| Daily Forex Technicals | Written by FOREXYARD | Oct 15 08 09:10 GMT | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HeadlinesAmerican and European Bank Bailouts Strengthen Markets Following the U.S. announcement on Tuesday that the government would pump $250 billion into banks, similar plans are being executed by governments in Britain, France and Germany. This direct capital infusion is exactly what traders were hoping for. As bank balance sheets are being shored up, the conditions for bank lending are receiving some slack. However, there is still much anxiety regarding the upcoming recession, so traders will have to see if this move produces the desired effect. Market Trend
Economic NewsUSD - U.S. Retail Sales on Tap Following the U.S. Treasury's announcement to inject $250 billion into financial institutions this week, the dollar finally appears to have broken its 3-day downward trend against the other major currencies. The dollar was traded at $1.3575 against the EUR at the end of yesterday's trading session after climbing steadily to 1.3767 over the course of the last few days. The previous appreciation of the USD was largely due to the reluctance of banks to lend to one another, which spurred a surge in demand for U.S. currency funding in global money markets. However, the Federal Reserve announced that it would offer European banks as many dollars as needed, and at a fixed interest rate, which has caused the dollar to slip against the other major currencies in recent sessions as an increased supply of USD is expected to ease demand. As a result of the aggressive steps taken to pump cash into troubled banks, investors have started to unwind safe-haven trades in the USD which has also caused a correction to the greenback's recent upswing. However, even after the latest measures by global governments to flood banks with cash, inter-bank lending rates were not expected to fall so quickly. It is still too soon to determine whether this move is going to end up causing bearishness for the USD over the long run, or if it will help stabilize the economic system. Traders have an important day of trading ahead of them today. Starting around 12:30 GMT and lasting throughout the day, a stream of announcements and economic indicators will be released by the American economy followed by speeches from Federal Reserve Board Chairman Ben Bernanke and a speech by FOMC member Donald Kohn about the state of the U.S. economy. With important figures such as Retail Sales and the Producer Price Index (PPI) being released, traders can expect some heavy volatility in USD trading throughout the day. EUR - Euro-Zone Bank Bailout Encourages Investment Lately the EUR has experienced a positive trend against its major currencies as investors are speculating that the European and U.S. government plans to pour cash into troubled banks will help markets climb out of the financial crisis. The European bailout plan gave a strong boost to the value of the various European currencies, primarily the EUR, which climbed out of the hole it found itself in after the USD's bullish run late last week. Following the U.S. announcement on Tuesday that the government would pump $250 billion into banks, similar plans are being executed by governments in Britain, France and Germany. This direct capital infusion is exactly what traders hoped for. As bank balance sheets are being shored up, the conditions for bank lending are receiving some slack. However, there is still much anxiety regarding the upcoming recession, so traders will have to see if this move produces the desired effect. Even though the European Central Bank (ECB) cut its target interest rates by 50 basis points last week, in concert with a global interest rate cut, the markets are expecting further rate cuts by year end. Investors should pay close attention to the release of the Consumer Price Index (CPI) today, as well as the figures coming out of the U.S., as these will be the strongest driving forces in the market throughout the day. JPY - Analysts Forecasting an Appreciation for the JPY Recent speculation that the U.S. Treasury's plan to inject $250 billion into financial institutions would not prevent a recession in the world's largest economy has caused the JPY to rise for the first time in five days against the dollar. The forthcoming data from the U.S. is predicting that the nation's retail sales have fallen at a faster pace recently as job losses and housing slumps hurt consumption, these factors may have strengthened the JPY versus the USD. The Japanese currency could also get support from the stock market decline as it shows that investors aren't completely ready to take on risk. The U.S. and Asian stocks have fallen recently, damping investor confidence in higher-yielding assets. The currency was traded at 101.35, up from 102.07 yesterday. Since Japan isn't as adversely affected as the U.S. and Europe are by the credit crisis, the JPY remains a safe-haven currency and is likely to be bought further in today's trading. It has climbed 9% versus the EUR this month as mounting credit-market losses encouraged investors to shed higher yielding assets funded by low-cost loans in Japan. As market concerns over a U.S. recession intensify, these worries may lead to a buying session for the yen. Oil - Will the Price of Oil Continue to Drop During the Winter Season? Unable to break through the price barrier of 77.80, the price of Light Sweet Crude continues to test its lower limits. How long it will test this price before breaking through, or climbing back to higher levels, is yet unknown. As always with the price of Oil, the USD and the American economy play an important role. With fears of a recession looming over investors countered by hopes of the recent financial bailout package, the market seems confused about which direction to take. One certainty is that recent market anxiety has lowered the demand for Crude Oil, which is showing its effects by the steady drop in price over the last two weeks regardless of supply. As the winter season approaches the northern hemisphere, the price of Crude Oil is typically forecasted to climb as the large industrialized nations of Europe and North America start buying up heating oil for their populations. With the recent slump in demand, however, the price of Crude Oil may indeed continue to fall despite winter demand. For today's trading, investors should continue to keep an eye on the American economic indicators as they will be the market movers throughout the day. Technical NewsEUR/USD The pair has been range-trading for the last few days, and is now traded around the 1.3620 level. Currently, the Bollinger Bands on the 4-hour chart is tightening, suggesting that a sharp movement is impending, and as all oscillators on the 4-hour chart are pointing down, it appears that the move will be bearish. Traders should wait for the breach and swing. GBP/USD The cable is currently range-trading within a relatively wide range. A doji formation on the 4-hour chart indicates that a sharp movement is forthcoming, and a bearish cross on the Slow Stochastic suggests that the move will be bearish. Traders should wait for the breach and swing. USD/JPY The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today. USD/CHF After peaking at the 1.1485 level, the pair is dropping consistently and is now traded around the 1.1370 level. Currently, as all oscillators on the 4-hour chart are pointing down, it seems that the bearish movement could extend. Going short appears to be the preferable choice today. The Wild CardEUR/AUD There is still a bearish configuration on the daily chart, indicating that the momentum is still down. The Slow Stochastic flows high supporting the notion that there is still room to run for this trend. In the shorter time frame there is a bullish cross forming on the hourleis indicating that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a current bearish trend. Indicators
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Wednesday, October 15, 2008
Daily Forex Analysis
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