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Forex Market Technical and Fundamental Recap

Discussion in 'Technical Analysis' started by forextrends24, May 20, 2009.

  1. forextrends24

    forextrends24 New Member

    Mar 27, 2009
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    Today’s Forex Analysis summary

    Risk takers drove the EUR USD higher on Tuesday. Traders for the most part decided to ignore the bearish U.S. housing report today and decided instead to focus on the possibility of the start of a global economic recovery.

    It’s hard to believe this market has so much buying power behind it after last week’s sell-off following the release of a report showing a huge contraction in the Euro Zone economy. Even in the face of bearish fundamentals, the Euro remains strong. This is causing problems with most fundamental analysts at this time. The best way to trade is to follow the trend and stay away from trying to rationalize the rally.

    News that the U.K. inflation rate dropped to a 15-month low in April under normal circumstances would have triggered a sell-off in the GBP USD, however, traders chose to ignore this report today and instead decided to focus on the long side because of strength in the global stock markets in particular financial sector stocks.

    Higher crude oil and equity markets helped drive the Canadian Dollar to within striking distance of a new high for the year at .8717. The chart indicates the main trend is up with a new higher bottom formed at .8465. A trade through this price will turn the main trend to down. The best suggestion is to continue to trade the trend and stay away from trying to forecast a top. Trader appetite for risk is strong, and cash is leaving the low-yielding U.S. Dollar to seek a better return elsewhere.

    Despite turning the main trend to up on the daily chart two days ago, the Japanese Yen is feeling downside pressure for a second consecutive day. This is being triggered by increased demand for more risky assets. Aggressive investors have been borrowing the Japanese Yen and selling the U.S. Dollar in a revival of carry trade activity.

    Weakness in the equity markets could also drive this market higher if trader demand for risk begins to wane. Gains may be limited to the upside as the Bank of Japan feels that excessive volatility could have a negative effect on demand for Japanese exports.

    The Swiss Franc posted a strong close versus the U.S. Dollar on Tuesday as Swiss investors repatriated in an effort to capture higher yielding assets elsewhere. Strong demand for higher yields encouraged traders to leave the safety of the Dollar.

    Traders for the most part have been ignoring the bearish outlook for the global economy at this time. The current increase in demand for higher risk assets is all speculation which means this market could fall much faster than it has gone up.

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    Disclaimer: Trading foreign exchange on the margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore should not invest money that you cannot afford to lose.

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