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Forex Daily Analysis

Forex Trading − The USD Remains Pressured on U.S Interest Rate Prospects

Wed, Sep 30 2009, 09:36 GMT
by Greg Holden

ForexYard  |  View company's profile

The U.S. currency may be headed for a quarterly decline against 14 of 16 major counterparts before report this week forecast to show American employers cut fewer jobs, boosting demand for higher-yielding assets. Although the greenback posted small gains against major rivals Tuesday, edging higher on the Japanese currency, the currency may reverse its earlier gains on speculation a Federal Reserve official will reiterate today that record-low Interest Rates will be unchanged for an extended period.

Economic News

USD - Lower U.S. Consumer Confidence Figures Boost the Dollar
The Dollar soared yesterday on lower U.S. Consumer Confidence figures of 53.1, rather than the forecasted 57.0. The Dollar rose to a near 2-and-a-half-week high vs. the EUR to 1.4526 at its highest point yesterday. It should be pointed out that the data from the U.S. seemed to lead to a decrease in demand for riskier assets that are funded by borrowing the U.S. Dollar.

The EUR/USD cross fell by nearly 70 pips on Tuesday to finish trading at the 1.4592 level. The EUR fell, despite positive economic news from the Euro-Zone. The Dollar fell for the second day against the GBP, as the pair finished trading at 1.5969. The USD went volatile vs. the Pound, due to the British currency rising as the Bank of England (BoE) announced that it had no plans for lowering bank reserve rates. With regards to the JPY, the USD to make some inroads as the cross closed at 90.15. This may be partially owed to Japan's government wanting to abandon a strong Yen.

Looking ahead to today's trading, there is plenty of economic news that is expected to be published from the U.S. economy. The most important of these is expected to be the ADP Non-Farm Employment Change at 12:15 GMT. Also, amongst the other important data releases from the U.S. are the Final GDP figures at 12:30 GMT and the Chicago PMI at 13:45 GMT. As you forex traders can see, there is no break expected from trading today. In addition, due to the high volatility expected, it is encouraged that you buy-up large USD positions now, as today's trading takes off.

EUR - EUR Tumbles to 2-Week Low against the Dollar
On Tuesday, the EUR tumbled to a near 2-and-half-week low against the Dollar. This came about even though the EUR experienced a day of positive data publications. The bearish EUR occurred as demand for riskier assets dropped. This was initiated by U.S. Consumer Confidence falling significantly yesterday. On the other hand, the British Pound actually rose vs. its key currency pairs, as the Bank of England (BoE) revealed to economists that it doesn't intend to lower the rates on the reserves of banks.

The EUR fell by about 70 pips vs. the USD on Tuesday to the 1.4592 level. The GBP/USD cross finished trading notably higher at 1.5969. The news in Britain helped the EUR/GBP fall for a second day in a row to the 0.9132 level. The news in Britain also led support to the GBP in regards to the GBP/JPY cross, as the pair rose by over 100 pips to the 144.40 level. It seems that on all fronts that the cable was unaffected by the pessimistic news in the U.S. With regards to the European currency, many traders were surprised by the pace of its decline in yesterday's trading.

Today's trading offers promising opportunities for forex traders. There is much data that is expected to be released from Britain, the Euro-Zone and Switzerland. The German Unemployment Change figures are expected to be published at 07:55 GMT and the CPI Flash Estimate at 09:00 GMT. From Britain, the Index of Services results are set to be released at 08:30 GMT. The KOF Economic Barometer is scheduled to be released from Switzerland at 09:30 GMT.

JPY - Strong Yen under Downward Pressure
The strong Yen has recently come under a lot of pressure lately, as the Japanese economy gets hit by deflation. For example, the Core Inflation tumbled by nearly 2.5% in September. This is the largest drop in the past decade. This comes as we have seen the JPY rise significantly vs. the GBP, USD and EUR since the start of the financial crisis. Due to the deflation problem, the new Democrats party has u-turned on Japan's policy of upholding a strong Yen.

The news seemed to put some downward pressure on the Japanese currency. The USD/JPY cross rose by about 20 pips to the 90.15 level. The GBP/JPY cross rose over 100 pips to the 144.40 level. The JPY's downward trend may continue if investors continue to lose confidence on an extremely battered economy. Market players should be paying a close attention to the upcoming releases: Tankan Manufacturing Index, Japanese Retail Sales and the Tankan Non-Manufacturing Index at 23:50 GMT.

OIL - Crude Oil Hits the $67 Mark
Crude Oil prices rose to over $67 to the $67.26 level, before falling to $66.75. This behavior was owed to a weak Dollar in early trading. However, the U.S. currency gained significantly on Tuesday ever since the negative U.S. Consumer Confidence figures were released. In turn, this put downward pressure on Crude prices. Thus as the USD strengthened, Crude Oil prices went lower.

Oil prices are set to encounter another exciting day of trading. The most important release today is the publication of Crude Oil Inventories at 14:30 GMT. The other important release that is set to impact the value of Crude today is the U.S. ADP Non-Farm Employment Change, as Crude is priced in U.S. Dollars. If you want to make profits from Oil today, then you should open your trades as soon as possible.

Technical News

EUR/USD
The sustained upward movement of this pair has begun to push the long-term oscillators, such as the daily chart's RSI, into the over-bought territory. This appears to be putting downward pressure on the price of this pair as it has begun to level off. As momentum shifts into a downward posture, going short with tight stops might be a good strategy.

GBP/USD
This pair's recent drop in value continues to hold the price in the over-sold territory on the RSI of the daily chart, signaling upward pressure. While the momentum appears to remain downward, we may likely see a number of upward corrections throughout the day. Buying on the lows and selling on the highs of these fluctuations will be a good strategy today

USD/JPY
There is a very accurate bearish channel forming on the 30 min. chart as the pair is now floating in the bottom of it. Currently, as all oscillators on the daily chart are pointing down, it seems that the downtrend will extend. Going short might be a good strategy today

USD/CHF
An imminent bullish cross on the hourly Slow Stochastic suggests that an upward movement is on the way. As the price recently exited the over-sold territory on the hourly RSI, there may be only a small amount of momentum for this impending bullish movement. Going long with tight stops may be the safest bet for today

The Wild Card

AUD/USD
The price of this pair currently floats in the over-bought territory of the 30 min. chart's RSI, indicating a downward pressure. The impending bearish crosses on the hourly MACD and Slow Stochastic both support the notion of a downward move. Those participating in the forex market today would be wise to pay attention to this pair as the downward pressure appears to be getting stronger and a bearish move may be impending.

Published on  Wed, Sep 30 2009, 09:40 GMT