Good morning and welcome to Varengold’s Daily FX Report. We have reached the end of a volatile FOREX week again. However, we hope you will make successfully trades and wish you a nice weekend.
Market review
The EUR/USD fell to its biggest weekly decline in a month on expectation ECB president Jean- Claude Trichet will signal a rate cut in his speech today. Last month president Trichet already suggested that the “important” bank meeting will be in March. However, the ECB council member Erkki Liilanen flagged the possibility of using unusually monetary policy to avoid a deepening recession and the financial system’s meltdown. On a weekly basis the EUR/USD declined from the first eight weeks in year 2008, all seven times. Yesterday, the EUR fell to 1.2584 from 1.2674 against the USD. It touched the level of 1.2513 on February 18th, which was the lowest price since November 21st 2008. Against the JPY the EUR weakened to 118.59 from 119.37, touching a day high of 120.34, which was the highest level since January 19th. The market players expect that the central bank may lower rates further at its next meeting on March 5th. The ECB reduced its benchmark interest rate by 2.25 % points in early October to 2 %. Declines in the EUR may be limited after speculations eased that the eastern European banking losses will push the regional recession.
The Dollar-Index rose for a second week on speculation that the US government plan will help to stem the recession in the world’s biggest economy. The index rose to a three-month high after President Barack Obama signed a $787 billion economic-stimulus bill on February 17th and proposed a $275 billion housing program the next day.
USD/JPY
Since the middle of December, the USD/JPY has been moving in a horizontal trend channel with a support level at 87.00 and a resistance line at 94.80. It’s the second time that the market is touching the resistance line. If the currency pair breaks through this line, it could start a new bullish phase.
USD/CAD
Since the beginning of December, the USD/CAD has been trading inside a bullish Fibonacci fan. After the market touched the 1.2750 resistance line twice, it pulled back, broke through the fan line and started to trade along the lower trend line of the fan. If the pair continues this phase, it could break the 1.2750 resistance towards the important psychological and technical resistance line of 1.30.
