[B]Economic News
USD[/B]
Yesterday was void of significant US economic releases, however there was a very important meeting comprising of US banking official to discuss the ever-growing credit crisis. U.S Treasury Secretary Paulson reaffirmed his opinion that the US economy will manage to deal with the growing credit concerns hinting that an imminent rate cut by the Fed may not be necessary. On the other hand US Senator Dodd that met with Paulson and Fed Chairman Bernanke urged the Fed to use all its available resources to put the brakes on the spreading credit crisis. Also yesterday the Fed injected another $3.75 B into the financial markets in an attempt to provide additional stability, the Fed has injected over $100 B last week. This action by the Fed coupled with Dodd’s and Paulson’s opposing rhetoric caused volatility all across the board and the USD had a mixed performance yesterday, as it continued on its bullish path against the EUR and the Sterling but lost ground against the JPY. The current market sentiment seems to be that the Fed will lower its benchmark rate in September and this was further reaffirmed by a reference in yesterday’s meeting that Bernanke is unsatisfied with the way the stock market reacted to Friday’s discount rate cut by the Fed. However the Fed will be able to avoid lowering its key interest rate if the market begins to experience signs of increased liquidity as a result of it dropping the discount rate from 6.25 % to 5.75 %.
Today there is also no market moving news expected from the US so greenback volatility will arise from factors that will affect the Feds descision on future monetary policy, namely the spreading credit concerns and the performance of the equity markets. The expectations of a rate cut from the Fed in September should provide stability to the equity markets and it will ease the credit crisis, therefore we should see the greenback maintain its bullish momentum in the near future.
[B]EUR [/B]
The most significant news to be released from the Eurozone yesterday was the German and European ZEW Economic Sentiment, which measure institutional investor sentiment, both released in negative territory and well below expectations at -6.9 and -6.1 respectively. This negative data strengthened the markets sentiment that the ECB will be forced to leave interest rates unchanged in September. The unrelenting problems in the US subprime housing sector coupled with the spreading credit concerns and reeling global markets will leave little room for the ECB to consider a rate hike in September and it is very possible that may even leave rates on hold in October and November as well. Future ECB monetary policy will very much depend on to what extent the US subprime mortgage crisis continues to negatively impact the financial markets. However in the meantime the fact that the majority of investors feel that the ECB will keep interest rates on hold in its next meeting is putting significant pressure on the EUR and it continued on its bearish path against the greenback yesterday. There was some positive news for the European economy yesterday as the Eurozone Trade Balance released at 5.2 B beating the expected figure of 3.2 B, but this news did not manage to provide the EUR with some much needed reprieve.
Today the only news to be released from the Eurozone will be the Current Account and the Industrial New Orders figures. Both of these indicators are not expected to have much influence on the EUR’s direction whose movement today will be mostly dollar centric as investors will also pay close attention to the financial markets which are expected to have a significant impact on future ECB monetary policy.
[B]JPY [/B]
The JPY range traded yesterday against the greenback and the EUR, consolidating on its recent gains that have resulted from a sharp rise in volatility which is making carry trades less appealing due to increased risk. The JPY has risen sharply against the EUR in the last few days as a result of the spreading credit concerns and its strength against the greenback has been mainly driven by the market sentiment that the Fed will lower its interest rate in September whilst the BoJ is expected to leave its key benchmark rate unchanged at 0.5 %. The Japanese interest rate announcement will be released later on today and there should be no surprises. The JPY could launch another bullish surge if the credit concerns persist and the equity market start reeling again. However the Feds descision to lower the discount rate has acted as a temporary safety net for the stock market and we could see increased liquidity, so this will slowdown the recent carry trade unwind thus causing the JPY to jump onto its all too familiar bear wagon.
[B]Technical News [/B]
[B]EUR/USD [/B]
The Pair was range trading yesterday between a support level of 1.3460 and a resistance level of 1.3510. Should the pair trade today above the pivot level of 1.3483 we could see a break through the resistance level and then the bullish trend for the EUR/USD could continue up to the 50% Fibonacci Level. An outbreak through the resistance level instead could indicate a drop down to 1.3400, the 0% Fibonacci level.
The traders have to wait for either breakthrough to occur in order to enter in the appropriate position.
[B]GBP/USD [/B]
The 4 hour chart indicates on an upcoming bullish trend when the long term Moving Average (Weighted 21) crossed by a bullish bar. Additionally the ADX (Average Directional Movement) also strengthens our opinion while the DI+ is on its way crossing the DI- from below which is considered a bullish signal. Going long seems to be preferable .
[B]USD/JPY [/B]
The pair moved yesterday with a slightly bearish trend between the upper level of 115.10 and the lower level of 114.10, slow stochastic on the hourlies indicates that it won’t become a reversal soon and that the pair might instead continue range trading today. Also MACD and RSI reside in neutral territory and thus point to an uneventful day for the USD/JPY.
[B]USD/CHF [/B]
The 4 hour chart implies on an upcoming bearish trend as the Slow Stochastic is crossed at 78 and has a negative slope ,however we need to pay attention to the current 4 hour bar ,when a positive bar may indicate an upcoming bullish trend and negative bar will imply on a range trading. Traders need to be aware during the next 4 hours where the market is headed and to take action
[B]The Wild Card
Gold [/B]
The 4 hour chart implies on an upcoming bearish trend as the Slow Stochastic is crossed at 78 and has a negative slope ,however we need to pay attention to the current 4 hour bar ,when a positive bar may indicate an upcoming bullish trend and negative bar will imply on a range trading. Those trading Forex need to be aware during the next 4 hours where the market is headed and to take action .