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Forex Daily Analysis

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The BOJ decided to leave rates on hold at 0.5%

Tue, Mar 20 2007, 10:04 GMT
by Lee More

ForexYard

Economic News
 
USD

Yesterday, the NAHB Wells Fargo Sentiment Index fell in the month of March, lower than expected pushed the USD lower, as concerns permeated in the sector. Homebuilders, once running high on continuous demand, were struggling to recover from the decline in overall sales. Moreover, speculation continues that further lending will be crimped on a rising number of sub prime defaults, leaving a drag on the overall sector. For the record, the index dipped to 36 from last month's reading of 39. Later today we will see German Producer Prices and U.K. CPI while U.S. housing starts may well provide the bigger move of the day with expectations for a reading of 1.44M and an increase in this indicator of 0.03M. However, with the FOMC rate decision expected tomorrow, the ranges should be limited. 

EUR

EUR comments helped to generate a slight decline in the underlying spot as creditability questions overwhelmed policy maker hawkishness. Although European Central Bank Council member Klaus Liebsher reinforced that the ECB will try to keep inflationary pressures in check, the EUR was forced slightly lower as French Interior Minister Sarkozy questioned the region's central bank. Targeting ECB Vice President Lucas Papdemos, Sarkozy criticized officials making light of the fact that the bank's single focus on inflationary pressures has crimped overall growth and increased the EUR strength in the markets. Overall, inflation raises concerns of a rate hike ,something that is and will continue to push the EUR higher. 

JPY

Yesterday, mixed trading, the dollar was higher against the JPY and the CHF, little changed against the EUR but lower against most high yielding currencies that benefited from the renewed interest in carry trades. The BOJ decided to leave rates on hold at 0.5% causing the JPY to decrease in value. 

Technical News
 
EUR/USD

The pair continues ranging between 1.3288-1.3325, halfway up. 4H MACD is neutral but faces down; Slow Stochastic is Bullish yet not overbought.

The daily chart is implying on an upcoming reversal with the RSI 79 and the Slow Stochastic at 84 . Today , the 1.3288 support level is to be tested and a breakout of this support level will take this pair to the bear's land . 

GBP/USD
 
Hourly charts are in neutral territory however, a bearish flag is establishing on the daily chart ,combined with RSI at 85 offering to send this pair down today. There is a major resistance level at 1.9500 and support at 1.9413 which may be breached today . 

USD/JPY

It seems that there is not much more room left for this bullish trend since a significant barrier is located at 118.39. 4H RSI 70 and slow stochastic intersection at 82 level implies range trading today. 

USD/CHF

The 2 hour slow stochastic is at 50 and RSI is at 68 suggesting a short term bullish behavior, however lack of volatility in the daily charts keeps this pair trading in a tight range of 1.2078 to 1.2160 that is unlikely to be broken today. 

The Wild Card
 
EUR/AUD 

Forex traders should notice that a very interesting pattern emerges from the daily charts since the bearish trend which was started a couple of days ago doesn't have much more room to go. Key support is at 1.6606 and was tested earlier today, 4H slow stochastic is at 40 and facing up together with RSI at 20 implies an upcoming bullish trend. 

Published on  Tue, Mar 20 2007, 10:06 GMT