Tuesday, October 21, 2008
20-Oct Daily Forex Analysis
| by: Forexyard Technical News EUR/USD The pair continues to fluctuate within a restricted range, and is currently set at 1.3500. A bearish cross on the 1-hour charts Slow Stochastic suggests that a downtrend might take place. Going short seems to be the right choice today. GBP/USD After completing a 100 pips rise, the cable's bullish momentum seems to be fading. And now, as all oscillators on the daily chart are pointing down, it appears that a bearish reversal might be imminent. Going short with tight stops could be the right strategy. USD/JPY There is a very distinct bullish channel forming on the 4-hour chart, as the pair is now floating in its upper section. And now, as the RSI on the daily chart is approaching the 40 line, it appears that the bullish momentum has more steam in it. Going long seems to be preferable. USD/CHF Although the pair is showing a violent and choppy session on many occasions, the daily chart is still floating on a very neutral territory with no distinct price direction. However, the Bollinger Bands on the 4-hour chart are tightening, indicating that a sharp movement is impending. Traders should wait for the breach and swing. The Wild Card AUD/JPY The pair is currently in the midst of a very strong uptrend after gaining over 700 pips in 4 days. And now, as all oscillators on the daily chart are giving bullish signals, it appears that the bullish trend might extend. This might be a great opportunity for forex trades to join a very promising trend. Economic News USD Presidents Bush and Sarkozy Call for World Summits on Financial Crisis Opening this week's trading sessions at the steady price level of 1.3400 against the EUR, the Dollar continues to hold its recent strength. This gain, which was brought about in recent weeks, has surprised many traders as the economic crisis had many analysts forecasting a drop in value. Contrary to those claims, however, the USD has continued gaining and holding strength versus every major currency except the JPY. Asked whether the USD would begin to lose value this week, many analysts were reluctant to answer. With so much uncertainty affecting its value, it has become more and more difficult to make an accurate forecast. The most important market data comes from news surrounding the various bailout packages being discussed and implemented throughout the U.S. and Europe, as well as the upcoming presidential election in the United States. President George W. Bush, French President Nicolas Sarkozy, and the European Commission stated this weekend that they will call for a series of summits between world leaders in which the financial crisis would be discussed more in depth. These summits will be held in the U.S., but not until after the November 4th election. As for today's trading, if investors can accurately gauge the upcoming valuation of the USD, as more information about the bailout packages are released, then the possibility to make lucrative gains are endless. A significant price move is in the making; which direction it takes, however, will be determined more by investor confidence than the various economic indicators being released. Traders should anticipate future monetary policy decisions on the USD during Fed Chairman Ben Bernanke's testimony later today in front of the House Budget Committee. He will no doubt give off clues about any upcoming decisions to be made by the Federal Reserve Bank. EUR Euro-Zone Set to Receive a Quiet News Week Further market uncertainty has gripped the forex markets as major world currencies seem poised to jump in value; direction being the only unknown factor. The EUR is no exception. Continuing to test upper and lower price levels within a small range versus its currency counterparts, it has still failed to make a significant breach. Opening today's trading at 1.3400 against the USD and 0.7765 versus the GBP, the EUR is looking for its next significant price move in a troubled market. In a speech delivered yesterday by European Central Bank President Jean-Claude Trichet, it was announced that banks in Europe should begin to increase inter-bank lending, as well as lending to clients, sometime in the near future. This increase in liquidity will help bolster confidence that the European market is heading in the direction of normality. It could not come at a better time. Stating that an unlimited amount of EUR and USD would be made available for banks has moderately reduced liquidity concerns. Whether or not it does the trick is yet to be seen. Right now banks and central governments have to worry about the loss of confidence in the markets as this has done more harm than many of the financial indicators currently being released. Numbers only tell half of the story; the consumer's interpretation of those numbers is the other half of the equation, and it carries a heavy impact. This week in the news we have very little information about the EUR being released. As the last two weeks have been laden with news about the various bailout programs, this week will seem mild for many investors. On the other hand, this can be deceptive. After a call from the American and French presidents for a series of economic summits to be held in the near future, there is always the possibility that unexpected information will be released until these summits are underway. News events such as these tend to influence the market heavily as traders anticipate future price movements. It would be wise for traders to keep an eye on the news this week as it is hard to predict what might be said by any number of actors. JPY Is the JPY's Bullish Run Over? The JPY began losing its momentum this morning after a long week of steady gains. Opening at 101.41 and then steadily losing ground to the USD, the JPY is now trading closer to 102.00. Some analysts claim that this is because of the uncertainty affecting the entire market, not just Japan's. Investors are waiting for the proverbial "sign from above" to see which way the market will go before picking a direction. Traders could see this indecisive fluctuation continuing throughout the day. Bank of Japan Governor Masaaki Shirakawa stated early this morning that the BoJ needed to keep an eye on the global economy and watch for the potential fallout that could come from this recent crisis. Japan's currency usually does well during times of economic downturn, but when investor confidence is restored, the market may see a sell attitude develop as traders return to their carry trades; selling JPY in exchange for higher yielding currencies. OIL OPEC Announces Future Production Cuts As global demand for Crude Oil slumps even further, actions are being discussed to cut production as a counterweight to falling prices. OPEC has agreed to decrease output, but there is still no agreement as to how much of a cut will be implemented. The upcoming production cuts will range between 1 and 2 million barrels a day, roughly 6% of total production, according to OPEC President Chakib Khelil. The announcement of these cuts was enough to calm the price of Oil for the time being as it appears to have leveled off in today's early trading sessions. A further depreciation may be expected in the short-term, however, as the effects of this production cut are purely psychological at this point. Until they actually take place, the price will continue to reflect investor expectations, and the value of Crude Oil compared to its currency counterpart: the U.S. Dollar. When the major currencies find their direction and take off, the price of Crude Oil will do the same. Traders should look to the USD as it has historically been a strong indicator for the direction of the price of Crude Oil. Labels: forex, Forex Analysis |
posted by Matbank at 12:20 AM
