USD’s previous pullback this month has created a few barriers to the upside which will need some momentum to overcome.  These obstacles include our 2nd and 3rd downtrend line along with August 7th highs.  As for the downside, the EUR/USD has technical cushions in our 3rd tier uptrend line and intraday lows.  Though today’s pop in the EUR/USD is certainly encouraging, the currency still has something to prove to the topside before we are comfortable with a return to its uptrend.

Present Price: 1.4270

Supports: 1.4274, 1.4262, 1.4241, 1.4216, 1.4200

Resistances: 1.4290, 1.4303, 1.4325, 1.4345, 1.4368

Psychological: 1.40, 1.45

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 gravitating towards our 2nd tier uptrend line, trading well off intraday highs after weaker than expected retail sales and weekly unemployment claims data from the U.S.  Meanwhile, it appears the Cable’s positive correlation with U.S. equities is back in play as is the EUR/USD’s.  However, despite the GBP/USD’s recent bounce, we haven’t witnessed considerable buy-side volume while two downtrend lines and the psychological 1.70 level bear overhead.  Therefore, there remains noticeable near-term downward pressure on the Cable.  It seems investors could continue their directional debate with the S&P futures trading back at their highly psychological 1000 zone.  We wouldn’t be surprised to see the GBP/USD continue to creep higher towards 1.67 as our 3rd tier uptrend line and 2nd tier downtrend lines approach their inflection point.   We recognizing an oncoming inflection point in gold as well, indicating the trading week could end on a volatile note.

Economic data will be quiet on the British front for the remainder of the week, leaving the GBP/USD’s performance dependent on its positive correlation with U.S. equities.  Wednesday’s CCC number and Britain’s slight rise in its headline unemployment rate show the rapid improvement in the UK’s labor market is leveling off.  Therefore, the Pound could experience relative weakness over the next couple trading sessions, especially if the EU’s CPI data can beat expectations as did today’s GDP releases.  Technically speaking, The GBP/USD must confront our 3rd tier and 2nd tier downtrend lines along with the psychological 1.67 level and June 30th highs.  As for the downside, the Cable has our 1st and 2nd tier downtrend lines to rely upon along with intraday lows and the highly psychological 1.65 area.

Present Price: 1.6592

Resistances: 1.6611, 1.6632, 1.6648, 1.6665, 1.6702

Supports: 1.6561, 1.6543, 1.6524, 1.6505, 1.6472

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 Yen is continuing its appreciation against the Dollar as investors exercise risk-aversion tactics in reaction to weaker than expected retail sales and employment data.  The USD/JPY’s decline coupled with gains in the GBP/USD and EUR/USD indicate investors are exiting the Dollar.  Despite the USD/JPY’s present pullback, the currency pair still has important technical cushions in place, including our 1st tier uptrend line and the psychological 95 area.  The USD/JPY’s near-term uptrend is intact until these two supports are compromised.  Therefore, it will be interesting to see how these supports hold up over the immediate-term.  Meanwhile, our 3rd tier downtrend and 1st tier uptrend lines are gradually approaching their inflection point.  Hence, the USD/JPY could jog between these trend lines as their collision course nears.  We notice inflection points in the rest of currency pairs along with gold.  As a result, FX volatility could continue for the next couple trading sessions.  On the other hand, the USD/JPY has re-entered a dense trading range, meaning a period of consolidation would not be surprising.

Present Price: 95.45

Resistances: 95.61 95.91, 96.10, 96.47, 96.67

Supports:  95.30, 94.99, 94.75, 94.52, 94.36

Psychological: 95

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 – Gold is dipping back towards $950/oz and our 1st tier downtrend line as both the GBP/USD and EUR/USD contract.  Gold managed to propel from our 1st tier uptrend line yesterday in reaction to a rally in U.S. equities along with a deflating Greenback.  However, volume is declining on the buy-side while our 3rd tier uptrend and 1st tier downtrend lines reach tier inflection point.  We believe this collision could carry some weight since we notice trend inflection points in the GBP/USD, EUR/USD, and USD/JPY as well.  Furthermore, volatility is picking up in U.S. equities and the S&P futures are still debating 1000 as crude battles $70/bbl.  Therefore, a sizable breakout in either direction over the next few trading sessions wouldn’t be uncalled for considering markets are at a critical juncture.

Meanwhile, investors should continue to monitor developments in both the EUR/USD and GBP/USD since gold has been tightly correlated with these currencies lately.  Gold’s psychological $950/oz zone should continue to play a factor for the near-term so long as the precious metal is constrained by our trend lines.  Gold still faces our 2nd and 3rd tier downtrend lines along with August 3rd and 7th highs.  Meanwhile, the precious metal is being sucked back under the lid of its 7/20-7/28 trading range.  Gold has some strong immediate-term technical cushions in our 2nd and 3rd tier uptrend lines along with $950/oz.  Consolidation in the precious metal is likely for the immediate-term as investors await more defining global economic data.

Present Price: $956.35/oz

Resistances: $957.74/oz, $958.77/oz, $959.66/oz, $960.94/oz, $962.22/oz

Supports: $956.33/oz, $954.93/oz, $953.77/oz, $952.37/oz, $950.70/oz

Psychological: $950/oz

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.

Plain and sinply put, the higher lows that we see in EUR/USD on the below daily chart bode well for our long-standing view of EUR/USD breaking higher. We continue to target the 1.47xx handle.

Sentiment seems to be changing ever since last Friday’s NFP data, with more and more traders and analysts looking to short EUR/USD. But the chart and some data this morning out of Eurozone (better than expected growth rates in France and Germany) remind us that some of the best indicators of medium term currency movements is reverse sentiment indicators.

A look at the below daily chart shows higher lows for EUR/USD in since early July. We added in Bollinger Bands to verify and note that a close today above the midline (approx 1.4234) will further validate our bias towards higher EUR/USD.

Our Stop Order for our full long EUR/USD position (see previous posts at www.backbayfx.com/blog.php) is presently on a daily close below 1.3750. We will move that level up today if the market closes above 1.4234.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

Thanks for FX Sol for the below image!

Boston August 13 10:06 EST

We noted John Auther’s piece in the Financial Times on July 30. He pointed out the sharp drop in Chinese Equities which are widely considered one of the riskier asset classes. Mr. Authers further pointed out that Chinese Equities were a foreboding frontrunner to the collapse of the global equities markets starting in late 2007 and even more so in the first half of 2008.

Chinese equity indices gave up another 4.6% or so this morning. With this coming just before a US FOMC meeting results and after the Bank of England admitted that their quantitative easing has not helped as much as they expected, it is a worrying sign for global equities bulls. It seems that many assets considered risky have been in a bit of a holding pattern since this past Friday’s US NFP release…….should make for an interesting read from the FOMC this afternoon.

As it related to the currency markets, we have seen EUR/USD sitting quietly since Friday’s US NFP, and the yield on the US 10 year note is slowing it’s ascent. If the Fed’s release today indicates positive signs for the us economy, we expect traders to continue their buying spree of risky assets; EUR/USD should rise and GBP/JPY should move higher in coming days. But any signs of negativity in the Fed’s release may pave way for lower EUR/USD in the next day or two.

We remain in our full long EUR/USD position with a Stop Order only on a daily close below 1.3750. Short term we will day trade GBP/JPY. We will go into the Fed’s release with a small long position and see where it takes us.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

Source: ForexYard

After suffering a mild setback following the release of yesterday’s Federal Funds Rate policy statement, the USD now seems poised for a come-back. At the opening of the US market today at 12:30 GMT, traders will catch a glimpse of US retail sales and unemployment claims which are both expected to show a continuation of growth in the United States helping the USD regain some of yesterday’s losses.

Economic News

USD – Dollar Down on All Fronts Except JPY Following Fed Statement

The U.S. Dollar trimmed earlier losses against major counterparts on Wednesday after the Federal Reserve left Interest Rates unchanged, near zero percent. The Dollar pared earlier losses versus the EUR in the first 20 minutes after the Fed’s statement on optimism that the end of the purchase program would reduce the risk of inflation, which erodes the purchasing power of the greenback. However, the USD resumed its decline afterwards as stocks gained.

Against the Japanese yen the U.S. Dollar kept broad gains after the Federal Reserve painted a less gloomy outlook for the U.S. economy, an assessment that led investors to return to commodity-linked currencies in droves. The Federal Reserve has also said it would slow the pace at which it buys Treasuries by extending the duration, but not the size, of its $300 billion program to buy long-term government securities.

Analysts have said that while sentiment toward riskier assets has improved, there was a general degree of caution on the Fed’s move to extend the time-frame of asset purchases as it indicated that the economy was still vulnerable. Today, forex traders will catch a glimpse into US Retail Sales and the weekly unemployment claims report. If sales continue to grow in the US, as is forecast, the USD may be capable of going bullish later in the day.

EUR – The Sterling Remains under Downward Pressure

The European currency gained for a 3rd consecutive day against the U.S Dollar before the European Union’s statistics office releases its 2nd quarter Gross Domestic Product numbers in Luxembourg. GDP in the 16-nation Euro-Zone shrank 0.5% after a 2.5% contraction in the 1st quarter, according to economist predictions.

The EUR also advanced against 13 of the 16 major currencies before the release of a U.S. report that may show retail sales gaining for a third straight month, prompting investors to seek higher-yielding assets.

The British currency had weakened yesterday ahead of the release of the Bank of England’s (BOE) quarterly inflation report. The Pound fell against the Dollar after the BOE said it may miss its inflation target amid a slow recovery. Fear of undershooting the target means the central bank is more likely to hold off on increasing rates, analysts have said.

Britain’s currency also dropped versus the Yen after the central bank’s governor said it was more likely that inflation will slow below 1% this year and unemployment may reach a 14-year high.

JPY – Yen Falls on Low Safe-Haven Demand

The Yen fell for a 2nd consecutive day against the EUR after the Federal Reserve said economic activity is leveling out, sapping demand for Japan’s currency as a refuge. The Yen depreciated to as low as 96.23 from 95.51 vs. the US Dollar at the close of Tokyo stock trading. A weaker domestic currency increases the value of overseas sales at Japanese companies when repatriated.

The JPY also weakened against all 16 major currencies as Asian stocks extended a U.S. equity rally on signs the global slump is abating, encouraging investors to buy higher-yielding securities. For today, most attention will be paid to the New Zealand Dollar (NZD) following the evening release of its retail sales reports. With a recently bullish NZD, this report has the potential of creating a reversal to this trend if it comes out worse than forecast.

Crude Oil – Oil Prices Rebound above $70 a Barrel

Crude Oil ended higher Wednesday as a rally on Wall Street and sudden Dollar weakness overshadowed government data showing a bigger-than-expected rise in crude supplies. While the fundamental picture is bearish, Crude is being supported by a weaker U.S Dollar and stronger equity markets. Traders appeared to shrug off government data showing a build-up in crude supplies. Oil’s strength came despite a report from the U.S. Energy Information Administration (EIA) showing U.S. Crude Oil Inventories rose 2.5 million barrels in the week to August 7, well over analysts’ expectations.

Oil trimmed gains after the U.S. Federal Reserve in its policy statement said the U.S. economy is leveling out and that it was extending purchases of long-term U.S. Treasury debt to the end of October. Crude also rose as the International Energy Agency (IEA) boosted its oil-demand outlook for this year and next. In its report yesterday, the IEA said that the world will need 85.25 million barrels of oil a day next year, 70,000 barrels more than previously estimated.

Technical News

EUR/USD

There appears to be a bearish cross forming on the 4-hour Slow Stochastic while the 4-hour RSI is just entering the over-bought region, signaling a downward correction may be in order later in the day. The hourly MACD supports this notion with its own bearish cross. Going short may be the preferable strategy today.

GBP/USD

Short-term indicators are beginning to level-off showing signs of neutrality. On the other hand, there is a very clear bullish cross on the 4-hour MACD and daily Slow Stochastic, pointing to the notion of an upward correction in the mid- to long-term for this pair. Waiting for the upward move and then entering long positions could be a good way to make money on this pair.

USD/JPY

A bullish cross has just formed on the hourly MACD and Slow Stochastic, signaling a fast upward tick may be in the works. However, longer-term indicators are showing downward signals. This pair may be range-trading in consolidation towards the 95.75 price level before making a volatile jump. Waiting for the breach and then entering the new trend early may be a wise choice.

USD/CHF

The price appears to have entered the over-sold territory on the 4-hour RSI, but it still points downward, indicating that the downward movement may not have finished just yet. The bearish cross on the 4-hour MACD supports this notion. Staying short on this pair for the time being may not be a bad tactic today.

The Wild Card – NZD/USD

This pair has been in a steady bullish channel for a number of months now with hardly any signs of stopping. However, the daily and weekly charts show the price floating in the over-bought territory of their respective RSIs. A bearish cross on the weekly Slow Stochastic has also just formed, indicating that this pair is due for a strong downward movement giving forex traders a great opportunity to call the reversal and ride out the downward wave for some hefty profits.

Forex Market Analysis provided by Forex Yard.

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