Apr 28, 2010

Forex Crunch Dollar Bulls Raging – Will the trend continue?

Forex Crunch Dollar Bulls Raging – Will the trend continue?

Dollar Bulls Raging – Will the trend continue?

Posted: 27 Apr 2010 03:22 PM PDT


The US dollar is on the move – fresh American data and fresh European worries send EUR/USD to new lows.Also other currencies are surrendering to the dollar – the US dollar index gave us signs of this breakout last week. Now it happens. You can guess which currency stands firm against the dollar. A sustainable trend still needs to be confirmed.

The US continues to show signs of recovery. The CB Consumer Confidence jumped to 57.9 points, the highest since the eve of Lehman Brothers’ collapse. This also exceeded early expectations for a rise to 53.6 points. American confidence was met with a sign of distrust in Europe:

It was Standard and Poors’ turn to downgrade Greece’s credit rating. They lowered it to “junk”. It can’t go lower from here. While Greece is the spotlight of the debt crisis for many months, the big fear is from contagion.

S&P also showed the way to contagion – Portugal, that already got downgraded a few week’s ago by another agency, was beaten by S&P – a downgrade from A+ to A-, worse than expected. Spain,Ireland and even Italy could be next.

EUR/USD managed to hold above the big barrier of 1.3267 during the day, but this downgrade sent it piercing down through last week’s temporary low of 1.3201. At 1.3150, the road to the significant support line of 1.3080 is open. Reaching this spot will be a full cycle for the Euro, that began a long term rally from this point at March 2009.

But it’s not only the Euro – the Pound, the Swissy, the Aussie and the loonie are all falling against the dollar. They have all lost their recent achievements – USD/CAD parity is drifting away.

This brings the US dollar index to 82.40 – above the target of 82.24 which was the peak on March 25th. This index is now at the highest level since May 19th 2009 – we have a significant breakout for this important index.

The one currency that doesn’t give in to the dollar is the Japanese yen – it gains against the dollar, and the yen crosses are falling. For example, the popular Geppy (GBP/JPY), that made an attempt to break above 146 early in the week, is now collapsing to 142.

The gains of the yen show that this is risk aversive trading – it leans on fear for the global economy more than on the US recovery. We will need to see many more positive indicators from the US, especially in the job market, in order to see sustainable gains in the US dollar index.

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Forex Daily Outlook – April 28 2010

Posted: 27 Apr 2010 02:00 PM PDT


FOMC and Federal Funds Rate statements are released in the U.S.  Inflation rates drop in Germany but rise in Australia. These are just a few of the events awaiting us today:

In the US, Federal Open Market Committee issues its statement regarding interest rates and Monetary Policy. This will influence current market activity as well as provide an outlook on future tendencies.

Later in the US, Federal Funds Rate issues their statement concerning short term interest rates. This is a major factor for currency valuation and will most likely effect the currency rates.

More from the US, Crude Oil Inventories, released weekly, measuring the number of barrels of crude oil held in inventory by commercial firms during the past week, and influences the price of petroleum products which affects inflation, but also impacts growth as many industries. It is expected to remain approximately 1.9M

In Europe, encouraging news from Germany, German Prelim consumer price index indicating the change in the price of goods and services purchased by consumers from 6 German states, which is the earliest major consumer inflation, is expected to drop from 0.5% to 0.1%.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Australia, Consumer Price Index, the primary indicator of consumer prices, expected to rise from 0.5% to 0.9% as an indicator of inflation it will create hefty market impacts. And also the Trimmed Mean CPI showing inflation trends shows a similar tendency.

More in Australia, CB Leading Index, released monthly, showing the change in the level of a composite index based on 7 economic indicators, used to predict the direction of the economy, is expected to remain about -0.2%.

For more on the Aussie, read the AUD/USD forecast.

In New Zeeland, Reserve Bank of New Zealand  (NBNZ) Business Confidence index, released monthly, measuring the level of a diffusion index based on surveyed manufacturers, builders, retailers, agricultural firms, and service providers, a leading indicator of economic health will probably remain around 42.5 points.

Their (NBNZ) Rate Statement about interest rates decision and commentary about the economic conditions was also issued. This will affect the currency as well as provide future forecast.

More from New Zeeland, Official Cash Rate, showing the short term interest rates by which banks lend balances held at the RBNZ is foreseen to remain around 0.25%.

Finally in New Zeeland, Trade Balance, released monthly, showing the difference in value between imported and exported goods is expected to have a favorable growth from 321M to 372M. This is really good news for New Zeeland’s economy.

That’s it for today. Happy forex trading!

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