[B]Economic News
USD [/B]
The bearish trend on the greenback continued yesterday as it once again got weaker against the sixteen most actively traded currencies, but mainly against the Cable and the 13 nation currency. The greenback’s value kept falling yesterday, and has reached a new record low against the EUR at 1.4663.
The belief of many Forex traders has been that even more pain is yet to come for the U.S. economy. We are only in the first phase of the tumultuous state of the weakening US economy, as banks in the United States are yet to reveal all the losses that have occurred in the mortgage sector. We are still expected to witness additional downward slides which will create further pressure on the greenback in the short and long term, as we saw on Sunday when Chuck Prince, CEO of the U.S. bank Citigroup quit, taking the blame for unexpected losses of $8-11 billion before taxes.
The greenback is 12.5% weaker against the EUR than it was a year ago, compared with a 3 percent slide against the JPY and a 5.4% drop against the Chinese Yuan.
The dollar looks to decline more as the outlook of lower Fed rates will stimulate investors to alter assets into higher-yielding currencies. It seems like the huge losses from subprime-mortgage and the credit crisis will continue to grow and emphasize uncertainty, which will only obligate the Federal Reserve to cut interest rates on Dec. 11, the third time this year.
[B]EUR [/B]
The EUR kept up its forward progress in a firm and solid direction against the US dollar on Tuesday, even after the U.S. Federal Reserve cut interest rates by a quarter of a point last week. The EUR and the GBP have been hiking steadily against the US dollar since August, due to uncertainties in the strength of the U.S. economy, on the basis of the subprime credit crisis. Yesterday the 13-nation EUR traded at $1.4556 in morning sessions, down from its record high of $1.4545, and as it is expected the US dollar may fall to $1.50 against the EUR by the end of the year. The U.S. economy is on course for a serious slowdown and still faces upcoming pressure. Outside of the US growth and a weaker dollar there are boosting exports from the US to Europe. Many investors began recently to relocate numerous funds to European countries where their deposits and mixed income investments can obtain higher returns. The Euro is being pushed forward by sentiment that the European Central Bank is working slowly but surely to increase rates. The pound will benefit from expectations that the Bank of England will not touch rates, and will leave them safe and sound rather than follow the Fed in cutting the cost of borrowing.
[B]JPY [/B]
Yesterday, the JPY fell against all sixteen of the most-actively traded currencies. The JPY declined to 166.74 per euro, and may fall to 167.50 per euro today. Australia’s dollar strengthened 1 percent against the JPY while New Zealand’s currency gained 2%. In addition, yesterday saw Japan’s index of leading economic indicators published. The index dove to zero for the month of September after a mark of 27.3 in August. The index hit zero for the first time since December 1997.
The Bank of Japan kept again its benchmark borrowing cost at 0.5% last week, the lowest among major economies but still the JPY is being considered as a favored currency among many investors for carry trade positions for the long term.
[B]Technical News
EUR/USD [/B]
The 4 Hour bullish channel was breached and the new all time high was set at 1.4664. The Momentum and RSI indicators still correlated and have a positive slope, thus indicating a possible continuation of the current bullish trend. Traders should wait for the reversal which may take place soon and is expected to test the 1.4577 Fibonacci support level.
[B]GBP/USD [/B]
An opposite head & shoulder structure is establishing on the 4 Hour chart, indicating the continuation of the current bullish trend. 2.1050 is the next resistance level which this pair is going to test. Going long seems to be preferable.
[B]USD/JPY [/B]
A falling wedge structure in a bearish trend has been established on the 4 Hour chart which may bring this pair to test the 113.00 support level. It should not however break the level and therefore going long at this value might be preferable.
[B]USD/CHF [/B]
An opposite 1 2 3 wave structure is establishing on the daily chart offering this pair to consolidate at 1.1100 in the long term.
An opposite 5 Elliott waves is establishing telling us that this pair should test the 1.1300, in case of a breakout the next support level is located at 1.1253.
[B]
The Wild Card
GOLD [/B]
A bullish channel was established on the 4 Hour chart and a breakout took place which caused the Gold to strengthen to 845.28. Currently, the slow stochastic and RSI indicators are clearly on overbought territory and Forex traders should anticipate a reversal. There is still room for the Gold to strengthen before any such reversal takes place.