Friday, April 8, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

Link to Forex Trading Education : Forex Trading Blog by FOREXYARD

BOE Holds Interest Rate; GBP/USD Could Continue Towards 1.64

Posted: 07 Apr 2011 06:51 AM PDT

printprofile

The pound was off slightly after the Bank of England held interest rates at an all-time low and did not adjust the Asset Purchase Facility. Market participants expected the moves by the BOE and the pound should continue its uptrend versus the dollar as the May BOE meeting approaches. Here expectations run high for an increase to the interest rate following the release of Q1 GDP data.

Despite rising inflationary pressures in the UK, the members of the Monetary Policy Committee decided to pass on a rate hike. In February, UK inflation rose to 4.4%. Economists suggest that an increase to the interest rate will happen in May as MPC members may want to see a recovery in growth rates before raising the interest rate. Q4 2010 British GDP contracted -0.5%. Q1 2011 GDP is forecasted to rise 0.7%.

Technicals are beginning to show the GBP/USD is overbought as daily stochastics chart are beginning to cross. That is not to say that the uptrend is at risk. Momentum continues to rise and value buyers should be found near the 100-day moving average at 1.5950 and the March low at 1.5930. Additional support is located at Monday's high at 1.6180. To the upside, the 1.6400 resistance remains the target and above that 1.6460 from the January 2010 high.

GBPUSD_Daily

Forex Market Focus on Central Banks

Posted: 07 Apr 2011 04:11 AM PDT

printprofile

As the European and British interest rate announcements draw near, Portugal has sought aid as the market sparsely reacted to the news.

Yesterday Portugal formally requested funds and authorities from the EU and the IMF have been quick to put together a package that could total 90B euros according to a Wall Street Journal article. The move was widely expected by market players and the euro barely budged after the report hit the news wires. Traders are focused on today's interest rate announcements. Prior to today's ECB interest rate release, the EUR/USD is trading off of yesterday's yearly high at 1.4270 from 1.4309.

Traders will be focused on the Minimum Bid Rate at 11:45 GMT where the ECB is forecasted to raise interest rates 25 bps to 1.25%. Following the announcement, all eyes will turn to the ECB press conference at 12:30 GMT for comments by ECB President Trichet. Risk runs high for a pullback in the EUR/USD should Trichet signal the increase to the interest rate is a one-off event and not the beginning of a tightening cycle. Support is found at the 20-day moving average at 1.4150. Resistance is 1.4580.

The BOE will also address interest rates this afternoon but there is a bit less excitement surrounding the event as no adjustment in British rates are expected. The GBP/USD has recovered almost all of yesterday's declines following the weak manufacturing data. Resistance for the pair is 1.6400 and support comes in at 1.6250.

US weekly unemployment claims will come in the afternoon and are fairly insignificant as FX traders focus on central banks and European rates.

EUR/JPY Update

Posted: 07 Apr 2011 01:51 AM PDT

printprofile

To continue with a previous analysis of the EUR/JPY, the pair continues to move higher prior to the release of the ECB interest rate announcement. Due to the sharp appreciation the pair, technicals show the pair may be overbought and faces a risk of a pull back on a buy the rumor, sell the fact.

Expectations for rising interest rates in the EU continue to support bids for the euro. Should ECB president Jean-Claude Trichet announce today the ECB's intention to continue the tightening of EU monetary policy the euro will garner further support. However, the ECB says it never pre-commits to interest rate increases. Therefore, there is a risk of a buy the rumor of the interest rate hike and a sell the fact at the release which could hurt the euro in the short term and trigger profit taking on long EUR/JPY trades.

A resumption of the carry trade has the yen on its back foot both against not only the euro but also versus the pound, greenback, and Aussie dollar. The coordinated intervention by the G7 nations is not the only factor for the decline of the yen but it certainly was a trigger for the current deprecation of the yen versus the majors.

Looking at the technicals, the weekly chart shows the pair paused on Friday at the 119.60 resistance level only to charge higher this week to a high of 122.60. Stochastics on both the daily and the weekly show the pair is overbought but rising momentum hints at future gains in the pair.

As such, traders may want to raise their stop below last week's high at 119.60 or take profit on profitable trades. For future trades, traders should be targeting a range between 127 and 128 which falls between the 2009 summer lows and the April 2010 high. Mid-term targets are 134.30 and 138.50. A breach of this level would target at the 2007 low/pre financial crisis near 150.00.

EURJPY_Weekly

Euro-Zone Minimum Bid Rate Set to Dominate Markets Today

Posted: 06 Apr 2011 11:28 PM PDT

printprofile

The euro-zone Minimum Bid Rate, scheduled to take place at 11:45 GMT, is likely to be the dominant force driving markets today. Analysts are unanimous in predicting that the European Central Bank will raise interest rates to 1.25%, a move which is likely to boost the euro above its recent highs against the Japanese yen and US dollar.

Here is a roundup of today’s other main economic indicators:

12:30 GMT- Canadian Building Permits

The monthly Building Permits figure has proven to be an effective gauge of Canadian economic growth and as such, tends to influence CAD pairs. The loonie turned bearish against the dollar yesterday. If today’s figure comes in at the predicted 1.6%, the USD/CAD could stage a downward reversal.

12:30 GMT- US Unemployment Claims

Following last week’s surprisingly positive US Non-Farm Payrolls figure, investors will be closely watching today’s unemployment number. Analysts are predicting a slight decrease in the number of people filing for first time jobless insurance. If the figure comes in at or below the expected 385K, it may help blunt the losses the dollar is expected to take following the euro-zone Minimum Bid Rate.

Japan, UK, and EU Interest Rates

Posted: 06 Apr 2011 12:47 PM PDT

printprofile

Tomorrow will be a busy day for central bankers as Japan, England, and the European Union have interest rate decisions. Only the ECB is forecasted to adjust interest rates higher. Prior to this highly anticipated market event, the euro moved higher on rising interest rate expectations.

The EUR/USD looks to close near its daily high at 1.4338 after opening at 1.4257 as the ECB rate decision approaches. All expectations are for the ECB to raise interest rates by 25 bp tomorrow. Should the ECB commit to further increases to the Minimum Bid Rate, the EUR/USD could surge higher with targets at the 1.4580 level. If the ECB does not signal additional tightening measures, the EUR/USD could fall sharply as expectations in the market run high. Support comes in at the November 2010 high at 1.4280 and the 20-day moving average at 1.4120.

The BOE will release its decision on the Official Bank Rate. No change is expected in the rate but the pound is rising as traders begin to price in an interest rate hike, potentially in May. Today the pound fell following a sharp decline in manufacturing production numbers but the pound rebounded higher in the US session and the GBP/USD looks to close near its opening day price of 1.6334.

The Bank of Japan will announce its interest rate decision tomorrow and the BOJ is not expected to adjust the nation's interest rate due to the natural disaster last month. In fact, the BOJ may announce additional easing capabilities to spur a recovery in the disaster hit areas. Further declines may be expected in the yen as momentum has swung against the currency. The yen is declining sharply against the euro and a target for the EUR/JPY is located at 128.00. To the downside, support is found at 119.60.

Gold and Silver Bullish Trends Continue to Run

Posted: 06 Apr 2011 11:14 AM PDT

printprofile

The commodities' spectacular run higher continues as inflation fears mount given the Federal Reserve's latest meeting minutes showed little dissent to the quantitative easing program.

Spot gold reached a new all-time high today, climbing as high as $1,461.83 from an opening day price of $1,452.93. Spot silver also climbed higher to $39.74 from $39.37. The all-time high for spot silver at $48.70 was made on January 17th, 1980.

Driving the prices of the metals higher are inflationary fears as increased prices in food and oil continue to rise in both developing and emerging markets. Today, spot crude oil briefly climbed above the $109 level before pulling back to $108.70. Supply fears driven by the geopolitical events in the Middle East and Africa remain in the back of traders' minds as increasing economic growth is providing a bulk of the support for the crude oil gains.

Yesterday's Federal Reserve meeting minutes showed the Fed still feels inflationary pressures are stable once the volatile food and energy components are eliminated. The Fed should continue on its current path of QEII which will keep access to cheap funding for the time being and according to the prices of gold and silver, inflation expectations are rising. With the exception of the Federal Reserve, central banks throughout the world are taking steps to tighten monetary policy which is the situation currently in China, India, and tomorrow with the ECB.

Until the Fed signals its intention to begin tightening US monetary policy, metal prices should continue their bullish run higher as market players move to protect themselves from rising inflationary pressures with assets in gold and silver.
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)