Greenback gain holds – investors await news from Fed

A brighter US economic outlook has helped the Dollar, while the Yen rebounds after no surprise easing announcements from the BOJ.

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Earlier today, the greenback was testing a seven-week high against a basket of currencies. It was assisted by expectations that encouraging economic news would persuade the U.S. Federal Reserve, at least for the moment, not to apply any fresh stimulus.

While there could be a bit of profit-taking ahead of the Fed’s announcement at 1815 GMT, the Dollar is seen supported by signs of improvement in the world’s biggest economy. Data released last Friday, had confirmed that February was the third month in a row in which there was a gain of more than 200,000 jobs.

The Dollar index stood at 79.78, virtually flat from late U.S. levels, after having risen to its highest level in seven weeks at 80.132 on Monday.

The Yen though, rebounded from a 11 month low against the Dollar, after the Bank of Japan (BOJ) stopped short of taking any aggressive easing steps.

Today, the BOJ did nothing beyond mentioning some changes with a small loan programme, prompting a buyback in the Yen, surprisingly even though many market players had expected such an outcome.

The BOJ kept interest rates unchanged at a range of zero to 0.1 percent, as was widely expected to be the case. It also avoided conducting any further expansion of its asset-buying programme.

The Yen is still seen as staying under pressure. One reason given by analysts, is that Japan’s trade balance has been in the red in recent months and the many overseas M&A deals and investments. Many Japanese companies are looking to enter foreign markets in a bid to offset their own shrinking domestic market.

The Dollar’s overall strength was in contrast to the Euro’s weakening, which saw it touch a one-month low on Monday. The common currency is still feeling the effects of fears that the European debt crisis could worsen again, even after Greece’s success in concluding an historic debt-cutting swap deal.

Many market players remain uncertain about whether other southern European countries, like Portugal and Spain, can escape a similar fate.

The Euro stood at $1.3157 earlier today, having recovered from hitting a one-month low of $1.3079 on Monday.

The Aussie bounced back after hitting a 7 week low of $1.0475 on Monday.

The growing concerns about slowing growth in China, which is Australia’s single largest export market, and relative economic strength in North America, has weighed broadly on the Aussie the past few sessions and helped to push the Aussie to a 10-week low against its fellow commodity currency, the Canadian Dollar, to around C$1.0400.

All the best!
Adrian Jones

*****

EXOTIC TRADING

Yen Rebounds, Euro Still Hampered By Debt Doubts

The Japanese Yen bounced back after the BOJ policy meeting revealed no surprise policy easing for the single currency.

The Euro continues to be hampered by doubts that the debt crisis is over. As a result, the currency’s outlook remains unstable seeing that the Euro Zone economy is slowly slipping into recession.

News Watch For EURJPY

There were a number of High Impact news releases scheduled for the EURJPY pair today but these have already occurred:

Tentative JPY Monetary Policy Statement
Tentative JPY Overnight Call Rate
Tentative JPY BOJ Press Conference
12:00pm GMT EUR German ZEW Economic Sentiment

EURJPY Analysis

There’s a lot going on with the EURJPY pair at the moment which is going to make for an interesting time over the next few days. Take a look at the following chart:


The Bulls made a suprise appearance and forced price up towards the upper bearish channel trendline, but we need to be aware of a potential Double Top.

Notice that on this particular chart, price has tested the current area on previous occasions and failed. Another failure at the current price could see price fall, forming a Double Top pattern.

In this scenario, we want to be looking to go short. A potential entry could be the breakout of the lower trendline of the black, dashed channel.

There is also a case for Regular Bearish Divergence on my indicators so it will be interesting to see if price follows suit.

Amidst all this Bearish evidence, there is still potential for the Bulls to dominate. Right now, we could get a signal to go either way and if there is a strong surge beyond this resistance area, we could potentially see price continue all the way up to the 109.80 level.

The chips are set to fall pretty soon so keep an eye on this one. All the best! :)

Happy trading
Wesley Govender

Senior Trader for
World Class Trading Stars

*****

Things were pretty slow going yesterday as the Cable moved down towards our target but stopped short. We were expecting a bit of a pull back first but ended up moving south a bit before coming back up. We haven’t gotten anywhere near the trend line we were talking about yesterday but I still see the bullish divergence slowly playing out and view this trend line as a viable target on the 4h chart.


We’ve got Usd news all day today so this may move the market quite a bit. At 8:30am EST we have Core Retail Sales and Retail Sales announcements, at 10:00am EST we have Business Inventories, and at 2:15pm EST we have an FOMC Statement and Federal Fund Rates. Three of these five releases are high impact so expect some volatility during these times.

Good luck and safe trading!
Joshua Schultz

Senior Trader For
Forex Master Method

*****


Tuesday 13th Mar 12

EUR/USD

4 hour chart

Weekly Pivot – 1.3170
Monthly Pivot – 1.3261

Resistance – 1.3190
Resistance – 1.3291
Support – 1.3102
Support – 1.3078
Support – 1.2973

Yesterday’s tactic of waiting for price to retrace to the 38.2 Fib level at 1.3159 worked out perfectly. It reach as far back as the 50% level, which would have given another chance to get short.

Most likely scenario now is for the 1.3102 – 1.3078 area of support to be tested. Possible trade could be to go short on a close below 1.3078, targeting the next support level of 1.2973. I would drop down to the 15 minute chart to look for a logical place to place my stop loss. As the target is just over 100 pips, the stop should be placed no more than 50 pips away to give you a 2:1 win ratio. This is particularly important for new traders.

Mark McRae

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