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FOMC And Its Wave Of Sentiment

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Sep 23, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    The USD traded at a new low for the year against the EUR on Tuesday as it met price pressure all day. The greenback also traded weakly against the GBP and JPY. The U.S. stock markets turned in a slightly positive day. Most investors are focused on the FOMC meeting results which will be announced later today. While there is almost no chance in Hades that an interest rate hike will take place, traders will read the language of the report carefully trying to determine the Federal Reserve’s economic outlook. The description ‘hawkish’ has not been used for a little over a year regarding interest rates, and though it is not likely that the Fed is going to focus on inflation, what investors will tune into - are the expressions the FOMC uses to describe growth and its prospects. Of importance too will be all aspects of monetary policy, which would affect the stimulus that has been implemented since the financial crisis has created its havoc.
    Many investors feel that the Federal Reserve and the USD are at a critical juncture. The greenback has lost significant ground to many currencies the past few weeks. While many investors believe that the USD’s value is part of risk appetite returning because of a belief that the international economy is going to experience a recovery, there are others who also believe that the Fed Reserve may simply want to keep the greenback weak in order to help the U.S. manufacturing base. There will be an overload of information and data these next few trading sessions, tomorrow Existing Home Sales and the weekly Unemployment Claims will be released. There could be additional impact from speeches made for the upcoming G-20 summit that will officially get underway Thursday. The currency market had plenty of volatility yesterday and considering today’s schedule, traders will be braced for another day of action. The USD has taken a pounding the past few weeks and today’s FOMC meeting could provide another lynchpin for a test of its sentiment.

    The EUR enjoyed another day of strength against the USD on Tuesday climbing to a new high for the year. Only the Italian Unemployment Rate was published yesterday and it produced a better than anticipated number but the likelihood of this data having had an influence on the EUR is basically nil. Today a truckload of PMI data will be released from Germany and France including readings from the Services and Manufacturing sectors. All of these Flash reports are forecasted to show better numbers. Germany is expected to have a Flash Manufacturing PMI figure of 50.9 compared to last month’s outcome of 49.2. The EUR has reached a new high against the USD and this has certainly grabbed the attention of many traders. One of the implications that may begin to face the EUR if it continues to build in strength against the greenback will be its impact on Germany, this because the country’s economy is largely based on an exports. The combination of the PMI data from the continent and the FOMC statement from across the Atlantic can be counted on to bring additional volatility for the EUR today.

    The Sterling managed to break its losing streak against the USD yesterday. The gains made by the GBP came on little economic data, but investors have been gearing themselves for the MPC Meeting Minutes publication anyhow. Traders will read through this report in an effort to try and reaffirm their existing sentiments. The Sterling has had a rollercoaster ride the last few weeks and after yesterday’s trading has pushed itself into an intriguing position. The Bank of England’s MPC report today should give insight regarding its intentions on the possibility of further quantitative easing measures. Also the BBA Mortgage Approval data will be released today and is estimated to produce a figure of 41.1K. The BoE publication today could prove another dose of impetus for the Sterling.

    The JPY gained slightly against the USD on Tuesday in rather light trading due to the Japanese holiday. The JPY has shown considerable consolidation the past week after making strong gains across the board. As a large amount of Asian traders return from their holidays it will be of interest to see if the JPY receives yet another push in the coming days taking into account risk appetite which is perceived to be increasing. Gold traded stronger on Tuesday on the heels of the USD giving up more ground and the precious metal should be watched closely today.

    Technical Trading Proves Profitable Yet Again


    Every once in awhile I repeat myself, because the market repeats itself. Today I will have to reiterate what I said yesterday, “From a technical standpoint, the market is still strong and seems to be holding relatively well.” Trading on Monday was not incredible but it was impressive. We gapped up on the open and while we did close the gap, we had a green day, and were able to touch just below the highs of the 17th at 1074.77. Support 1064.3, 1061.2, 1058.5, 1051.9, 1035 Resistance: 1074.77, 1097.6, 1133.5, 1209.1.


    Take a look at the highlighted candles. These are very bullish candles, and may often signal the end of a down move. In our case they only accentuate the strength of the market. While these candles are large with at least a 10$ on each of them, with proper trade entry, one can feel relatively confident about getting into a long position. We are still seeing strength in this market, but I believe we will have to push past these highs sooner rather than later if we want to continue this move. Support 1011.90, 1006.2, 1003.2, 997.35, 989.95, 982.40, 971.75 Resistance, 1019.65, 1024, 1032.3


    Apparently the U.K is “exiting the recession” and thus they do not “see the need for more quantitative easing”. Considering that the words “quantitative easing” sent the Pound spiraling downwards, we could expect to see some strength in this market. However, we are technical analysts, so we don’t really care about things like that. ?
    Since we popped off of support two days ago we have been trading 2 cents higher. While trading this channel we expect us to trade the full range of it, and try and push back up to about 1.6741. On the way we have a few resistance points at 1.6413, 1.6586, 1.6658, 1.6741. Support can be found at 1.6295, 1.6262, 1.6112, 1.5982, 1.5800


    As we look at this currency pair we can see the bearish reversal candle I have often mentioned. At this point we were not able to push higher, and started a 2 cent decline. At the moment we are seeing some consolidation, but we expect a push to the 1.0589 level, if not lower. The US dollar has been weak as of late and the trend is certainly down. Some may expect a pop, but as of now we must continue to look at this market technically, and technically it is weak. Support 1.0659, 1.0589, 1.0489, 1.0419, 1.0312 Resistance 1.0735, 1.0793, 1.085, 1.0933

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