[B][U]Economic News [/U]
USD[/B]
Yesterday there was not any significant US economic data released apart from the FOMC Meeting Minutes and on the back of this announcement the USD remained relatively firm against most of the major currencies but weakened slightly against the EUR. The FOMC Meeting Minutes did not expose much about what the Fed is planning in the mid-term regarding its policy; however it pointed out that it would cut both the discount and Fed Funds rate to prevent some of the unpleasant effects on the economy that might take place. The Fed rate cut is now expected to be at least 0.5 % and if it is put into effect it could once again shake the greenback. As it stands the U.S. subprime housing crisis is absolutely not over yet and it will not come to an end until 2009 with a total of 150 billion dollars. Although the significant weakness in the emerging markets is due to that crisis the overall global growth remains strong and stable. While the US economy still suffers from the last housing problem, credit difficulty and subprime mortgage complexity, the up coming positive effect is that the U.S. trade deficit is getting smaller as stronger overseas development and a weaker dollar makes U.S. exports more competitive on the global market. Despite that the US dollar might resume its downtrend against the 13 nation currency, due to the fact that the European economy is currently viewed as more diversified and less exposed to the crisis. Towards the end of the month the Fed will make its key interest rate decision which will be closely followed by traders as a further monetary easing will place the greenback under pressure.
[B]EUR [/B]
Yesterday, during a conference meeting the President of the European Central Bank, Trichet, implied that the next main issue which will be discussed at the G7 meeting is that of the exchange rates. As it stands at the moment this main issue will mainly concern the Yuan, US dollar and Japanese Yen. Trichet did not suggest that the EUR was one of the problems and this view continues to be supported by German officials.
The most up-to-date observations came from the part of Germany’s Finance Minister who unambiguously pointed out that he is in favor of keeping a strong EUR. The impact of the currency’s rise persists to be more noticeable in German data than French data, even though the French have been more attentive than the Germans in regards to the current level of the EUR. During the same month, the French deficit actually improved. EUR bears should not expect to get any support from the ECB in the short term.
[B]JPY [/B]
Tomorrow at 15:30 GMT the policy board of the Bank of Japan will declare its assessment at the ending of the two-day meeting regarding the issue of Japans key Interest Rate. As it stands, the Governor of the Bank of Japan, Toshihiko Fukui, will most likely avoid raising the interest rate and will leave it on hold at 0.5 percent because deflation remains a constant battle for the Japanese economy. The BoJ’s last rate increase occurred in February and as a result of the U.S. housing problem and its negative effect on economic growth the BOJ would like to avoid a situation in which it will raise rates while other central banks are cutting them or keeping them on hold. The market is currently very volatile and it calls for apprehensive monitoring, so the BOJ has to raise its interest rate slowly but surely to avoid incompetent future investment and sustain growth over the long term. However the major global central banks expect the BOJ to possibly look to raise its key interest rates by December, which will provide the fledgling JPY with some support. In the last week the JPY has been on steady downtrend and this is likely to continue today as there are no significant news releases to provide the JPY with some reprieve.
[B][U]Technical News [/U]
EUR/USD [/B]
On the 4 Hour chart we see that the bearish trend is still running ahead. There is more volatility on the EUR/USD and there is a consolidation after the pair has broken the 1.4100 resistance level. The price might continue to move downwards a little bit and do a correction in a range of 1.4050 to 1.4000. As it seems, the bearish pressure will continue to gather momentum as well today.
[B]GBP/USD [/B]
The GBP/USD broke the 2.0400 resistance level and uptrend is supported by the positive momentum in the 4 Hour chart. The volatility in the GBP/USD is low and the Bollinger bands are tightened. We should expect to see a bullish trend today.
[B]USD/JPY [/B]
We can notice negative momentum on the 4 Hour chart, and it seems the pair might continue with the bearish trend. There is a resistance entry level at 117.50, and in case the pair breaks this level it is a very strong buy signal.
[B]USD/CHF [/B]
There is high volatility in the USD/CHF, and we can see it by the wide Bollinger bands in the 4 Hour chart. We also see that this Stochastic Slow is crossing deep in oversold territory indicating a strong possibility of a reversal.
[B][U]The Wild Card [/U]
Gold [/B]
Gold broke the 740.20 support level, and it is in an uptrend supported by the 1H exponential moving averages. The volatility is high, and the Bollinger bands are wide. Today, we expect to see a bullish configuration. The target is 741.55. This provides Forex traders with a great opportunity to go long on a very healthy uptrend.