Concerns over Local Currencies’ Strength Boost Dollar 2012

Indications from around the globe of a more restrictive official stance toward capital flows and currency volatility have been contributing to a reduction in risk appetite in trading recently. Concerns in countries outside the U.S. and China are mounting over the weak Dollar and Yuan. Recently several emerging-market central banks have taken measures seen as an attempt to control their currency’s appreciation versus the Dollar. The link of the Yuan to the weakening Dollar continues to push the Chinese currency down, adding to pressure from China’s export competitors to let the Yuan appreciate.

Brazil, South Korea and Indonesia have unveiled this past week various measures and forms of capital control to help better manage foreign exchange risks and imbalances. These measures are seen as attempts to limit their respective currencies’ appreciation versus the Dollar.

As the U.S is the world’s largest importing economy and China is the world’s largest exporting economy the continuous weakness in these currencies is hurting exporters in competing countries. The exporters suffer both from erosion in profits as well as extreme competition from China which hinders global economic recovery.

This concern over the strength of local currencies aided the USD during Thursday’s trading and if the restrictive stance is set to continue, these one sided interferences with the exchange rate might provide a much needed boost to the Dollar.

source: forexyard.com

AUD and NZD Decline on Reduced Risk Appetite 2012

The Australian and New Zealand Dollars headed for their first weekly loss against the USD this month as well as their first weekly decline versus the Yen in three weeks as Asian equities extended a global slump, reducing demand for higher yielding assets. Putting further pressure on the South Pacific currencies was the release of weak U.S economic data which signaled sluggishness in the recovery of the world’s largest economy, reducing risk appetite further.

The New Zealand Dollar was at 73.07 U.S. cents from 73.11. It has dropped 1.7 % this week. Australia’s dollar was at 91.88 U.S. cents, heading for a 1.4% weekly drop. It slid 1.2% Thursday as a drop in equities discouraged carry trades. In carry trades investors buy higher yielding assets with assets from countries with relatively low interest rates, namely Japan and currently the U.S as well. Borrowing costs are near zero in the U.S. and 0.1% in Japan while interest rates are 3.5% in Australia and 2.5% in New Zealand; this disparity attracts investors to the South Pacific nations’ assets.

Australia’s currency has risen 51% in the past 12 months against the greenback, the top performing currency against the Dollar as the Reserve Bank of Australia became the first central bank to increase borrowing costs twice this year. However, investors are becoming more skeptical as to the chances of a 3rd consecutive increase this December, putting more strain on the AUD.

source: forexyard.com

The EUR Turns Bearish on Waning Risk Appetite 2012

The single Euro-Zone currency slid broadly on Thursday as investors’ revived safe-haven demand for the U.S. and Japanese currencies accelerated the EUR losses. The EUR weakened as equity and commodity markets fell encouraging investors to pare back exposure to risk and buy back the U.S and Japanese currencies against perceived riskier currencies. On Wednesday, the EUR climbed more than half a percent against the dollar but struggled on Thursday to break back above $1.5000.

The European currency fell 0.4% to $1.4911 vs. the U.S dollar on speculation the German economy could face a double-dip recession in late 2010 or early 2011 as extra public spending are withdrawn. The EUR currency also slid to a more than 2 week low against the Japanese yen, although later rebounding to 132.58 yen. However it was still down 0.9% for the day in volatile trading with almost 2 yen separating the day’s high and low.

The British pound depreciated for the first time in 5 days against the EUR, weakening 1% to 89.50 pence. The Pound also dropped vs. the U.S dollar 0.7% to $1.6644 today.
The Sterling fell for a 3rd day versus the U.S dollar after the Daily Telegraph said U.K. lenders are in a worse state than those elsewhere, citing the world’s largest credit-checking company. Analysts said that there are ongoing concerns about the state of the banking sector in the U.K., and that is weighing on Sterling.

source: forexyard.com

U.S Unemployment Claims to Impact the dollar 2012

- It’s the primary gauge of consumer spending, which accounts for a majority of overall economic activity.

- British retail sales have stayed unchanged in the past 2 months, disappointing the Pound. This time, they’re expected to rise by 0.6%. Like in every country, this is a major release; any number will move the market.

13:30 GMT U.S Unemployment Claims

- The number of individuals who filed for unemployment insurance for the first time during the past week.

- This is the nation’s earliest economic data. The market impact fluctuates from week to week – there tends to be more focus on the release when traders need to diagnose recent developments, or when the reading is at extremes.

16:00 GMT EUR ECB President Trichet Speaks

- The president of the European Central Bank sometimes slips a worried call that shakes the markets, although he’s been rather mild in the last rate decision.

- This week, he speaks in three events: the first was on Wednesday at 8:40 GMT, the second, that focuses on monetary policy, will take place Today at 16:00 GMT is of higher importance, and the third one is about the exit strategy to the crisis, and will happen on Friday at 10:30 GMT – probably the most important speech.

- As head of the ECB, which controls short term interest rates, he has more influence over the EUR value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy.

source: forexyard.com

Crude Oil Prices Set to Decrease 2012

Crude oil rose above$80 a barrel on Wednesday as the dollar weakened, prompting investors to once again buy into commodities. However, as I will demonstrate below, Crude Oil may very well be heading for a reversal later today. This might be a good opportunity for forex traders to enter the trend at a very early stage and a great entry price.

• The indicators used are the Slow Stochastic, RSI and MACD.

• Point 1: There is a “doji” candlestick that has formed on the chart, indicating that a reversal should take place.

• Point 2: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 3: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.

• Point 4: The MACD indicates an impending bearish cross, which may signal a downward movement is going to occur in the near future.

Crude Oil 4-Hour Chart

source: forexyard.com

Potential Reversal for GBP/CHF 2012

The GBP/CHF pair provides strong signals for a possible change of trends. The pair is reaching towards a support level at the moment. If the level is breached, the downward move is likely to extend.

• The chart below is the GBP/CHF 4-hour chart by ForexYard.
• The technical indicators used are the Bollinger Bands, the Slow Stochastic, the MACD/OsMA and the Relative Strength Index (RSI).
• The chart provides a very distinct bullish channel. However, the chart is touching its lowest border.
• A bearish cross on the Slow Stochastic has successfully predicted the modest bearish correction that we’re currently experiencing, which led the pair to the 1.6974 level.
• Currently, both the MACD and the RSI are on the verge of indicating a bearish reversal. If the MACD will indeed perform a bearish cross, and the RSI will drop below the 70 line (both marked in red), it will be a string sign for a significant drop.
• There are 3 consecutive support levels that can be observed at the moment. The support levels are placed at the 1.6950, 1.6800 and the 1.6650 prices. If a certain level will be breached, the pair is likely to reach towards the next support level.

source: forexyard.com

Dollar Stabilizes before GDP data 2012

The U.S dollar rose Tuesday as a decline in stocks and dimming expectations about the U.S. economic recovery increased demand for U.S currency perceived as safer. Some investors buy the Dollar, seen as a safe haven, against other higher-yielding currencies and sell assets like stocks and commodities when economic optimism diminishes.

The greenback also climbed on speculation traders exited bets against the dollar before the U.S. Thanksgiving holiday. Analysts said that risk aversion is back in the markets supporting the greenback and putting pressure on high-yielding currencies like the EUR. In the current environment a weak U.S. Gross Domestic Product (GDP) number weighs on sentiment. Traders are a little more sensitive to sentiment changes because they want to get out of positions ahead of the long U.S. weekend.

The Commerce Department will release its second estimate of 3rd quarter GDP at 13:30 GMT today. The data may show the world’s largest economy expanded at a 2.8% annual rate, compared with the 3.5% estimated last month, according to economists. Traders will keep on eye on the advance estimates on corporate profits to be released together with the GDP report. The U.S. economic data have become more mixed and a further poor U.S. economic data and a general desire to reduce risk ahead of year-end are likely to interact to support the U.S dollar.

The Federal Reserve will also release minutes of its Nov. 3-4 meeting at 19:00 GMT, which will include economic projections for the next two years. Market players will particularly focus on the Fed’s forecasts for unemployment in the U.S.

source: forexyard.com