Forex Traders await European Central Bank Policy Decision
The EUR USD is trading flat as Forex traders await this
monthâ€™s European Central Bank policy decision. Investors are looking for the
ECB to leave interest rates at the historically low 1% level.At the same time, the market will be looking
for comments on the debt problems in Greece,
Portugal and Spain.Expect the language of the report to be
dovish in tone.
After the release of the ECB policy statement, central bank
President Trichet is expected to comment on the European Union debt issues, the
European banking system and the sluggishness of credit in the Euro Zone
region.Trichetâ€™s comments are likely to
be market moving especially if he comes down hard on the countries experiencing
Technically, the Euro is trading in a range. The main trend
is down, but this market still has the potential to rally to 1.4680, to
complete a major 50% retracement.On the
downside, 1.4386 remains a short-term target.
The AUD USD is trading better this morning.Investors bought the Aussie and shorts
covered positions following the release of a robust Australian jobs report. The
Australian jobless rate eased in December while the economy added close to three
times as many jobs as initially forecast.
The size of the rise in the number of jobs has increased the
chances that the Reserve Bank of Australia will raise interest rates
at its next meeting on February 2nd. Some economists are forecasting a 5.50%
rate by December 2010.Gains could be
limited by traders who believe a tighter monetary policy in Australia and an end to Chinaâ€™s
stimulus measures will dampen Australian exports.
Technically, upside momentum could continue to drive the AUD
USD into the November 16th top at .9405.At this time, the Aussie is walking up an uptrending Gann angle at
.9294.To remain bullish, this market
has to cleanly regain this level and begin to establish support on it.
The bullish action in the Australian Dollar is spreading to
the NZD USD.The Kiwi is trading in a
range overnight, but .7523 remains the next possible upside target. Momentum
seems to be slowing as traders may be concerned that a higher priced currency
may curtail demand for New
Zealand exports.The chart indicates that any shift in
sentiment may drop this market to an uptrending Gann angle at .7250 over the
Demand for riskier assets is helping to give the USD JPY a
boost.With risk sentiment back on, the
Yen has room to fall. Traders are shifting once again to a risk demand environment
because the stock market continues to remain strong and the prospects for a
rate hike by the Fed diminished.
Overnight reports, which led to the drop in the Japanese
Yen, highlight the countryâ€™s reliance on exports. Last nightâ€™s reports showed
that producer prices fell for the 12th straight month and machine orders
unexpectedly dropped. These reports indicate that the government is likely to
take more action to combat deflation in an attempt to revive economic growth.Look for the Japanese government to implement
more monetary easing and fiscal policies to fight deflation.This means that it would be in the countryâ€™s
best interest to promote a softer Yen at this time.
Technically, a short-term range has been created at 93.77 to
90.72.Watch for a retracement to 92.24
The fear of an intervention by the Swiss National Bank and
less demand for lower risk assets are the conflicting stories keeping the USD
CHF inside of a tight trading range. For the third straight day, the currency
is ping-ponging inside a 50% price at 1.0212 and a .618 price at 1.0143.
Technical factors are building which suggest that traders are likely to â€śgo the
way of the moveâ€ť.This means a break-out
to the upside is likely to trigger a rally to 1.0327 and an acceleration to the
downside could drive this market to 1.0083.
The USD CAD is trading flat overnight.Greater demand for gold, copper and natural
gas, three commodities which provide almost half of Canadaâ€™s export revenue are helping
to support the Canadian Dollar. Look for this currency to remain strong as long
as there is demand for raw materials.
The inability of the USD CAD to break further is a direct
result of the comments from Canadian Prime Minister Harper who earlier in the
week said he was concerned about the rise in the Canadian Dollar and its
negative effects on the economy.Traders
seem reluctant to challenge the PM at this time out of fear of possible
intervention by the Bank of Canada.
Technically, the USD CAD is in a downtrend with the October
bottom at 1.0205 a potential target.On
the upside, a downtrending Gann angle at 1.0385 remains the strongest
The GBP USD is trading flat to lower ahead of the New York opening.The British Pound turned the main trend to up
on the daily chart earlier in the week when it crossed a main top at
1.6240.This move was primarily driven
by a Bank of England memberâ€™s call for higher interest rates later in the
year.Furthermore, traders are beginning
to believe that the need for further stimulus has dissipated.The first upside objective is a 50% level at
1.6355, followed by 1.6478.A weaker
market today could trigger a short-term retracement to 1.6104.
In addition to this morningâ€™s ECB statement, traders will
have the chance to react to the U.S. Retail Sales Report.Based on previously released new motor
vehicles sales and December Chain-Store Sales, traders should expect a healthy
report.Look for retail sales to grow by
0.4% and retail sales less autos to increase by 0.2%. Todayâ€™s jobless claims
report should show an increase of 3K with a range of 400K to 450K.
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