Tuesday, September 30, 2008
29-Sep Daily Forex Analysis
| by:Forexyard Technical News EUR/USD The pair has retained its bearish inclination during the weekend and is currently traded at the 1.4470 level. The 4 hour studies show that the current price has dropped beneath the Bollinger Band's lower border, suggesting that another bearish session is expected. Next target price might be 1.4350 GBP/USD After going through a mild bullish correction on Friday, the cable has resumed its bearish trend with full steam as it dropped almost 150 on the beginning of the trading week. As all oscillators on the 4 hour chart are pointing down, it seems that another bearish movement might take place. USD/JPY The pair is continuing to provide mixed results with no specific direction. However, a bearish cross on the 4 hour chart's Slow Stochastic indicates that a downtrend is imminent. Going short might be the right strategy today. USD/CHF There is a very accurate bullish channel forming on the 1 hour chart, as the pair is floating in the middle of it. And now, the Bollinger Bands on the 4 hour chart are tightening, implying that another bullish move is forthcoming, with a target price of 1.1100. The Wild Card Oil Oil price are continuing to fluctuate within a restricted range, and a barrel of oil is currently traded around $105.20. Nevertheless, a bearish cross on the 4 hour chart's Slow Stochastic indicates that oil prices should depreciate. This might be a good opportunity for forex traders to join a very popular trend. Economic News USD Dollar in Position for a Rebound After taking a beating last week, the USD is beginning to show some small signs of recovery. Starting the week clouded by uncertainty and straining under market anxiety, the USD sustained blow after blow from the impact of deliberations about a U.S. economic rescue plan, and worse-than-forecasted economic indicators. The verdict is almost out as news from Washington is indicating that a breakthrough was made over the weekend and the bailout package is almost set to be passed into law, giving the U.S. Treasury more authority over the financial workings of domestic banks and financial institutions and, in theory, stabilizing the recent financial crisis. Generating less volatility than expected, the market last week was characterized more by lack of direction than anything else, as analysts struggled to predict the movement of the major currencies. The $700 billion rescue plan, the largest financial bailout since the Great Depression, if enacted, could put an end to this currency flotation and send traders en masse back to regular trading. Fed Chairman Bernanke and Treasury Secretary Paulson are both pushing Congress to pass this legislation as quickly as possible. But is this bailout package a blessing or a curse? With the potential to correct the economic woes of today's market, it also pushes the U.S. financial system closer to socialism and farther away from the capitalist economy which gave it its most powerful boost following the Great Depression and World War II. Analysts are divided about the short- and long-term costs and benefits of this package, but only time will tell which side was right. Looking at the expectations for today, traders can anticipate less volatility with the USD as few major indicators are set to be released and the bailout package is still being discussed. Unless a major decision is passed regarding the bailout, the USD is expected to remain rather stable versus its currency counterparts. Looking at the rest of the week, traders may look for larger amounts of volatility come Wednesday as ADP Non-Farm Payrolls are expected, followed by the actual Non-Farm Payrolls figure to be released Friday. These indicators typically generate high trading volume, as well as market volatility, as traders anticipate their impact on the market. Traders should start the week looking to set up beneficial positions for what could be a big week in the Forex market. EUR German Economy Implicates Recession for Euro-Zone Last week, the EUR went through some choppy waters while showing mixed results against the Majors. The 15-nation currency lost value versus the USD closing at 1.4665 on Friday, but gaining significant ground against the GBP just before closing out Friday's trading session. The EUR did experience some volatility against the JPY, due to a strong news week by the Asian powerhouse. The EUR bullishness against the USD was mostly motivated by U.S. developments, as investors around the world are closely following what moves will be enacted by the U.S. leadership in order to improve the economy's condition. The economic indicators from the European economy, released last week, continue to confirm what the European Central Bank fears most: a Euro-Zone recession. The German Ifo Business Climate extended its 7-month decline as it was published at 92.9, failing to reach expectations of a 94.2 reading. As Germany possesses one of the most influential European economies, its indicators have a strong impact on the entire Euro-Zone. While the EUR continues receiving negative signals, it appears as though it will continue floating with no significant price breach so long as the other major economies especially that of the United States, release no significant data. Looking ahead this week, we have important events to anticipate from the Euro-Zone such as German Unemployment Change, the CPI Flash Estimate, and others. European Central Bank president Jean-Claude Trichet is set to speak twice this week. The first will be after accepting the European Banker of the Year award, and the second will be in a debate on the role of wage politics for growth and competitiveness at the European Trade Union Conference. Traders should expect high volatility in the market at these times as investors try to ascertain the future movement of interest rates. Today, the market will be driven more by global news events than anything else as few economic indicators are set to be released. JPY Japan's Economy Afflicted by Negative Expectations Last week was a wild week for the JPY as it experienced a hefty amount of volatility. The Asian currency experienced bearish trends versus all of the major currencies during most of last week's trading sessions, until late in the week when it began to make some reversals. The Japanese currency gained over 100 pips against the USD when it closed trading at 106.13 last Friday, after losing value steadily throughout the week. The weakened U.S. economy has been one of the major culprits in Japan's economic downturn, as well as the price jump in Crude Oil, which has generated an adverse impact on the JPY. An example of this was delivered when the Japanese exports to the U.S. fell by 19.1% in August, marking its lowest figures since January 2006, all of which pushed investors to lose confidence that the Japanese economy would be less affected by recent events. This week should be a somewhat active week for the JPY as well seeing as a batch of indicators are expected to shed light on the Japanese economy as a whole. The JPY is off to a good start this week as yesterday's Retail Sales figure came out better than expected. If this week's indicators continue to produce positive results, the JPY could see a strengthening week. An important event will be Tuesday's Tankan Manufacturing Index and Non-Manufacturing Index. These indicators are a measure of general health in the Japanese economy. They are currently forecast to be a negative number, indicating an economic contraction and hence may signal the possibility that Japan will not release much positive data this week. Traders should also keep tabs on the USD and EUR trends as they continue to be very dominant factors in the movement of the market. OIL Price of Crude Oil will be Heavily Influenced by U.S. Bailout Package Crude Oil continues its decline; the contract price settled down at $106.89 a barrel last Friday. Even though there has been some bullish momentum in the market for the past few months, prices are still down 28% from record highs above $147 a barrel reached in July. The main reason for that spike was the economic crisis world-wide and high fuel costs which hurt demand in the United States and other developed economies. The price of Oil is down now primarily because of the USD. The dollar rose against the major currencies on Monday. Hopes that the bailout bill will soon be passed and revive the U.S. financial system has spurred a rally in the U.S. currency. Moreover, the latest news that Iran, the world's fourth-largest exporter of Oil, has avoided new sanctions in a United Nations vote over the weekend also put some downward pressure on prices of Light Sweet Crude. However, the traders remain cautious about the U.S. government's bailout package. There is some fear that this risky package could generate a decrease in the demand for Oil. The market is paying close attention to the U.S. lawmakers' upcoming vote later today, which will establish future U.S. government policy regarding monetary and fiscal policy. A possibility still remains that the $700 billion government bailout package won't pass in Congress. In that case, a looming economic slowdown in the U.S. won't be prevented and would cut demand in the world's biggest energy-consuming nation, which will lead to further deterioration in the price of Crude Oil. Labels: forex, Forex Analysis, FX Instructor |
posted by Matbank at 2:56 PM
