Forexyard.com analysis - USD Weakens and World Economies Strengthen?

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Forexyard.com Analysis - USD Heads Higher Before the U.S. Non-Farm Payrolls Release

The Dollar consolidated gains against the EUR and JPY before the high impact U.S. Non-Farm Payrolls Report is released today. This indicator always provides for extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 1:30pm GMT.

Economic News

USD - The Dollar Gains Ground Ahead of U.S. Payrolls Report

The USD has strengthened against most of its major counterparts, continuing to prove that, for the time being, this is the solid currency that traders can rely on to provide them with steady profits. The EUR/USD stopped the upside move at a good resistance level of 1.2900 level and from then on the pair fell all the way down to the 1.2790 level. Risk aversion continues to give the Dollar strength and that is likely to continue until we see signs of stabilization.


The dollar rose yesterday on renewed hopes the Obama administration will shore up a tattered financial system, turning around markets that had tumbled on fresh signs of a deep recession. Moreover, U.S. Treasury debt prices also recovered slightly, as weak U.S. and Euro-Zone economic data trumped worries over an expected surge in new issuance, a day before the release of the widely anticipated payrolls report for January.


As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the Non-Farm Employment Change which is expected to fall to 530K. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the Unemployment Rate is scheduled which should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. market, and the USD is likely to weaken as a result.

EUR - EUR Fluctuates as ECB Keeps Interest Rate Unchanged

The EUR completed yesterday's trading session with mixed results versus the major currencies. The 16 nation currency fell against the USD, pushing the oft traded currency pair to 1.2790. The EUR experienced similar behavior against the GBP as the pair dropped from 0.8900 to 0.8745 by days end. The EUR did rise over 150 points against the JPY and closed at the level 116.38.


The European Central Bank (ECP) kept Interest Rates unchanged after four reductions since early October as officials gauge the severity of the recession before cutting borrowing costs again. The EUR may continue to be pressured as ECB President Jean-Claude Trichet said that despite the easing of inflation pressures, the door for further rate cuts will remain open in the next meeting. The recent string of poor economic data which stems from a deteriorating European economy suggests that Interest Rates may need to fall substantially in the months to come.


Looking ahead to today, the most important financial indicator scheduled to be released from Europe is German industrial production numbers. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement, as a stronger than expected result may boost the EUR.

JPY - Yen Rapidly Falls to One Month Low Against the Dollar

The JPY saw a very bearish trading session yesterday, losing ground against all of its currency crosses. The JPY fell to a one month low against the USD and closed at 90.80. Moreover, the Japanese Yen lost almost 150 points versus the EUR, closing at 116.38.


The Bank of Japan needs 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.


Today, there is no major economic news expected to be released from Japan, however, we should see active JPY trading in response to key U.S. data releases. The near term outlook for the JPY remains relatively bearish. Therefore, traders are advised to follow US news and Euro-Zone data with extra precaution as they will mark future JPY price movements.

OIL - Oil Makes Light Gains in Early Trading

Oil prices rose slightly yesterday as part of a wider market rally on hopes the Obama administration's plan to shore up the financial system would help banks stem losses and revive lending. Prices had fallen earlier during yesterday's trading session as weak economic data stoked concerns about waning oil demand.


Recently, the lower demand has fueled the losses, and a rash of poor economic data this week has not provided any support. The U.S. Non-Farm Employment report today is expected to show a poor performance and traders may not see very much upside to Crude today.

Technical News

EUR/USD
The Slow Stochastic and the RSI on the daily chart are showing a continuation of the current bearish correction. There is also a very accurate bearish channel forming on the 4 hour chart. In addition, all indicators on the hourly chart are pointing down. Going short might be the right choice today.

GBP/USD
This pair is still in the midst of a steady uptrend which is not yet showing any sign of leveling out. The RSI and Momentum on the 4 hour chart are still positively sloped indicating that there is still plenty of steam left in this bullish move. Once this pair breaches the 1.4680 level it's likely to make another sharp break upwards.

USD/JPY
Narrow range trading continues as the pair did not make any significant move in either direction. The daily chart is showing signs of a bearish momentum. The Bollinger Bands are tightening and a breach might be imminent to any side. A good strategy might be to wait for the signal and ride the momentum.

USD/CHF
The pair's bullish sprint has passed it through the 1.1700 level yesterday. As all oscillators on the 4 hour chart are pointing up, the pair might test the 1.1760 level - making a 2 month record.

The Wild Card

OIL
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 indicates 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 currently bearish trend.

 

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Forexyard.com analysis - The Market Anticipates a U.S Economic Rescue Package

The U.S. Senate is slated to vote early next week on an economic stimulus package totaling at least $780 billion that President Barack Obama said is needed to prevent the economy from sinking into a deeper recession. The world's largest economy entered a recession in December 2007, according to the National Bureau of Economic Research in Cambridge, Massachusetts. Gross Domestic Product contracted at a 3.8% annual rate in the fourth quarter, the most since 1982.

Economic News

USD - Will the Economic Stimulus Bill Help the USD Recover?

Last week ended with a dismal report from the U.S. Labor Department which showed Non-Farm Payrolls dropping an additional 598,000 jobs this month, the deepest employment cut in 34 years! Traders saw the USD drop against every major currency pair, save the JPY, as a result. After closing Thursday's session up against the EUR at the 1.2835 price level, the USD turned around and lost a healthy portion of its momentum Friday, closing the week at 1.2966. Against the Pound Sterling, the greenback continued to take on loss and is currently trading at 1.4843.

What's reassuring at the start of this week is the fact that U.S. stocks have begun to rebound as investors are anticipating a hasty passage of the economic stimulus bill currently in the Senate. Analysts began forecasting that this stimulus package would get passed rather quickly as a result of the poor employment data released on Friday. With such negative news in the jobs sector, the U.S. government will no doubt need to take quick steps to counter this recent turn of events as it appears to be spiraling out of control. But will this stimulus be enough to stave off further losses in the U.S. Dollar?

As far as news goes this week, the USD is not set to receive much information regarding economic releases. However, as this week may mark the passage of President Barack Obama's economic stimulus package, forex traders will see a flurry of speeches and press conferences being held by high ranking members of the administration on the future of the economy, among other topics. Information released in this fashion can sometimes carry subtle clues as to the future of other potential stimulus legislation as well as monetary and fiscal policies. If the bill is indeed passed this Tuesday, as many economists expect, it may carry the impact of boosting demand for U.S. goods and services, which will likewise increase the demand for the USD. Traders might look to an appreciation of the Dollar versus most of its currency pairs this week.

EUR - Despite Recent Strength in the EUR, Something is Still Missing

The EUR appears to be the recipient of much support lately as the other safe-haven currencies have taken a dive on recent economic data. The U.S. jobs market took such a beating last month that the Dollar appears to be feeling the effects and has now raised this pair back up towards the 1.3000 price level. The only currency appearing to be out-pacing the EUR's recovery at the moment is the British Pound. The EUR/GBP has continued to distance itself from the recent near-parity price levels and is now trading around 0.8750.

After the European Central Bank (ECB) decided to hold short-term interest rates steady at 2.00% last Thursday, the EUR has remained relatively flat against most pairs; continuing previous trends at a mild pace. However, once U.S. employment data was released on Friday, the EUR/USD saw a sharp appreciation of over 100 pips throughout the last hours of the New York trading session as a result of two factors. One was that the EUR benefited from an increase in risk appetite brought on by the assumption that the U.S. Senate will pass Obama's stimulus bill by Tuesday this week. The second factor was a depreciation of the major rivals to the 16-nation currency brought on by negative economic data.

The EUR has been in a relatively unstable position these past few weeks as traders don't quite know what to think of this currency. The USD has always been the safe-haven of choice, and the European economies typically fare well as a result of the French and German economies; yet something is amiss lately. Data doesn't seem to support the EUR, and that data which shows positive results, lately, has weakened the Euro-Zone currency contrary to forecasts. Until the Euro-Zone regains confidence in the markets, it isn't likely that forex traders will see a significant rise in the value of the EUR.

JPY - Japanese Yen May Weaken as U.S. Markets Rebound from Stimulus

The Japanese Yen has seen some signs of a small reversal against last week's downtrend against the USD. Ending trading on Friday at 91.81 against the Dollar, the JPY now trades near the 91.60 price level. With such poor employment data emanating from the U.S. on Friday, most investors were speculating that the U.S. government would take hasty steps to pass the economic stimulus bill proposed by President Obama. The bill is expected to pass during Tuesday's vote.

Adding to this is the prediction that Treasury Secretary Timothy Geithner is going to announce a bank consolidation plan aimed at controlling toxic mortgages on the balance sheets of many banks. These moves together will likely boost confidence in the U.S. markets and will help drive the USD higher versus the Japanese currency. The Yen has been the primary beneficiary of the recent financial crisis and recession as its currency is programmed to operate counter to the economic cycles. As the U.S. markets rebound, traders are likely to see a depreciation of the Yen versus its major currency pairs.

OIL - Oil Producers have High Hopes that Oil has Hit Bottom; But Has It?

After a short-lived spike in the price of Crude Oil last Friday, the commodity has apparently returned to its previous holding pattern and now trades around the $40 price level. Traders may actually be seeing the price of Crude Oil reach a stable price level. For the first time in months, the price of Light Sweet Crude has remained relatively stable with no clear indication of direction. We now have analysts claiming that $40 may be the lowest price Crude Oil will hit for the year 2009.

Not to be tempted into the fallacy of relying on such predictions, it is more likely that OPEC's production cuts, coupled with the recent weakening of the USD due to employment data, is the culprit behind the stable price of oil. Global energy demand remains low and the recession doesn't appear to have an end in sight. As such, the price of Crude Oil should still be under a downward pressure. The recent events just outlined above, however, are helping to support the price of this commodity. If the USD makes a healthy rebound after Obama's stimulus bill is passed in the Senate, and further oil production begins to arrive from Iraqi ports, traders are likely to see a continuation of the downtrend to the price of Crude Oil into the 2nd quarter of 2009 at the very least.

Technical News

EUR/USD
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.29 level. The 4 hour chart's RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Going short with tight stops appears to be preferable strategy

GBP/USD
Narrow range trading continues as the pair did not make a significant move in either direction, and is currently traded around the 1.47 level. The 4-hour chart RSI is already floating in the overbought territory. It appears that the possible next move might be a bearish one. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

USD/JPY
The Daily chart showing that the pair is still in the bullish configuration; however, the RSI is already floating in the overbought territory. On the contrary, there is a fresh bullish cross on the hourly chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.

USD/CHF
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

The Wild Card

Silver
Silver prices rose significantly in the last 2 weeks and peaked at $13.07 for an ounce. However, daily charts' RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

 

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Forexyard.com Analysis - EUR Tumes on Russian Banks Restructuring European Loans The

The EUR fell sharply in late-day trading after it was reported that Russian banks may seek to restructure over $400 billion loans. This adds to the already fragile European banking system and highlights the considerable tension that still exists in the financial markets.

Economic News

USD - USD Regroups after Negative News for Euro Banks

The Dollar initially lost ground yesterday but recovered in late trading as forex markets shrugged off a delay to the much anticipated U.S. bank bailout announcement. Despite the postponement, riskier currencies gained favor and currencies such as the USD and JPY fell as traders' risk appetite increased.

The U.S. bank bailout package is expected to provide added stability to the global economy, restore confidence to shaky financial markets, and has the potential to boost U.S. economic growth. This is providing traders with new reasons to take on riskier positions. This type of trading weighed on the Dollar yesterday but the currency later recovered as the EUR/USD finished the day down at 1.2821.

The bank bailout announcement was delayed as officials in the Obama administration focused on details that could potentially hold up the approval of the $819 billion economic stimulus package in the U.S. Senate. Both bailout packages are being highly anticipated and it is yet unknown what impact they will have on the financial markets. Traders are advised to follow tomorrow's announcement by Treasury Secretary Geithner as he outlines the bank bailout plan. This key event may help decide the day's direction for the EUR/USD.

EUR - EUR Plunges on Russian Loan Restructuring

The EUR fell sharply in late day trading after it was reported that Russian banks may seek to restructure over $400 billion loans from foreign banks. The 16-nation currency also came under pressure after European finance ministers suggested it may be more difficult for European banks to borrow in the financial markets.

These two events drove the EUR lower across the board. The EUR/GBP finished the day down sharply at 0.8646 from 0.8771, and the EUR/JPY was also sent lower to the level of 117.17.

The EUR had built on its gains made since Friday and continued to rally through most of yesterday's trading as the new week began with more support for riskier currencies. Last week saw U.S. Non-Farm Payrolls post a higher than expected job loss numbers and this in turn helped to appreciate the EUR against the Dollar. However, these gains were quickly erased late last night amid the Russian banking news.

JPY - Traders May Look for Further Weakening in the JPY

The JPY gained against its currency pairs on news that Russian banks may seek to restructure loans to their European counterparts. This puts more pressure on the already struggling European banking sector. Japan is not without its own banking troubles considering Japan's largest investment bank and brokerage, Nomura, will seek new capital upwards of $3 billion. The investment firm is struggling to absorb its acquisition of Lehman Brother's Asian operations.

Yesterday the USD/JPY finished down at 91.36 while the GBP was at 135.51 Yen from 135.09.

Traders may be looking for further weakening in the JPY, specifically after U.S. Treasury Secretary Geithner's speech at 16:00 GMT. His outline of the U.S. banking system bailout may help reduce market risk. This could allow traders to dump their safe haven JPY positions for riskier currencies, depreciating the Japanese currency. Look for the USD/JPY to finish the day at the 92.00 mark.

Oil - Oil Settles below $40 Ahead of Inventory Data

The price of Crude Oil settled below the $40 mark yesterday as traders await Crude Oil inventory data due Wednesday. Many have predicated a rise in the price as the U.S. economic stimulus package inches closer to Congressional approval; however, the commodity has been range trading between $39-43 for the past 10 days, unable to find solid support.

Yesterday's closing price of $39.83 was still within this range. This is more than $100 off Crude Oil's peak price seen last July.

Wednesday's Crude Oil Inventories Report, combined with the passage of the U.S. economic bailout plan, has the potential to ignite a price rally. An unexpected drop in inventories could help to push Crude Oil above the $45 resistance level by week's end.

Technical News

EUR/USD
The hourlies show quite a wide range-trading with no specific direction; however, the daily chart's Bollinger Bands are tightening, indicating upcoming increased volatility. A bearish cross on the 4-hour chart's Slow Stochastic indicates an upcoming test of the 1.2800 level once again. If that level is breached, swinging in the trend would be the best strategy.

GBP/USD
The pair's bullish price movement continues within the bullish channel, which still has yet to be breached. The bullish cross forming on the hourly chart's Slow Stochastic supports the upward notion as well. The RSI is floating above the 50 level pointing to the continuation of the upward movement. Next testing point might be around 1.4950.

USD/JPY
After touching a base at 90.89, the pair now consolidates a bit higher at around the 91.46 level. All oscillators show that the bullish momentum will probably continue. The Slow Stochastic of the 4-hour chart is showing no crosses in the horizon, and the bullish momentum there appears to be intact as well. On the daily chart, this pair is still trending upwards and there are no imminent indications of a reversal. Therefore, traders can maximize profits by entering steady long positions.

USD/CHF
The bullish momentum continues full steam ahead within the bullish channel which still has yet to be breached. The 4-hour chart is showing a strong bullish cross, and the RSI on the hourly chart also supports the continuation of the bullish movement. Next testing point should be around 1.1780. Going long appears to be preferable today.

The Wild Card

Gold
There is a very distinct downwards channel forming on the hourly chart. A fresh bearish cross on the chart's Slow Stochastic implies that the bearish correction is quite imminent. The RSI on the 4-hour chart is floating below 40, supporting the notion that there is still more room for the downwards correction. Forex traders can maximize profits by taking advantage of a currently bearish trend.

 

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Forexyard analysis - Economies Writhe in Agony from Geithner Speech

U.S. Treasury Secretary Timothy Geithner gave a less-than-inspiring speech yesterday regarding the U.S. bank bailout program. Many analysts criticized the speech as failing to give enough specific details regarding the plan which led most to assume that this bailout may not be as well thought-out as originally assumed. Stock markets and world economies felt the pinch as investor confidence dropped following this event.

Economic News

USD - Dollar Records Mixed Results as Bank Bailout Plans Disappoint Investors

The Dollar recorded some mixed results in yesterday's trading as traders were disappointed by Treasury Secretary Timothy Geithner. Geithner spoke yesterday about the Treasury's plan for a new $2 trillion Dollar banking bailout plan. This follows the approval by the U.S. Senate of Obama's $800 billion Dollar stimulus plan. Geithner received criticism that he wasn't specific enough in his speech, leading to a lack of confidence in the Dollar and U.S. Stock market.

Against the EUR, the USD fell 40 pips to 1.2871 by the close of Tuesday's trading. The Dollar also lost ground against the JPY by nearly 100 pips to 90.36 as investors cut their losses and returned to what they saw as a safe-haven currency. However, against the Pound, the USD rose by 350 pips to close at 1.4481. This was due to a knock-on effect as the British economy has been extremely volatile as of late, especially as a result of the failing banking sector. Therefore, bad news from the U.S. means even more bad news for Britain and the GBP.

Looking ahead, Obama and Geithner need to show more substance in order to rescue the U.S. economy. Only time will tell if both stimulus plans will lift the U.S. out of recession. Today, however, does have some important economic data releases from the U.S. Firstly; Geithner is scheduled to speak again at 15:00 GMT. At 13:30 and 19:00 GMT respectively, the U.S. Trade Balance and U.S. Budget Balance figures are set to be published. If the figures are indeed as forecast, or worse even, the USD may fall against its major currency pairs. On the other hand, better than expected figures could lead to a bullish Dollar in today's trading.

EUR - Pound Tumbles Due to Aftershock of U.S. Treasury Speech

The Pound slid against it major currency pairs as it felt the shockwaves of the Pessimism in the U.S. following the disappointing speech about a banking bailout by U.S. Treasury Secretary Timothy Geithner. The British economy and British currency are extremely volatile due to negative news from the U.S. and Europe, as their economy has been hit worse than many other countries in the developed world since the start of this recent recession. For example, Britain's GDP is expected to decline the most out of the G7 nations, by over 2.8%, according to the International Monetary Fund (IMF).

The GBP slid by a staggering 350 pips to 1.4481 vs. the USD. It slid by 220 pips vs. the EUR, against the JPY it slid by an enormous 430 pips to 131.19. These large losses show that investors returned to safe-haven currencies in yesterday's trading sessions. The thing that this shows forex traders is that the Pound acts very negatively to uncertainty in the financial world. Therefore, a lesson for the future may be for investors to follow U.S. news events more closely, and use the GBP as bait. This is useful because the Pound is very volatile to both positive and negative economic news coming from the U.S.

Today there are several important news events that may determine GBP and EUR currency crosses. These are the British Claimant Count Change at 9:30 GMT, the Bank of England's (BoE) inflation report at 10:30 GMT and a scheduled speech by BoE Governor King also at 10:30 GMT. Positive news may lead to a reversal of yesterday's losses in the GBP. Traders are advised to watch the Euro-Zone's reaction to this as King's speech may lead to the European Central Bank (ECB) revealing more details about possible rate cuts next month. This may result in high volatility for the EUR's pairs in today's trading.

JPY - Yen Climbs as U.S. Bank Bailout Produces Pessimism

The JPY rose against its major currency crosses in Tuesday's trading, as traders flocked back to the safe-haven Japanese currency. This came about as stocks in the U.S. and Japan fell heavily following statements by U.S. Treasury Secretary Timothy Geithner concerning the new $2 trillion U.S. banking bailout plan. Traders reacted with pessimism as they saw very few specific details about how Geithner, Obama, and the U.S. government will go about salvaging the U.S. banking sector, and thereby save the U.S. economy.

The JPY rose 80 pips against the EUR in yesterday's trading to close at 116.39. Against the USD, the JPY climbed 100 pips to finish yesterday's trading at 90.36. The JPY rose by a staggering 530 pips versus the GBP in yesterday's trading to close at 131.19. Forex traders are advised to follow Japanese, U.S., and British data releases throughout today's trading. The results of these may determine the JPY's strength against its major currency crosses into the middle of next week's trading.

Oil - Oil Plummets on U.S. Stimulus Doubts

The price of Crude Oil dropped by $1.80 a barrel, or 4.5%, to $38.04 in yesterday's trading as investors lost confidence due to the weak statements made by U.S. Treasury Secretary Timothy Geithner regarding the U.S. banking rescue package. Additionally, even though the U.S. Senate passed the economic stimulus plan, the House of Representatives and Senate need to close the gap on the further disagreements about the stimulus bill. Furthermore, it seems that OPEC threats of further decreasing Oil production has not dissuaded traders from selling-off Crude Oil.

Oil is expected to tumble by another $2 to $36 a barrel by the end of this week, as U.S. Crude Oil Inventories continue to build up. The Crude Oil Inventories figures are expected to be released later today at 15:00 GMT. U.S. stockpiles of Oil are likely to increase into March, adding additional downward pressure to the price of Oil. It is advisable to follow economic developments coming out of the U.S. as these developments may be the main factor determining the price of Crude Oil in the coming months.

Technical News

EUR/USD
This pair has apparently been building towards a volatile price movement recently as all oscillators show the price floating in neutral territory. The Bollinger Bands on all charts are also beginning to tighten in anticipation of a significant movement. Traders should wait for the breach and swing.

GBP/USD
The price of this pair appears to be floating in the over-sold territory on the RSI of the hourly and 4-hour charts, indicating an upward correction may occur in the near future. A bullish cross also appears to be forming on the 4-hour chart's Slow Stochastic, adding support to this notion. Going long might be the right choice today.

USD/JPY
The pair has finally ceased range-trading and has recently moved downward; however, the price currently floats in the over-sold territory on the hourly and 4-hour chart's RSI, signaling an upward correction may be imminent. Going long with tight stops might be the right choice today.

USD/CHF
There appears to be a leveling-off in the price of this pair as the Bollinger Bands on the hourly chart appears to be tightening, signaling an impending volatile price movement. Most oscillators show a lack of direction, however. Waiting for a clearer signal might be the right choice today.

The Wild Card

Oil
The price of this commodity appears to be floating in the over-sold territory on the RSI of the hourly and daily charts, indicating an upward correction to the recent downward movement may occur later today. The imminent bullish cross on the daily chart supports this notion. As the price of this commodity has discovered a new range to trade in, forex traders can benefit greatly from selling on highs and buying on lows within this price zone.

 

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Forexyard.com analysis - Falling Crude Oil Prices and Passage of Stimulus Bill May...

Yesterday's drop in Crude Oil prices lent weight to the notion that traders are expecting the consolidating USD to spike in value versus its major currency pairs in the not-too-distant future. The passage of Barack Obama's stimulus bill yesterday may also lend weight to this notion. Today, traders could see the value of the EUR/USD pair drop towards the 1.2800 price level as US Retail Sales and Unemployment Claims provide a level of support to this currency pair.

Economic News

USD - Will Today's Retail Sales Data Drive the USD Higher?

The greenback completed yesterday's trading session with mixed results versus the major currencies. The U.S. Dollar was little changed against the EUR, with the pair closing at the 1.2950 level, but higher against the GBP in a volatile session which saw the pair closing at the 1.43 level. This came amid signs that the U.S. Senate and House of Representatives will be able to bridge their differences on the economic stimulus plan.

The market expressed some optimism for the USD after the U.S Congress and Obama administration reached a deal yesterday on a $789 billion economic stimulus package that would mix tax cuts and new government spending in an effort to rescue the faltering U.S. economy. Analysts now say that the USD is likely to continue to appreciate against the EUR given investors' hopes for a big stimulus package, which might be a slight positive for risk-taking. This is important, as it removes some uncertainty in the U.S economy in contrast to the recent weak economic data coming from the Euro-Zone.

As for today, a batch of data is expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the Retail Sales which is expected to increase from previous reading. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the weekly Unemployment Claims figure is scheduled and should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. market, and the USD is likely to weaken slightly as a result.

EUR - German Data Indicates a Weakened Euro-Zone

The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15-nation currency saw gains versus the GBP for most of the day and closed at the 0.8900. Versus the JPY, the Euro-Zone currency was broadly unchanged throughout most of the day, as most of the market movement from yesterday was focused on the USD.

In addition, yesterday was a slow news day in Europe as there was only one economic indicator published. Germany's inflation rate dropped to the lowest level in almost five years in January after the recession deepened and oil prices plunged. The inflation slowdown in Germany, Europe's largest economy, was led by a 15% drop in prices for Crude Oil from a year earlier. In recent months, the Euro-Zone economies are not having much of an impact on the value of their currency. The EUR may in fact be waiting for clear signs of direction from the United States' economy before picking a direction.

Looking ahead to today, the most important financial indicator scheduled to be released from Europe is Industrial Production. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today's Industrial Production announcement as a stronger than expected result may bolster the EUR in the short-term.

JPY - Foreign Influence over the Yen Gaining Strength

The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 116.00 level. The JPY also saw bullishness against the GBP as it jumped around 100 points and closed at 129.20.

Japan's wholesale inflation dropped for the first time in more than five years as the global recession lowered the cost of oil and commodities. Falling commodity prices and weakening demand for goods kept many firms from hiking prices and even led some to make cuts.

As for today, Japan will be absent from the economic calendar. The JPY's trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially U.S. Retail Sales since it has a correlation to Japanese exports.

Oil - Price of Crude Oil Hits One-Month Low

Oil prices slid 4.3% during yesterday's trading session, the lowest in four weeks. This drop came after a U.S. government report showed Crude Oil inventories rose more than expected in the world's top energy consumer, and after the International Energy Agency (IEA) said that global energy demand this year would post its biggest decline since 1982 under the weight of the economic crisis.

Oil prices have dropped significantly in the last few months due to the global economic slowdown and its impact on consumer and business fuel consumption, raising alarms for OPEC members that have agreed to record output cuts to counter this weakness.

Technical News

EUR/USD
This pair continues to build towards a volatile price movement as all oscillators are still showing the price floating in neutral territory. The Bollinger Bands on all charts are still tightening in anticipation of a significant movement as well. With the weekly Momentum oscillator showing mild downward pressure, there is a possibility that the price will go bearish after the breach. Setting short positions with tight stops might be the right choice today.

GBP/USD
The price of this pair appears to be floating in the over-sold territory on the 4-hour chart's RSI, signaling an upward correction in the near future. The recent bullish cross on the 4-hour chart's Slow Stochastic supports this notion. With the Bollinger Bands on the hourly chart tightening, a volatile bullish spike may occur later today. Entering buy positions with tight stops before the breach might be the right strategy today.

USD/JPY
There appears to be an imminent bullish cross on the hourly chart, indicating an upward correction may occur soon. However, the weekly chart's Momentum oscillator shows steep downward pressure. Waiting for the upward correction to peak then setting sell positions might be a wise choice today.

USD/CHF
There appears to be a leveling-off in the price of this pair as all oscillators show the price floating in neutral territory. Even the weekly Momentum oscillator shows almost no direction. Yet, this pair fluctuates within quite a wide trading range of approximately 130 pips. The relatively volatile nature of the recent trend allows traders to open short term positions and to maximize profits by buying on lows and selling on highs.

The Wild Card

Gold
There appears to have been a violent breach of the upper border of the Bollinger Bands on both the hourly and 4-hour charts, signaling moderate downward pressure on the price of this commodity. The price currently floats in the over-bought territory on the 4-hour chart's RSI and a bearish cross has recently formed on this chart's Slow Stochastic, which supports the notion of a downward correction in the near future. Forex traders can benefit from this potential trend reversal by setting early sell positions and riding out the downward movement.

 

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Forexyard.com Analysis - G-7 Takes the Task of Rebuilding the World Economy

The G-7's finance ministers and central bankers meet tonight and tomorrow before releasing a statement and talking to reporters at about 2:30 p.m. local time. On the agenda: How to thwart protectionism, overhaul financial oversight and end what the International Monetary Fund calls a depression in advanced economies.

Economic News

USD - First Good Sign from the U.S Economy

The Dollar continues to safely strengthen against the major currencies, and yesterday the greenback reached a 10-day high against the EUR. For now, it seems that the ongoing reports claiming the U.S government is combating recession, and the wide acceptance of the steps it's taking by financial experts around the world are enough to set free the bullish trend we're witnessing for the past couple of weeks.

As for yesterday, a batch of relatively positive data was delivered, supporting the Dollar's upward trend. The monthly U.S Core Retail Sales rose 0.9% in January, beating forecasts for a 0.5% decline. That piece of information is extremely significant, as this is the first time in 6 months that the monthly value of sales at the retail level (excluding automobiles) was greater than the one in the previous month. In a few months, we all might look back and say that this was the first sign of the rehabilitated U.S economy.

Another important indicator that was released yesterday was the Unemployment Claims. The published figure showed that 623K individuals filed for unemployment insurance for the first time during the past week, and if we said that the Core Retail Sales might be a good sign, this is a very disturbing sign, for sure. It is now the second week in a row that over 600K people are losing there jobs in the U.S, pointing out the well-known fact that the U.S economy is continuously contracting.

As for today, the Preliminary University of Michigan Sentiment survey will be released at 14:55 GMT. This survey is considered to be a primary indicator of consumers' financial confidence, and thus tends to have a large impact on the market. Currently, a 60.6 mark is expected, which is considered to be a positive result, however traders should keep their eyes focus, and look for a possibly change of trend during this time.

EUR - Low Oil Price to Help Euro-Zone Economy - Says Trichet

Yesterday the EUR saw a volatile trading session against the major currency pairs. The EUR climbed against the JPY; however it continued its downtrend against the USD.

The main news from the Euro-Zone yesterday came from Jean-Claude Trichet's speech, in which the European Central Bank President said that that the expansionary impact of relatively low oil prices, and technological progress should come to aid of the Euro-Zone economy. In his speech Trichet expressed his optimism despite of the challenges the economies will face in 2009.
Trichet's speech was probably the leading factor to halt the slide of the EUR/USD at midday, as it was his first hawkish speech in quite a while now. It is safe to say that investors have an endless thirst for such words from the economic leaders, especially in times like now.
Also yesterday, the European Monthly Industrial Production indicator was released. The indicator showed that the total inflation-adjusted value of output has dropped by 2.6% in December as opposed to the previous month. This publication reflected 4 straight months in which this economic indicator is deteriorating, demonstrating how unhealthy the Euro-zone industrial production is currently.

Looking ahead to today, the European Flash Gross Domestic Product (GDP) is expected at 10:00 GMT. This indicator measures the change in the value of all goods and services. Forecasts for this indicator are suggesting that the Euro-zone's GDP has dropped by 1.3% in December, painting quite a gloomy picture of the current financial status. Traders should also stay informed of news released from the G7 Meeting that will be held during the next to days, as any information from that meeting could change the course of the local currencies before the trading week reaches its end.

JPY - Japanese Yen Seems to Be the Best Financial Investment

The JPY underwent an extremely volatile session against all the major currencies. During early trading the JPY dropped against the USD and the EUR, however, later on the trend reversed, and the JPY returned to its previous rates.

It appears that investors are considering the Japanese economy to be the safest one, or at least the most stabile economy to trust their funds in at the moment, as the JPY is gaining strength in a consistent way, in spite of the fact the all the experts are predicting on a daily basis that the JPY is overvalued and that a downtrend is just a matter of time. It should be said that the best currency to go long on, for a few months now is the JPY, and weather you traded it against the USD, the EUR or the GBP, either way you gained profits, and a lot of profits. As long as no clearer signs are proving that the JPY has limited its bullish trend, it will retain its status as one of the best investments in the current economic turbulence.

As for today, no significant data is expected from the Japanese economy, however, the G7 Meeting that will be held during the weekend, is likely to affect the Yen as well. Traders are advised watch closely after any development from the meeting, especially for announcements regarding the Japanese economy.

OIL - Crude Oil Prices Following Equity Markets

Crude Oil prices continue to slide on a permanent basis, and a barrel of Crude Oil was traded for $33.50 yesterday.

Forecasts are assuming that world oil consumption will drop 1.7% to 84.3 million barrels a day this year, and particularly there is a serious concern that oil demand will drop sharply in the U.S. it seems that as long as the U.S economy continues to deteriorate, oil prices will continue to respond in lowering prices. if oil prices were considered to be attached to the USD in the past, it appears that today oil prices are more attached to the Dow Jones than to anything else, and as long as equity markets in the U.S will deliver bearish signs, a barrel of Crude Oil might be values under $30.

As for today, traders are advised to continue following equity markets in the U.S as they seem to be the best tool in order to predict future developments.

Technical News

EUR/USD
This pair is in the midst of a narrowing upward channel and is now floating in the middle of it. The hourlies are showing mixed signals with its RSI floating in neutral territory. However, the Slow Stochastic of the daily chart is showing quite a strong bullish momentum, and the RSI confirms that the direction is indeed up. All indications are that there is more room for further upward movement and the preferable strategy today will be to go long on dips.

GBP/USD
Despite yesterday's sharp drop, the bullish channel on the daily chart is still intact. According to a 4 hour chart, the pair is oversold; therefore a fresh bullish momentum may be quite imminent on the 4 hour chart as well. Going long with tight limits might be a preferable strategy today.

USD/JPY
The pair is still in a bullish configuration and is now floating around 91.00. The momentum on the 4 hour chart is very strong and it appears that there might be a testing the level of 91.60. The Bollinger Bands are tightened on the daily chart implying that volatility will increase during the day; meaning that traders may have a good opportunity to make profits during today's trading session.

USD/CHF
The hourlies are showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 2 days. Indicators on the 4 hour and the daily charts are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.

The Wild Card

Silver
There is a very accurate bullish channel forming on the daily chart, as the break through the bottom level of it was just validated. Silver now has enough bullish momentum to be carried into the 14.50 zone. This is a great opportunity for forex traders to use this technical break and swing into a high potential upwards move.

 

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Forexyard.com analysis - The U.S. Currency is bolstered by Optimism

It appears that actions taken by the new administration of President Barack Obama might help to restore confidence among investors in the United Sates economy. U.S. Treasury officials said on Saturday that the U.S. dollar is likely to emerge from recession sooner than expected following massive fiscal stimulus.

Economic News

USD - U.S. Dollar Sees Strong Recovery after Economic Stimulus Bill is Approved

The U.S. Dollar opened this week with a dramatic jump in the right direction. Gaining strength against every major currency, except the JPY, the greenback has been benefiting heavily from the passage of last week's economic stimulus bill, which is due to be signed by President Obama this Tuesday. Closing last week against the EUR at 1.2870, and against the Pound at 1.4358, the USD saw lows this morning around 1.2783 and 1.4251 respectively after market open.

The $787 billion economic stimulus bill passed by both the U.S. Senate and House of Representatives marked a great success for the early period of Barack Obama's administration. The market jumped in excitement from the optimism this legislation brings to the American economy. While not a clear indication that the economy will start to recover immediately, it nevertheless places a degree of confidence behind the notion that it may indeed recover at a later time.

For now, the market focuses its attention to the signing of this bill on Tuesday, followed by the discussion of another bank bailout program to be detailed by various FOMC Chairmen later this week. The important economic figures to watch this week, outside of the layout of various stimulus and bailout plans, is this month's housing data. On Wednesday, the U.S. government will release data on building permits and housing starts during the month of January, and may likely show a continuation to the recent downtrend these figures have seen since last year. Balanced against the stimulus euphoria, these negative figures may not carry as large an impact as usual.


EUR - European GDP Weaker; ECB Remains Conservative on Interest Rates

As Europe's GDP slumps even further, the Euro-Zone currency begins to slide lower against most of the other major currencies. After dropping as low as 1.2720 against the USD late last week, the EUR later rebounded towards levels of 1.2870 by end of trading Friday. However, upon market opening this week, the EUR dropped against the greenback towards a price near 1.2780, signaling a shift back towards general weakness in the Euro-Zone.

Friday's economic data releases on regional GDP indicated a decrease of roughly 1.5% for the combined total economies making up the European Monetary Union (EMU). The European Central Bank (ECB) commented on Saturday that they will remain conservative with interest rate decisions as they would like to maintain a level of flexibility when it comes to a plan of attack which utilizes monetary policy. The trouble comes as analysts begin to forecast that without an aggressive rate cut, the Euro-Zone could enter a severe period of downward-spiraling negative economic output; further weakening the EUR.

Looking ahead, the Euro-Zone is preparing for a quiet news week as Tuesday will see one of the only indicators to be released until Friday's various reports on manufacturing and service sector output. The ZEW Economic Sentiment report from Germany has been inching towards a positive number steadily since July of last year. While expected to remain a negative figure, this report may show that confidence in the German economy has gained lately and may spark a short correction to the EUR's pairs early in the week.

JPY - JPY Largely Unaffected by Largest GDP Drop Seen Since 1974

The Yen saw some relatively moderate appreciation against its currency rivals as this weekend's G7 Summit reaffirmed very little which wasn't already known by world financial chiefs. Failing to comment on the recent strength of the JPY led some to believe that it was a normal turn of events, even expected by the Bank of Japan (BoJ) despite growing concerns over a slouching GDP. The Yen ended last week down against the USD near the 91.90 price level, but has strengthened back towards 91.50 during this week's early trading hours.

Slowing down the pace at which the Japanese economy recovered, however, was the recent release of its preliminary GDP figures which showed a 3.3% decline in the island economy's output, the largest decline since 1974. With a number of economic indicators being released this week, including another round of interest rate talks, the JPY may see a higher-than-normal amount of volatility, especially considering that most indicators are forecast to show further negative levels of economic output. Traders may look for a further weakening of the Yen in the coming days.

OIL - Crude Oil Trades Below $38 on Slowing Global Demand

The price of Crude Oil broke through a number of significant barriers last Friday. Starting the day just above $36 a barrel, the price then cut through the $35 and $34 price barriers before climbing back up $3 higher by market close. This week, the price of Crude appears to be back on the downward slide as the price has already fallen over $0.40 towards the $37 a barrel price range.

The strengthening of the USD from last week's passage of Obama's economic stimulus bill helped push the value of this commodity lower towards the end of the trading week. With more news on the way regarding the signing and implementation of this bill, the USD is likely to appreciate throughout the coming days, putting further downward pressure on the price of Crude Oil. Traders may in fact see the price of Oil drop to as low as $30 a barrel by week's end.

Technical News

EUR/USD
After a long period in which the pair has mainly fluctuated, it seems that we are on the verge of a relatively strong move. The pair has crossed the lower border of the 4 hour chart's Bollinger Bands, indicating that it should enter a downtrend. A breach through the 1.2720 might validate the bearish move with a price target of 1.2690.

GBP/USD
The pair is continuing its bearish development, as the cable dropped almost 300 pips in the past 3 days. All oscillators on the hourly chart are pointing down, indicating that the falling trend has more room to go. Next price target might be 1.4100.

USD/JPY
The bullish momentum continues with full steam as the pair breached the key Fibonacci level of 90.91. Currently, all oscillators on the daily chart are giving bullish signals; hence, going long seems to be preferable.

USD/CHF
It seems that the pair is extending its bullish correction, as it entered an uptrend ever since it tested the 1.1600 level. Currently, all oscillators on the 4 hour chart are pointing up, suggesting further bullish behavior for the pair. Going long might be preferable today.

The Wild Card

EUR/AUD
The 4 hour chart shows both the tightening of the Bollinger Bands, and also a bullish cross on the Slow Stochastic, suggesting that a strong bullish momentum is likely to take place. This might give forex traders an excellent opportunity to enter a promising trend at a very early stage.

 

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Forexyard.com analysis - Dollar Jumps on Future EUR Interest Rate Moves

The Dollar rallied yesterday on possible Interest Rate cuts in the Euro-Zone while in Japan GDP and an intoxicated Finance Minister helped push the Yen Lower.

Economic News
USD - Dollar Rallies across the Board

A larger than forecasted drop in Japanese GDP curbed traders' risk taking yesterday in the forex market. Also hanging over the market was dissatisfaction with the outcome of the G7 meeting and the passage of the U.S. economic stimulus bill. These market events failed to ignite a rally as traders moved into typical safe-haven currencies.

Risk appetite was curbed yesterday as Japan reminded the world that global growth is indeed slumping. Japanese GDP declined by 3.3%. This was worse than the forecasted number of 3.2% predicted by economists. The flight to safety sent the USD higher against the Yen. The market was also unimpressed with the end of the G7 meeting as the world's finance ministers failed to lend any support to global currencies.

Analysts have been saying higher yielding currencies will get a boost once a turnaround in global economic activity is forecasted. The release of Japanese GDP is a signal that perhaps the worst is yet to come for slowing global economies.

Looking ahead to a brighter story today, the release of the TIC long term purchases is due at 14:00 GMT. The release is forecasted to show an improvement from last month's dramatic drop in asset purchases by foreigners. If the TIC fails to reach its estimated target, look for the USD to depreciate to the 1.2750 level.

EUR - New Interest Rate Cuts are Priced in to the EUR

During Japanese trading hours, the EUR/USD made a significant downward move on a poor financial outlook in Europe and the potential for new Interest Rate cuts in the Euro-Zone. The start of the depreciation was due to concerns that Ireland may potentially default on its sovereign debt. However, much of this downward momentum can be attributed to the currency pair breaking the significant 1.2750 mark. Once this support line was crossed, many traders automatically sold off the EUR, helping to compound its losses. The EUR/USD closed down on the day at 1.2649 against the Dollar.

Also fueling the losses for the EUR is the potential for renewed Interest Rate cuts by the European Central Bank (ECB). It appears the market has priced into the EUR/USD a rate cut by the ECB in their meeting next month. The question is now open as to how much will that rate cut be?

Today we will have the release of the German ZEW Economic Sentiment survey. This month the indicator is expected to improve slightly, though the price momentum of the currency pair is working against it. Look for the pair to continue its slide to the 1.2600 level.

JPY - Japanese GDP Tumbles, Finance Minister Resigns

The Japanese economy has now experienced declining GDP for the third consecutive quarter. GDP for the fourth quarter last year fell 3.3%. Exports also fell a staggering 14%. This helped to send the USD/JPY higher by almost 1% to 92.43.

In an unrelated event, Japanese Finance Minister Shoichi Nakagawa said he will resign from his post. The resignation stems from his unusual behavior at the G7 summit. Some attribute his bizarre behavior at a press conference because he was under the influence of alcohol. This is a serious setback for the Japanese government that has already lost much of the confidence of its citizens to bring the country out of a recession amid the global financial crisis.

Forex traders should be looking forward to Thursday's Overnight Call Rate from the Bank of Japan (BoJ). No change is expected to take place with Japan's Interest Rates, but the speech from the bank's governor could provide insight for the future direction of the Japanese economy.

Oil - Crude Oil Fails to Rally with the Dollar

Coming on the heels of a large rally this past Friday, Crude Oil looked for price direction but could only find itself range trading. The price rally as seen from the impending approval of President Obama's economic stimulus plan was not strong enough to carry over into the new trading week. Surprisingly, today's price rally in the Dollar was also not enough to push Crude Oil higher.

More fundamental data that may hurt Crude Oil is due to be released on Friday as U.S. Crude Oil Inventories will be reported. It is widely expected for the inventories to increase amid the global economic slowdown. The price level of $30 a barrel doesn't seem so unreasonable any more.

Technical News

EUR/USD

The price of this pair appears to be floating in the over-sold territory while the hourly chart's RSI is indicating that an upward correction may be imminent. The upward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the upward breach occurs, going long with tight stops appears to be the preferable strategy.

GBP/USD

The typical range trading on the 4-hour chart continues. Both the hourly RSI and Slow Stochastic are floating in neutral territory. However, there is a fresh bullish cross forming on the daily chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. In that case, traders are advised to swing in after the breach takes place.

USD/JPY

A bearish cross on hourly chart's Slow Stochastic implies that a downward correction might take place in the nearest time frame. The 4-hour chart's RSI is floating in the over-bought zone, suggesting that the upward trend might be out of steam. Going short with tight stops appears to be the right strategy today.

USD/CHF

The daily chart is showing mixed signals with its Slow Stochastic fluctuating in neutral territory. However, the hourly Chart's RSI is already floating in the over-bought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card

Gold

Gold prices rose significantly in the last month and peaked at $959.40 for an ounce. However, the hourly chart's RSI is floating in an over-bought territory suggesting that the recent upward trend is losing steam and a bearish correction is impending. After this correction takes place, there might be a good opportunity for forex traders to join the bearish trend.

 

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Forexyard.com analysis - U.S. Stimulus Bill Signed into Law; Dollar Strengthens

Following the signing of President Barack Obama's economic stimulus bill yesterday, the USD made modest gains against most of its currency rivals. In expectation of today's housing data, the USD may continue to strengthen unless this news disappoints investor confidence.

Economic News

USD - Greenback Broadly Extends Gains

The Dollar continued to benefit on Tuesday amid heightened worries about the global economy and investors' concern that Euro-Zone banks are highly exposed to financial turmoil in Eastern Europe. The greenback was also pushed higher after President Barack Obama signed a $787 billion stimulus bill into law yesterday. The bill passed both houses of Congress on Friday.

The U.S currency rose 1.4% yesterday to end the day at 1.2595 per EUR after earlier appreciating as high as 1.2564, its highest level since December 4th. Against the Japanese currency, the USD rose 0.8% to 92.44 Yen, not far from a one-month peak at 92.75 hit earlier today.

Although the U.S. economic data has painted a grim picture, with the New York Federal Reserve reporting its manufacturing activity index plunged to a record low this month, analysts say that the Dollar still remains just about the only short-term alternative for investors. It appears that foreign demand returned to U.S. securities in December, supported by ongoing safe-haven buying of Dollar-denominated deposits. As the market focuses on bad news from Eastern Europe, which plays an important role in the weakness of the EUR, and on the slide in Japan's GDP, investors seek the relative safety of the greenback, hence broaden USD gains.

EUR - EUR Falls on Eastern Europe Concern

The Euro-Zone currency was traded near a 10-week low against the Dollar after a credit agency said it may cut the ratings of several banks with units in Eastern Europe, adding to concern that financial turmoil will deepen. The agency stated that the combination of higher provisions for bad debt, the rise in bank borrowing costs, and falling currencies, would weigh on the profitability of the banks concerned and erode their capital base. As a result, the EUR is likely to further extend its losses versus the greenback and the Yen on speculation the currency will fall on renewed concerns about credit markets, making the U.S. and Japanese currencies more attractive as havens.

The EUR was traded at 1.2579 from 1.2582 late in New York yesterday. It also was down at 116.31 Yen from 116.27. The European currency was also lowered 1.3% against the British pound to 88.45 pence per EUR yesterday after the Office for National Statistics said inflation slowed last month, prompting analyst speculation that the Bank of England (BoE) will reduce the pace of Interest Rate cuts.

Analysts now say that the main reason for the EUR weakness is from worry not only about the European regional economy but specifically those in Eastern Europe where currencies are falling rapidly across the board. The EUR was also under pressure on growing expectations that the European Central Bank (ECB) will ultimately have to play catch up on rate cuts made by the Federal Reserve and Bank of England. Market players anticipate Euro-Zone Interest Rates to fall below 1.0% later this year, with a cut to a record low of 1.5% in March.

JPY - Japanese GDP Data Increases Recession Fears

Japan's economy, only months ago, forecast to be the best performing among the world's most advanced nations, has now become the worst. Gross Domestic Product (GDP) shrunk an annualized 12.7% last quarter, the Cabinet Office said yesterday. Japan's government is struggling to cope with the economic crisis, and may expand its stimulus plans by 20 trillion Yen to 30 trillion Yen to fund a supplementary budget for the fiscal year starting April 1, 2009. The second blight on the Japanese economy is the surge in the Yen currency. The JPY has climbed 17% in the past year; in today's trading the currency was at 92.44 per USD.

As the global financial crisis deepened, investors reduced their carry trades, where they borrowed in low-yielding currencies to invest in nations where interest rates exceeded Japan's. Investors' focus is on whether the Bank of Japan (BOJ) will come out with specific policies to lower term rates. The BOJ has already cut its benchmark Rate to 0.1%, from 0.5% in October, in a bid to help spur the faltering economy. According to several analysts the BOJ policy-makers will likely keep borrowing costs unchanged on February 19th, leading the JPY to continue with its recent trends.

Oil - OPEC to Discuss Production Cuts; Oil Demand Falling

The Organization of the Petroleum Exporting Countries (OPEC) is looking to reduce oil supply further if demand is insufficient to absorb supplies, oil ministers said on Tuesday. OPEC, supplier of more than a third of the world's oil, has raced to cut supply to match falling demand from a slowing global economy. OPEC next meets in March to discuss supply. Crude Oil Prices have fallen by more than $110 from the peak seen last July's to now trade at $38 a barrel on Tuesday. Oil has mostly traded in a $35 to $45 range since December.

Analysts say that the economic outlook will continue to dominate the first half of 2009. The United States, Euro-Zone and Japan are all in synchronized recession, which is depressing fuel demand and sending Crude Oil prices down sharply from its record highs. Traders should watch for U.S. crude oil inventories data to be released by the American Petroleum Institute later on Wednesday and by the U.S. Energy Information Administration on Thursday. These will give an indication to the reserves held by large energy consumers like the United States.

Technical News

EUR/USD
A bullish cross appears to have just taken place on the 4-hour chart's Slow Stochastic, signaling an imminent bullish correction to the recent downward trend. The price also appears to be floating in the over-sold territory on the 4-hour chart's RSI which also lends support to this notion. Going long with tight stops might be the right choice today.

GBP/USD
The Bollinger Bands on the hourly chart are tightening, signaling an imminent volatile price movement. With the recent bullish cross on the daily chart's Slow Stochastic, the imminent movement will likely be in an upwards direction. Going long with tight stops might be the preferable strategy today.

USD/JPY
After yesterday's volatile price movements, this pair appears to have temporarily calmed down. The price appears to be floating in neutral territory on most oscillators and momentum appears to be showing a flat price movement. Waiting for a clearer signal might be the right choice today.

USD/CHF
The price of this pair appears to be floating in the over-sold territory on the hourly chart's RSI, signaling an upward movement may occur in the near future. This pair, however, appears to be trading in a bullish channel. Traders can benefit by buying on the lows and selling on the highs of this up-trend.

The Wild Card

Silver
Silver has been trading in a steady bullish channel for the past few weeks with clear peaks and troughs. Following this commodity's recent upward movement, traders can now see the price hovering in the over-bought territory on the 4-hour and daily charts' RSI, combined with bearish crosses on their Slow Stochastic oscillators as well, all signaling the impending downward correction. Forex traders can benefit from this style of range trading by buying on lows and selling on highs as the price of Silver holds steady on this path.

 

[forexyard]

Forexyard.com analysis - Dollar Rises on Fed Statement while JPY Continues its...

The U.S. Dollar is increasingly being chosen over the Yen as the choice currency during times of heightened risk aversion. The contracting global economy helped to strengthen the Dollar yesterday as the Yen begins to lose favor as a safe haven currency.

Economic News

USD - Dollar Jumps on Safe Haven Trading

After a relatively negative news day, the USD still managed to appreciate against most of its currency counterparts. Analysts have declared a decreased risk appetite and market uncertainty as the culprits. The loss of risk appetite means that most traders are waiting for more steady market conditions before taking a position in higher yielding currencies. There is too much uncertainty right now with the various bailout plans. This factor has produced the recent "wait and see" attitude in the forex market. On top of that, we have negative figures such as yesterday's Building Permits, which also adversely affect the market.


The price contraction has brought new fears after the cheapening of Oil and other raw materials because it could trigger deflation. In yesterday's FOMC Meeting Minutes, Fed officials said that they lack the ability to counteract a deflationary spiral because Interest Rates are already too low. Deflation is considered for many as a danger to the economy. The resulting fall in prices may lead to consumers and businesses holding off on further purchases in expectations of even lower prices, sending the economy down a dangerous path. In addition, the Fed also pointed during its meeting that the committee held its Interest Rate near zero to prevent further damage to the already weak economy


USD trading will be interesting today as another batch of important economic data is expected to be released. Similar to yesterday, the news will start at 13:30 GMT with a series of economic indicators being released starting with PPI figures, unemployment claims and the Philly Fed Manufacturing Index. Surprisingly, almost all of these releases are expected to be higher than their previous figures meaning the USD could continue to show further bullishness today. Traders should stay close to the market today, as there is a strong chance to capitalize on the fluctuations which will likely follow these releases.

EUR - EUR Suffers from European Banking Woes

The EUR saw very little change in its overall value against the other currencies yesterday. While continuing with its recent downward trend, it has managed to remain rather calm in light of recent news from the Euro-Zone market. The EUR fell against the USD for a fourth day as the pair closed at 1.2500 levels. The 15 nation currency experienced similar behavior against the GBP as the pair dropped from 0.8920 to 0.8810 by days end.


Western European banks may be more severely hurt by an economic slowdown in Eastern Europe. These banks have lent to companies in Eastern Europe, investments that were sound as Eastern Europe's economy grew at robust rates during the boom period of 2003-2005. But now recessions in these nations will threaten debt service capabilities, hurting Western Europe's banks, which will weigh on the EUR and GBP


There will only be one data release from EZ today as the Italian Trade Balance will be announced during early trading. This indicator tends to have a relatively small impact on the market. A rising trend will have a positive effect on the nation's currency. In addition, traders should pay close attention to the response of equity market to determine how to continue with EUR positions.

JPY - JPY Corrects as the Currency Falls out of Favor with Traders

The Yen continued to depreciate as investors are choosing the Dollar over the Yen for a safe haven trade. The JPY fell against the USD and closed around 93.65. Moreover; the Japanese Yen lost almost 150 pips versus the EUR, closing at 117.70 and just around 200 pips versus the GBP.


The world's second-largest economy shrank at the steepest pace since the 1974 oil shock last quarter as a global slowdown triggered record declines in exports and output. Gross domestics' product dropped an annualized 12.7% last quarter, more than twice as fast as declines in the U.S. and Europe. The economy may suffer a bigger contraction in the current quarter, which could weigh on the JPY.


Looking ahead today, the Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today The rate is expect to remain unchanged but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan's economic future. Later tonight, the monthly All Industries Activity Index is expected to be released with a negative figure. This should add bearish momentum to the Yen against its counterparts. If Crude Oil prices change drastically following the Crude Oil Inventories release, expect some more volatility on the JPY.

OIL - Crude Oil Traders Await U.S. Inventory Data

Crude Oil prices experienced another day of depreciation as the oft-traded commodity dropped below $38 in this morning's early trading session. Oil prices traded down for the second straight day. Much of the bearish movement in Crude Oil can be attributed to fears of a drop in fuel consumption due to poor economic outlook in the major world economies.


With economic growth slowing in the U.S. and Europe, and another month of falling service industry numbers, Crude Oil may continue to see a depreciating value. As for today, the U.S. Crude Oil inventories figures will be released. Expectations show a drop to 2.9M from last week's excessive 4.7M. Traders can, and should, expect wide market volatility around the 14:00 GMT release of these inventories figures because of Crude Oil's recent drop below the $40 price level.

Technical News

EUR/USD
There appears to be a bullish cross forming on the daily chart's Slow Stochastic, indicating that an upward correction is expected in the near future. However, almost all other oscillators are stuck in neutral territory, signaling that this pair may be less volatile than expected. Going long with tight stops might be the right strategy today.

GBP/USD
A bearish cross on the 4-hour chart is forming, signaling a potential price drop, while the Bollinger Bands are also tightening, pointing to an imminent volatile price movement. However, the daily chart's Slow Stochastic indicates a recent bullish cross, signaling a possible upward movement. In the short-term traders may expect a downward correction, but longer-term traders may want to maintain their long positions today.

USD/JPY
The price of this pair appears to be floating in the over-bought territory on the 4-hour chart's RSI and there appears to be an imminent bearish cross on the Slow Stochastic, indicating a downward correction may occur soon. The price also appears to be floating in the over-bought territory on the daily chart's RSI which also lends support to this notion. Going short might be the right choice today.

USD/CHF
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, however it's Bollinger Bands are tightening, implying that a violent breach may take place. Until that will happen, 4 hour chart reflects quite a stable fluctuation within a flat channel thus providing traders a chance to make profits from buying on dips and selling on lows.

The Wild Card

Gold

This commodity has been trying to massively correct the intensive bullish move, and is now trading around the 977 level. The sharp bearish channel is in a high spot at the moment and together with a bearish cross of the 4 hour chart's Slow Stochastic it provides forex investors quite a good potential for short positions.