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Economical News
USD
Yesterday, the greenback continued it's much needed recovery and it made some significant gains against the EUR and the Sterling. The main reason for the USD rebound this week was concern that U.S Banks will continue to project credit related losses and this caused carry trades to unwind. The leading financial institutions in the U.S have already reported more than $50 b in losses and many investors are sure that there is more to come. Therefore this created a risk-aversion scenario as investors reduced there risk abroad and backed away from investing in higher yielding currencies. Last week, Fed Chairman Bernanke created more negative sentiment surrounding the greenback by stating that the he expects the rising oil prices to increase inflationary pressures and that there will be a significant U.S economic slowdown in the near future. However ,with investors now shying away from carry trades and with losses in financial stocks expected to spread globally, the greenback may just be able to hold on to its positive momentum particularly against the Sterling and other higher yielding currencies despite losing some ground this morning. Nevertheless, the majority of analysts believe that this was just a corrective move upward and that the main trend of a bearish dollar will prevail.
Yesterday, there was no significant economic data released from the U.S as the country celebrated the Veterans Day Holiday so the greenbacks rally may have been slightly exaggerated. Today, there is no market moving news expected from the U.S and the market will look ahead to the CPI, PPI and Retail Sales figures, which will be released later on this week, and will help investors better gauge the state of the U.S economy and the direction of future interest rates. For today, traders can expect less volatility and the greenback should be able to maintain its positive momentum as investors remain risk-averse.
EUR
Yesterday, the EUR dropped sharply against the USD on the back of widespread risk aversion by investors. There is a hint of negative sentiment beginning to surround the EUR as investors fear that the ECB will intervene in the currency markets by selling its own currency in order to protect exports and growth as the EUR rises further. The German economy is heavily reliant on exporters and it is one of the key players in determining Eurozone growth performance, so the ECB will be hesitant to see the EUR strengthen any further. Therefore the current risk aversion sentiment coupled with a possible intervention by the ECB in the currency markets will dampen any upward resurgence by the EUR.
There was no significant data released from the Eurozone yesterday. Today the most important news that will come out of the European market will be the German Zew Economic Sentiment, which is expected to release below the previous figure of -18.1 at -19.5. This figure measures the institutional investor sentiment and it will give another indication to the market of whether the strong EUR has made a noticeable negative impact on the Eurozone economy.
JPY
The JPY strengthened all across the board yesterday on the back of a sharp carry trade unwind driven by the turmoil of major U.S financial institutions. The Japanese interest rate, at 0.5%, is the lowest in the industrialized world and so it gained significantly against all the other major, particularly versus the carry trade favorites such as the AUD and the NZD. However, the bullish rampage of the JPY was halted earlier today during the Asian trading session on the back of speculation that BoJ Governor Fukui will hint at leaving interest rates unchanged in the near future. The main reason for this speculation is that the decline in the housing sector will significantly jeopardize economic growth. Earlier today, the Japanese interest rate statement remained unchanged and released inline with expectations at 0.5% but all attention will now be focused on BoJ Governor Fukui's speech. Although carry trades have unwounded very sharply, if Fukui hints at leaving interest rates unchanged then the JPY will lose more of its recently gained ground, particularly against the USD and the EUR.
Technical Analysis
EUR/USD
There is a bullish configuration forming on the 4 Hour chart. The volatility is high and the EUR/USD is not in a consolidation stage, especially after the pair has returned to the 1.4628 resistance level. The price should continue to move upwards in the 1.4600-1.4730 range. As it seems, the bullish pressure will continue to gather momentum at least until the week end.
GBP/USD
In the past few days the pair is going through a choppy period, and is giving mixed signals on the hourly level. The daily chart is showing massive bullish formation, and it looks as if the pair is heading 2.0800 again. A preferable strategy might be going long for the short run.
USD/JPY
A significant bearish trend is shown on the daily chart and it seems that there is still steam left for the continuation of the JPY strengthening as the Slow Stochastic ,RSI and Momentum still have a negative slope.
USD/CHF
The RSI and Slow Stochastic support the current bearish trend when the next support level is located at 1.1222, in case of a break out we may see this pair breaking the 1.1200 and heading for 1.1173.
Wild Card
Gold
The 4 Hour chart implies that the current bullish trend is to maintain its momentum and when the first barrier is located at 807.28 and expected to breached since the Slow Stochastic ,RSI and Momentum are supporting this bullish trend. forex traders may use this opportunity to go long which seems preferable today.
Market Trend
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