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US Dollar drops as Bernanke hints of Interest Rate cuts. Heavy data day for US with NY Fed survey, Philly Fed, Industrial Production and TIC flows released. CURRENCY TRADING SUMMARY – 15 FEBRUARY 07 (23:30GMT)
- U.S. Dollar Trading (USD) fell against all other majors following poor economic data and statements made by Federal Reserve chairman Bernanke. As a result the USD fell to six week lows against the Euro as Bernanke indicated that inflation pressures were receding in his semi annual address to the senate, adding cause to the likelihood of an interest rate cut later on this year. In other news, retail sales ex-autos was released softer than expected with a figure of 0.3% lower than the forecasted 0.4% for the month of January (previous was revised higher 1.3% than 1.0%). In US share markets, the NASDAQ rose by 28.50 points (1.16%) whilst the Dow Jones also rose by 87.01 points (0.69%). Crude oil dropped over Wednesday by US$1.10 a barrel to US$57.96. Looking ahead, in what is a heavy data day for the US, plenty of attention will surround any suggestion on the further slowing of the US economy. Beginning with Jobless claims, markets are forecasting a figure of 312k higher than the previous 311k. The Empire State survey (NY Fed Manufacturing) is also made public with expectations at 10.0 higher than the previous 9.13 index. Furthermore, TIC flows for the month of December are also released today with markets suggesting a stronger figure of 72.50 bln than the previous 68.40 bln. The trend is set to continue with further data in the form of Industrial Production for the month of January with figures of 0% expected lower than the previous 0.4%. Other production data in the form of the Philly Fed index (Feb) is out with a softer figure expected at 4.0 lower than the 8.3. Finally, with plenty reaction to Bernanke’s statement to the Senate indicating inflationary pressures dropping on Wednesday, Bernanke will address the House with investors awaiting added suggestion of interest rate cuts.
- The Euro (EUR) rose significantly against the USD reaching six week highs. The Euro broke solidly 1.31 for the first time since early January reaching a high of 1.3152 (low of 1.3024) before closing the day at 1.3124 in the New York session. Looking ahead ECB President Trichet is scheduled to speak on Globalization which may cause some interest.
- The Japanese Yen (JPY) strengthened against the USD by 0.3%. Overall the JPY traded with a range of a low 120.62 and a high of 121.37 before closing the day at 120.77 in the New York session. Looking ahead, GDP for the fourth quarter is released out of Japan later on today with economists predicting a 0.9% figure, higher than the previous 0.2%. UPDATE: GDP at 1.2%
- The Sterling (GBP) released ILO unemployment with an unchanged figure of 5.5% as forecasted. Overall, the GBP traded within a range of a low 1.9457 and a high 1.9641 before closing the day at 1.9619 in the New York session. Looking ahead, Retail Sales is scheduled for release later on today, with markets predicting a rise of 0.10% significantly lower than the previous 1.10%.
- The Australian Dollar (AUD) strengthened against the USD comfortably breaking the 0.7800 level. Overall the AUD traded with a range of 0.7787 and a high of 0.7849 before closing the day at 0.7837 in the New York session.
- Gold (XAU) rose following a drop in the USD, rising by US$4.20 an ounce to US$672.60.
TECHNICAL COMMENTARY | Currency | Sup 2 | Sup 1 | Spot | Res 1 | Res 2 | | EUR/USD | 1.2940 | 1.3024 | 1.3135 | 1.3176 | 1.3196 | | USD/JPY | 119.96 | 120.62 | 120.25 | 121.37 | 122.20 | | GBP/USD | 1.9317 | 1.9402 | 1.9635 | 1.9642 | 1.9751 | | AUD/USD | 0.7707 | 0.7784 | 0.7835 | 0.7850 | 0.7883 | | XAU/USD | 648.00 | 657.30 | 669.45 | 672.00 | 676.35 |
Initial support at 1.3024 (Feb 14 low) followed by 1.2940 (Feb 12 low). Initial resistance is now located at 1.3176 (61.8% retracement of 1.3368-1.2865 decline) followed by 1.3196 (76.4% retracement of 1.3298 to 1.2865 decline). Initial support is located at 120.62 (Feb 14 low) followed by 119.96 (Feb 6 reaction low). Initial resistance is now at 121.37 (Feb 14 high) followed by 122.20 (Jan 29 trend high). Initial support at 1.9402 (Feb 13 low) followed by 1.9317 (Jan 11 corrective low). Initial resistance is now at 1.9642 (Feb 14 high) followed by 1.9751 (61.8% of 1.9917-1.9482, 1.9749 id Feb 2 high). - Australian Dollar – 0.7835
Initial support at 0.7784 (Feb 14 low) followed by 0.7707 (Feb 12 low). Initial resistance is now at 0.7850 (Feb 14 high) followed by 0.7883 (76.4% retracement of the 0.7940 to 0.7697 decline). Initial support at 657.30 (Feb 9 low) followed by 648.00 (Feb 8 low). Initial resistance is now at 669.00 (Feb 9 high) followed by 676.35 (Jul 17 reaction high) Forex trading involves substantial risk of loss, and may not be suitable for everyone. 
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| This article provides an overview of the factors affecting the the leading currency pair: Euro-Dollar exchange, commonly expressed as EUR/USD. The Euro to Dollar exchange rate is the
price at which the world demand for US Dollar equals the world supply for Euro. Regardless of geographical origin, a rise in the world demand for Euros leads to an appreciation of the Euro. |
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Technical analysis is built on three essential principles:
1. Market action discounts everything This means that the actual price is a reflection of everything that is known to the market that could affect it, for example,
supply and demand, political factors and market sentiment. The pure technical analyst is only concerned with price movements, not with the reasons for any changes.
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