Dollar Trades Higher as Fed Rate Announcement Awaited
[9:17 AM | 0 komentar ]
The Federal Reserve is expected to keep its benchmark Interest Rate unchanged near zero
today, as traders get ready for a busy news cycle. Investors will focus on the interest rate
outlook, but many analysts say the Fed is unlikely to change the wording of its pledge to
keep rates low for an extended period. This may have the result of stabilizing USD trading,
or potentially driving the world's primary currency to new extremes. Will the USD experience
a reversal from yesterday's bullishness?
USD - Dollar Advances vs. EUR ahead of Fed Statement
The U.S. Dollar clung to small gains versus the EUR Tuesday, but pared earlier gains as
traders waded through mixed signals on the health of the economy and the Federal Reserve
started its 2 day policy meeting.
The Dollar climbed to a 1-month high against the EUR as concerns about the global banking
sector reignited safe-haven demand for the greenback. The Dollar climbed against its major
rivals asinvestors retreated from risk assets on jitters over banks and braced for central
bank meetings in the United States, the Euro-Zone and the UK.
Traders remained wary ahead of this week's heavy news cycle; the U.S. Federal Reserve
started its 2 day policy meeting on Tuesday and the European Central Bank (ECB) and the Bank
of England (BOE) will also hold policy meetings later in the week.
The overwhelming consensus is that the Fed will hold the federal funds rate steady at near-
zero, where the Fed's target has been since last December. Investors will be paying close
attention, however, to the wording of the Fed's statement for any clue as to when the
central bank would begin pushing Interest Rates higher. Once American markets open for the
day, traders should expect a lot of volatility.
EUR - Sterling Falls Sharply on UK Banking Sector Concerns
The EUR reversed its gains against the U.S. Dollar and the Yen Tuesday, when concerns over
the banking sector boosted the greenback, which tends to gain wheninvestors shed risk
assets.
The 16-nation currency traded at $1.4760, from $1.4775 yesterday in New York, after rising
to $1.4811 earlier. It was also at 132.95 yen, from 133.32 yesterday after strengthening to
133.98 earlier. Sentiment on the financial sector in Europe was weak and that pressured
theEUR and the Pound earlier and contributed to the recent strength of the U.S dollar,
analysts have said.
The Sterling tumbled to a 1-week low against the U.S. Dollar after the UK Treasury announced
a shake-up of British banks, which raised concerns about the financial sector. The British
Pound declined for a 2nd day against theEUR and slid 0.1% versus the Dollar at $1.6398 on
speculation the BOE will extend its asset-buying program this week.
JPY - Yen Hits Session Low vs. USD
The Japanese yen hit a session low in trading on Tuesday as U.S. stocks cut losses, reducing
safe-haven demand for the Japanese currency. The Yen weakened to 90.46 per Dollar from
90.21.
The Yen climbed earlier on reduced demand for higher-yielding assets after the 101-year-old
commercial lender CIT Group Inc. listed $71 billion in assets and $65 billion in debt in its
Chapter 11 filing in U.S. Bankruptcy Court in Manhattan recently. Low interest rates in the
U.S. and the bankruptcy filing of CIT Group are among the reasons Japan's currency is rising
against the USD, analysts have stated.
The JPY fell against the EUR on speculation the global economic recovery will boost demand
for higher-yielding assets. Japan's currency dropped to 133.89 versus the EUR from 133.32
yesterday.
Crude Oil - Crude Oil rises 2% Ahead of U.S. Factory Data
Oil prices rose above $79 a barrel on Tuesday after data showed U.S. factory orders in
September expanded at a quicker pace than expected, signaling potential for more fuel demand
in the world's biggest energy consumer.
Crude prices had fallen sharply earlier in the day as the U.S. Dollar firmed to a 1-month
high against other currencies and equity markets declined. A firming dollar and falling
stock prices are typically signs of investors shunning riskier assets, including
commodities.
Oil traders were awaiting weekly U.S. oil inventory data. Analysts expect that U.S. crude
inventories rose by 1.4 million barrels last week, but stocks of distillates, like heating
oil and diesel, were expected to fall by 1 million barrels, according to experts.
EUR/USD
This pair appears to be continuing to trade within a minor bearish channel. Currently at a
peak within this channel, it now appears that there are some indications of an impending
downward correction. The pair is currently over-bought on the hourly RSI and the daily MACD
shows a bearish cross. Going short may be a wise tactic today.
GBP/USD
This pair has neared the end of a consolidation trend on the daily chart and a tightening of
the Bollinger Bands is beginning to show. As this trend continues,traders will likely see
very few indications of a clear direction, but a sharp movement may be on the way in the
next week and traders should be on the lookout. Waiting for clearer signals may be a wise
move today.
USD/JPY
With many indicators floating in neutral territory, this pair appears to be floating within
a very tight range. With a fresh bullish cross on the 4-hour MACD, there is a possibility
for an impending upward movement. Forextraders should try to capture profits on this pair
today by buying on lows and selling on highs within its current range.
USD/CHF
This paid continues to show modest bullishness, and few indications that this will stop any
time soon. The hourly RSI shows this pair floating near the over-sold border, which could
suggest a level of upward pressure. The weekly Momentum oscillator also shows an upward
turn, hinting at the quickening pace of the upward movement. Going long appears to be
today's preferable strategy.
USD/TRY
This pair is giving off some decent indications of downward movement. The pair has been
trading within a tightening consolidation trend since yesterday morning and now appears to
have reached the tipping point. Many indicators show neutrality, but the longer-term
momentum appears to be down. Forextraders can see a fresh bearish cross on both the 4-hour
MACD and daily Slow Stochastic, and use this information to anticipate the strong bearish
movement which will likely occur today in order to capture great profits!
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