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FX Daily Update

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Market Sweetness…is Dollar Weakness

Thu, Jul 16 2009, 11:54 GMT
by Lena Manousarides

SpikeCharts

The dollar continued to weaken all across the board, after the FOMC meeting didn’t show anything new regarding the rates direction, as most members of the FED were passing along mixed messages, with some saying economy is stalling for now and others that recovery will be fast in the coming months. The lack of a unified message passing across market participants left the investors more confused as to what will happen in the monetary policy over the next few months.

The EUR/USD is trading heavily since the FOMC meeting yesterday and the pair needs to take out 1.4130 in order to sustain further gains above 1.42. For the time being, as long the pair trades above 1.40, the upside seems like the possible plan.

The GBP/USD looks good for further gains, and the daily charts suggest that as long as 1.63 is kept intact, the pair has potential to break above important 1.65, towards 1.6630.

The economic calendar has a few releases today, with TICS data out of US later on, which will show the demand of domestic securities from foreign investors and it will be interesting to see if the number improved for the month of June, what with latest risk aversion coming back into focus. Also we have jobless claims to take under consideration, and the fact that numbers have been better for the last few weeks, gives market participants a new found hope that the employment sector will start to stabilize in the coming months. All the economic data lately have been monitored closely by traders and the latest numbers by China this morning, which saw GDP rising at a faster pace than estimations projected, are making investors buy risky assets again.

In other markets, we saw the DOW JONES and NIKKEI gaining overnight, following by better earnings for banks and corporations, therefore giving investors some kind of reassurance that conditions may start to stabilize. One thing I have noticed though, talking to other traders around the world, is that when markets rally these days, we don’t feel optimistic anymore but feel even more wary and analyse what the rally means and when the sell off will occur! It is difficult to” fall in love” with a market rally and it always feels right to sell on highs until we have solid proof the rally will be justified and sustain itself.

Let’s see how the markets will react after the New York opening and if recent optimism fails to impress traders ahead of this week’s close…

Published on  Thu, Jul 16 2009, 11:55 GMT