December 2009 – Page 14 – InvestMacro FX

December 9, 2009

GBP/USD Declines with Broad-Based Dollar Strength

By Fast Brokers – The Cable is moving lower with the EUR/USD as we continue to witness risk-averse money flows. The recent wave of negative psychology events continues after Standard & Poor’s announced it is lowering Spain’s credit rating outlook to negative. The negative outlook in Spain adds onto debt worries in Dubai and a downgrade of Greece’s national debt. Fears of government debt over-exposure has increased investor uncertainty once again, placing downward pressure on the Cable as investors snap up the Dollar for safety. In the UK, Chancellor announced there will be a one-time, 50% tax on bank employee bonus and the national tax rate will be raised in 2011 in an effort to reduce the nation’s swelling debt. The concept of higher taxes takes a bite out of expected consumption, a negative catalyst for the UK economy.

In addition to today’s negative psychological developments, Britain released a trade balance which was 200 million Pounds below analyst expectations. Hence, imports are outweighing exports, resulting in larger Pound outflows and consequently a weaker currency. However, investor focus likely remains on tomorrow’s BoE monetary policy meeting in conjunction with America’s Trade Balance in the afternoon. Although the BoE is expected to keep its benchmark rate and QE package unchanged, the central bank has been prone to induce monetary shocks in the past. Therefore, investors will be paying close attention to whether the BoE’s monetary policy stance has altered from the central bank’s previous meeting.

Technically speaking, the Cable has dipped below key November lows and is presently approaching our 2nd tier uptrend line. Hence, a downward pressure remains on the Cable. That being said, the currency pair does have our 1st and 2nd tier uptrend lines serving as technical cushions along with the psychological 1.60 area should it be tested. As for the topside, the Cable faces multiple downtrend lines due to recent weakness. Additionally, the Cable has 12/07 and 12/04 highs serving as technical barriers along with the psychological 1.65 level.

Present Price: 1.6222

Resistances: 1.6246, 1.6260, 1.6284, 1.6325, 1.6346, 1.6371

Supports: 1.6200, 1.6163, 1.6133, 1.6113, 1.6098, 1.6049

Psychological: 1.60, 1.65

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

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December 9, 2009

EUR/USD Retreats After S&P Cuts Spain’s Credit Rating

By Fast Brokers – The EUR/USD is retreating from earlier gains after Standard & Poor’s announced it has lowered its credit outlook for Spain to negative. The EUR/USD is taking a slight hit from the news, and it will be interesting to see if intra-day losses accelerate as investors focus on Spain due to a lack of pertinent economic data. Meanwhile, the EUR/USD is balancing along our 2nd tier uptrend line as bulls look to keep the currency pair above November lows. Our 1st and 2nd tier uptrend lines may carry some weight since they run through September and August lows, respectfully. Hence, if the EUR/USD doesn’t solidify soon, the currency pair could be in for another wave of near-term selling pressure. That being said, the EUR/USD still does have our 1st and 2nd tier uptrend lines serving as technical cushions along with November lows. Should conditions deteriorate, the EUR/USD could find solid support in the form of its psychological 1.45 area and October lows. As for the topside, the EUR/USD is building near-term topside barriers as it weakens. The EUR/USD faces multiple downtrend lines along with 12/07 highs and the psychological 1.50 level. Therefore, it seems near-term topside techncials outweigh supports, meaning there remains a downward pressure on the EUR/USD. As a result, investors should monitor the behavior of gold and the S&P futures as investors await Thursday’s set of important economic events.

Although today is light on the economic data side, Thursday could have more than enough news to move the FX markets. Australia will begin with key employment data during the Asia trading session, followed by French Industrial Production, the BoE’s monetary policy statement, and U.S. Weekly Unemployment Claims along with its Trade Balance. Lastly, China will release its Industrial Production number during Friday’s Asia session. The FX markets have been rocked by psychological developments throughout the week, meaning investors will be looking for fundamental confirmation from Thursday’s data flow. If economic data prints poorly, then the EUR/USD may be subjected to addition near-term selling pressure. On the other hand, a wave of encouraging data points could help weaken the Dollar and allow the EUR/USD to consolidate while building a new base.

Present Price: 1.4707

Resistances: 1.4724, 1.4738, 1.4754, 1.4780, 1.4812, 1.4841

Supports: 1.4691, 1.4682, 1.4669, 1.4650, 1.4640, 1.4628, 1.4612

Psychological: 1.45, 1.50, November Lows

Market Commentary provided by Fast Brokers.

December 9, 2009

Impending Bearishness for USD/MXN

By Anton Eljwizat – The sustained upward movement of the USD/MXN pair doesn’t seem to be receiving much resistance lately. As I will demonstrate below, the price of USD/MXN may very well be heading for a correction, and it might have the potential of reaching towards 12.8500 in the coming days. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price.

• The technical indicators that are used are the MACD, Relative Strength Index (RSI), and Slow Stochastic.

• Point 1: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.

• Point 2: The Slow Stochastic indicates a bearish cross, which may signal a downward movement is going to occur in the near future.

• Point 3: The MACD signals a bearish course for the pair is imminent, as the MACD oscillator is set to go reverse course anytime soon.

USD/MXN 4-Hour Chart

Forex Market Analysis provided by Forex Yard.

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

December 9, 2009

The Dollar Hits 5 Week High on Dubai and Greece Concerns

Source: ForexYard

The U.S. dollar rose on Tuesday to the highest level versus the EUR in 5 weeks and gained against other major currencies, as worries about high levels of debt in Greece and Dubai led investors to buy assets that would offer protection in a crisis.

Economic News

USD – Dollar Falls Broadly against the Yen after Bernanke Comments

The U.S. currency gained some ground against the EUR Tuesday as a trickle of dollar short covering continued in the wake of better-than-expected U.S. jobs data last week, but the Dollar stayed on the back foot as Fed officials said the U.S. economy remained weak. The greenback fell against the Yen and struggled against the EUR after Federal Reserve Chairman Ben Bernanke cooled speculation of an early rise in U.S. interest rates. Bernanke said the U.S. economy still faced headwinds and unemployment could stay high for some time, playing down the impact of Friday’s stronger-than-expected jobs report and helping send yields on shorter-dated Treasuries lower.

Against the Yen, the U.S dollar fell half a percent to 89.01 yen. The Dollar hit a 14-year low of 84.82 yen at the end of November as worries about Dubai’s debt saw investors unwind risk trades funded in yen, which then sent dollar/yen down. Dollar gains were slowed down following a rally from late last week, when a surprisingly strong reading of U.S. employment had triggered some expectations the Fed may start to normalize ultra-easy monetary policy earlier than expected.

Gains in the U.S. currency were also tempered after Pacific Investment Management Co., which manages the world’s biggest bond fund, said that more USD weakness should be expected and declines in its value may help redress global economic imbalances and spur growth in the U.S. economy.

EUR – EUR Trades Lower on Concerns More European Rating May be Cut.

The European currency hovered near a 5 week low against the U.S dollar on speculation credit ratings of more European nations will be cut after Greece’s debt ranking was lowered by Fitch Ratings. Fitch yesterday lowered Greece’s credit rating one step to BBB+, the third-lowest investment grade, and said the outlook for the rating is negative.

The British pound declined to its weakest level in almost 2 months versus the Dollar on concern that Dubai’s state-controlled companies will have to sell U.K. assets to pay for loan obligations. There are also concerns that companies in Dubai, which are falling behind on debt payments, may need to sell U.K. property, according to economists. Sterling fell roughly half a percent to the day’s low of $1.6376 as the market awaited the UK government’s pre-budget report on Wednesday, which is expected to highlight the dismal state of the Britain’s finances.

Analysts said that since most investors are worried that more European countries’ sovereign ratings will be downgraded the U.S dollar will probably be bought and the EUR will likely be sold, as risk aversion prevails.

JPY – Yen Advances vs. Majors

The Japanese yen may extend its advance versus all of its major counterparts after a reduction in Greece’s debt rating by Fitch Ratings and a Dubai developer’s $3.65 billion loss discouraged demand for riskier assets. Japan’s government announced today a 7.2 trillion yen economic spending package that includes 3.5 trillion yen to help regions, 600 billion yen for employment and 800 billion yen on environmental initiatives, the Cabinet said in a statement.

The JPY also rose on speculation Japanese officials won’t act to weaken it even as they say they are concerned about the effect of yen strength on the economy. The Yen tends to strengthen during times of turmoil because Japan’s trade surplus makes it less reliant on foreign capital. The nation’s current-account surplus increased 42.7% to 1.4 trillion yen ($15.7 billion) in October from a year earlier, the Ministry of Finance said yesterday. The JPY traded at 130.01 per EUR, after appreciating yesterday as much as 2.4%, the biggest intraday gain since Nov. 27. Japan’s currency was at 88.43 per Dollar, following a 1.2% advance.

OIL – Crude Reverses after 5-Day Decline

Crude Oil prices climbed above $73 a barrel after an industry report showed U.S. supplies dropped, bolstering optimism that fuel demand in the biggest energy-consuming nation will increase. Oil rose for the first time in 6 days after the American Petroleum Institute said crude inventories fell by 5.82 million barrels. Oil fell after U.S dollar climbed against the EUR, damping demand for commodities as an alternative investment.

Oil markets have looked to wider economic data and equity markets this year for a sign of a turnaround in the economy that could bolster crude demand and drain high inventory levels in key consumers, such as the United States. Crude dropped after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will face a weak labor market and tight credit, signaling fuel demand will be slow to recover. A downward revision to the U.S. government’s forecast for 2010 global demand growth also pressured Oil prices.

Technical News

EUR/USD

There is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the 4-hour chart’s Momentum oscillator also supports this notion. Going long with tight stops might be the right strategy today.

GBP/USD

The GBP/USD cross has experienced a bearish trend yesterday. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the oversold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.

USD/JPY

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upward breach occurs, going long with tight stops appears to be preferable strategy.

USD/CHF

The USD/CHF cross has experienced a bullish trend for the past week. However, it seems that this trend may be coming to an end. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart’s Slow Stochastic. Going short with tight stops may turn out to pay off today.

The Wild Card – USD/SEK

This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the daily chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Forex Market Analysis provided by Forex Yard.

December 9, 2009

Forex Daily Market Review Dec 09,09

Market Movers of the day

Europe

U.K Halifax house price index better than expected at 1.4%.

U.K Manufacturing production worse than expected at 0.0%

U.K Industrial Production worse than expected at 0.0%

Americas

Canada’s housing starts better than expected at 159.00k

Canada’s rate decision at 0.25%

The U.S stock market presented another disappointing session as economic data and news headlines weighed on the intraday session. The start of the session was characterized by a major drop as U.S traders were influenced by the Asian and European markets. The FTSE for example, finished the session with a loss of -1.65%, just above its 50 day moving average.

Weakness came as the Wall Street Journal posted fresh news that Moody’s Investors Service believes the U.S and the U.K need to trim their deficits otherwise their respective AAA rating could be jeopardized. Furthermore analysts at Fitch stripped Greece of its A-rated status. One must note that a part of the problem is due to Greece’s capital problems and high unemployment rate, which now lies at 9.2%.

Despite the intraday weakness, Obama gave it his best shot to try to support the markets, calling for new infrastructure projects and tax breaks for small businesses that will help the unemployment situation. Even thought recent numbers showed a decrease of 0.2% compared to September’s result and further jobless of only 11k, the current unemployment rate is still at double digit levels of 10%.

This time round it was the energy sector that weighed the most on the markets, closing with a loss of -1.70%. The financial sector dropped by only a mere 0.9%. The broader market S&P500 finished the session with a -1.03% loss, above major support.

S&P500 Daily Chart

BOC Unchanged, Japan Provides Further Stimulus

On the Forex market the Dollar index broke its trend line resistance and 50 day moving average as investors preferred the Dollar safe-haven compared to other riskier assets. Even though the U.S received a warning regarding its huge deficit, investors fled to the Greenback arming up against a possible equity drop.

In addition, the Japanese Yen received a boost during the session after Prime Minister Yukio Hatoyama announced that his administration intends to inject another 7.2 trillion yen ($81 billion) into the system. This was following last week’s announcement of a 10 trillion yen credit program to support the economy and following recent GDP data which showed a worse than expected result. Gross domestic product rose at an annual 1.3%, slower than the 4.8% reported in preliminary figures last month. Furthermore according to the numbers the economy expanded by only 0.3%, compared to the 1.2%, previously reported.

From a technical point of view the Yen received strength, boosted by its recent correlation to the equity market. The USD/JPY dropped throughout the session but found support above of 87.60.

The Bank of Canada made no surprises yesterday holding its central rate at a low of 0.25%. In the statement that followed, the BOC said their economy is showing positive signs compared to previous months and that Canada’s growth is expected to become more “solidy entrenched” in the future. Furthermore the bank touched on inflation, stating that it will remain moderated and return to the 2% target level.

The Day Ahead

Similar to yesterday’s session, today’s’ schedule holds an interest rate decision. This time round the RBNZ will take the stage. The markets are expecting a no-change status, which should leave the bank’s central rate at 2.5%.

In addition, England is scheduled to release its trade balance numbers and Australia will release its Employment change and unemployment rate. The employment change is expected to show a lower increase of 6k, compared to the previous figure of 24k, while the unemployment rate is expected to jump to 5.9%.

Daily Forex Market Analysis provided by eToro

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December 8, 2009

Bernanke’s Speech Weakens the Dollar as Interest Rate Changes are Doubtful

Source: ForexYard

The dollar fell today after Federal Reserve Chairman Ben Bernanke gave comments concerning the slow recovery of the U.S. economy may keep inflation low. This hints towards a continued Fed policy of lower interest rates for the foreseeable future and short term pressure on the dollar.

Economic News

USD – Dollar Falls after Bernanke’s Speech

Bernanke’s speech did not hint at an estimated time of a rate increase, though one will be needed to tighten monetary policy after the excess liquidity provided by the central bank during last year’s financial crunch. The U.S. economy is still in recovery mode with high unemployment at 10%. At this point in time, inflation concerns are slight and the chance of a rate increase in the near future is slim.

The remarks made by the Fed chief helped to boost the EUR/USD, ending a dollar rally that began on Friday after a better than expected U.S. Non-Farm Employment change. Friday’s significant drop in the pair’s rate required many traders to abandon their long positions in the pair, adding significant momentum to the downward price move. However, today the long term upward trend was seen as the EUR climbed against the dollar.

The pair is currently trading at 1.4840 after floating just below the 1.4800 prior to Bernanke’s speech. Earlier in the day the EUR/USD was trading at its lowest level in the previous five weeks. The Pound also fell against the dollar, trading at 1.6452, down from an opening price of 1.6476.

The Canadian Dollar will come into focus during today’s trading. The Bank of Canada will announce its decision on the overnight rate which is not expected to change, along with the release of the accompanying rate statement. The explanation may contain hints at the future direction of Canadian monetary policy. A dovish tone in the rate statement may continue to push the USD/CAD lower towards the 1.0400 level today.

EUR – GBP Economic Data to Highlight Today’s Trading

Yesterday’s trading had the Pound mixed against its major pairs. The pound traded down against the Dollar, while strengthening against the EUR. During the Japanese trading session, the EUR/GBP was trading up at 0.9020 but off from yesterday’s opening price of 0.9034.

Today traders will focus on the state of the U.K. economy as major economic data is set to be released. First to be released at 9:00am GMT will be the Halifax Housing Price Index (HPI). The leading indicator of the housing industry’s health shows the change in housing prices and can influence the movement of the Pound. The rate is expected to decline by 4%. Up next will be manufacturing production numbers, set to be released at 9:30am GMT. The number is associated with the previous month and is a large percentage of total industrial production. The release is considered to be a good indicator of England’s overall economic health.

These two major economic indicators may set the tone for today’s trading in the Pound’s crosses. Bullish numbers could send the pound higher against its rivals. Toward s the end of the trading day, we may see the GBP/USD trading near the 1.6535 mark and the EUR/GBP floating close to 0.8990.

JPY – Dollar Drops against the Yen after Profit Taking

The Dollar fell versus the yen yesterday with traders taking profits. The pair fell from last week’s one month high after the pair was boosted by the surprisingly positive U.S. Non Farm Payrolls report which posted better than expected job numbers.

As the USD/JPY approached the key 90 yen level, the currency pair was sold off. Today’s overall Dollar weakness also helped to push the pair lower. The pair is now trading down at 89.03 from an opening price of 89.86.

Yesterday’s price movement can be attributed to the speech by Federal Reserve Chairman Ben Bernanke. The market may continue to be influenced by speculation and predictions of just when the U.S. will raise interest rates. With this in mind, the dollar may push above the 90 yen resistance level by the end of the week.

Crude Oil – Oil Falls again Despite a Weak Dollar

Crude Oil continued its decline for the fourth consecutive trading session following Bernanke’s speech and estimations for lower inflation and a weak U.S. economy. The price of Crude ended the day down at $74.14 after an opening price of $75.60. This was a price drop of almost 2%. Today’s weaker dollar may have helped to lessen the price drop in Crude.

The price may have also been influenced by weak fundamentals in the Crude Oil market. There may still be an excess amount of supply in the market that has yet to be reduced with lower demand due to the slowing global economy.

The positive from yesterday may be in Bernanke’s speech. As long as inflationary pressures are muted, the Fed will continue to hold Interest Rates low. This could be a positive factor for the price of Crude Oil. A higher Interest Rate would be dollar positive, thereby potentially pushing crude oil prices lower.

Technical News

EUR/USD

The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

USD/JPY

The pair has recorded much bearish behavior yesterday. However, the technical data indicates that this trend may reverse anytime soon. For example, the 4-hour chart’s Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the hourly chart’s Slow Stochastic. Going long with tight stops may turn out to pay off today.

USD/CHF

The price of this pair appears to be floating in the over-bought territory on the 4-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the daily chart’s Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card – Crude Oil

Crude oil prices have dropped significantly yesterday and peaked at $74.00 per barrel. However, on the 4-hour chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by Forex Yard.

December 8, 2009

The Benefits of Implementing Japanese Candlestick Trading In your Portfolio

By Steve Warshaw – The Trade Detective – Developed in the 18th century by Homma Munehisa, candlestick charts were designed to give rice traders a simple open,high,low, and close view of the markets. Due to the ease of reading, candlestick charting become the preferred method of market analysis, and traders quickly began studying their usefulness in predicting future market direction. Candlestick charts were applied to the stock market first by Charles Dow around 1900, and popularized in the US by Steve Nilson in the late 1980s.

Why Use Candlestick patterns

The major benefit of Candlestick signals is that they are very easy to learn and identify. You do not need to learn formulas. You do not have to do extensive fundamental analysis. A Japanese Candlestick reversal signal is a visual identification of a change in investor sentiment. Of the 50 or 60 Candlestick signals, there are 10 major signals that occur at the reversals the majority of the time.

Mastering Candlestick analysis can be done very easily by learning the 10 major signals. Knowing the signals, and understanding how those signals are formed, provide investors with a tremendous insight into what goes on an investor sentiment at reversal areas in a trend. Being able to identify the major signals and understand the investor sentiment that created those signals allows an investor to project market reversals with a high degree of accuracy. This is based upon hundreds of years of actual observations by Japanese rice traders. Simple logic tells us that if these signals did not work, they would not be here for us to view after centuries of use.

Single Stick Candlestick Formations

Each candlestick can tell you much about the forces acting on the market that day. The Japanese quickly began to identify and name these individual patterns:

1. White candlestick – signals uptrend movement (those occur in different lengths; the longer the body, the more significant the price increase)

2. Black candlestick – signals downtrend movement (those occur in different lengths; the longer the body, the more significant the price decrease)

3. Long lower shadow – bullish signal (the lower wick must be at least the body’s size; the longer the lower wick, the more reliable the signal)

4. Long upper shadow – bearish signal (the upper wick must be at least the body’s size; the longer the upper wick, the more reliable the signal)

5. Hammer – a bullish pattern during a downtrend (long lower wick and small or no body); Shaven head – a bullish pattern during a downtrend & a bearish pattern during an uptrend (no upper wick); Hanging man – bearish pattern during an uptrend (long lower wick, small or no body; wick has the multiple length of the body.

6. Inverted hammer – signals bottom reversal, however confirmation must be obtained from next trade (may be either a white or black body); Shaven bottom – signaling bottom reversal, however confirmation must be obtained from next trade (no lower wick); Shooting star – a bearish pattern during an uptrend (small body, long upper wick, small or no lower wick)

7. Spinning top white – neutral pattern, meaningful in combination with other candlestick patterns

8. Spinning top black – neutral pattern, meaningful in combination with other candlestick patterns

9. Doji – neutral pattern, meaningful in combination with other candlestick patterns

10. Long legged doji – signals a top reversal

11. Dragonfly doji – signals trend reversal (no upper wick, long lower wick)

12. Gravestone doji – signals trend reversal (no lower wick, long upper wick)

13. Marubozu white – dominant bullish trades, continued bullish trend (no upper, no lower wick)

14. Marubozu black – dominant bearish trades, continued bearish trend (no upper, no lower wick)

Exmples of Major, Complex Japanese Candlestick Patterns

Harami – “Pregnant Woman”, or “Body Within”, the Harami is a 2 candlestick trend reversal formation

Tasuki Gap – “A sash that holds up one’s sleeve”, that Tasuki gap is a 3 candlestick formation that confirms the continuation of the existing trend.

Engulfing Pattern – A two candlestick reversal pattern in which the second candle, known as the DAKI (“embracing line”) engulfs (body is larger and is both higher and lower than the previous candlesticks body) the previous candlestick.

Piercing Pattern – A two candlestick, bullish reversal pattern. The first candle is black, a continuation of the existing trend. The second candle is formed by opening below the low of the previous day. It closes more than midway up the black candle, near or at the high for the day

Dark Cloud Cover – A bearish reversal pattern comprised of two candlesticks. The body of the first candle is white and the body of the second candle is black. The black day opens higher, above the trading range of the previous day. The price closes below the 50% level of the white body.

Star Patterns – A symmetrical, reversal candlestick pattern. The bullish pattern, known as the Morning Star, is a three day signal consists of a long black body, usually one produced of the fear induced at the bottom of a long decline. The following day gaps down. However, the magnitude of the trading range remains small for the day. This produces an indecision type – day. The third day is a white candle day. The white candle represents the fact that the bulls have now stepped in and seized control. The optimal Morning Star signal would have a gap before and after the star day.

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December 8, 2009

Canada holds interest rate steady at 0.25%.

By CountingPips.com

The Bank of Canada held its interest rate today at the all-time low of 0.25 percent as widely expected by economic forecasts. The bank reiterated its intention to hold the rate at this level through the second quarter of 2010, conditional on the inflation rate and also said that the country’s currency rise could dampen its economic recovery.

The BOC commented on the global economy stating that, “While significant fragilities remain, global economic developments have been slightly more positive and the global outlook has improved modestly relative to the Bank’s projection in its October Monetary Policy Report (MPR).” On Canada’s economy, the bank stated that, “In Canada, as expected, the composition of aggregate demand is shifting towards final domestic demand and away from net exports. In the third quarter, the balance of these shifts resulted in weaker-than-projected GDP growth. Core inflation in recent months has been slightly higher than the Bank had projected, although total CPI inflation remains close to projections.”

The BOC warned that the Canadian loonie’s rise could work against its economic growth as the Canadian currency could be “a significant further drag on growth and put additional downward pressure on inflation.” The higher Canadian currency has made its exports more expensive to the U.S. which buys roughly 80 percent of Canada’s exports.

The Canadian loonie has risen against the dollar steadily from earlier in the year as broad-based U.S. dollar weakness has helped push the loonie close to parity. The dollar exchange rate was as high as 1.3000 loonie per USD in early March before a steady decline brought the exchange rate down to its lowest point of the year of approximately 1.0205 loonie per USD in October.

Today’s forex trading has seen the U.S. dollar increasing versus the loonie after the rate decision in the North American trading session. The USD/CAD opened the day trading around the 1.0499 exchange rate and has increased to trading above the 1.0620 level at 1:21pm EDT.

December 8, 2009

Gold Hovers Around $1150/oz

By Fast Brokers – Gold bounced on Monday following Friday’s hefty sell-off in reaction to encouraging U.S. employment data. Friday’s data made investors snap up the Dollar in speculation that the Fed may raise interested rates sooner than anticipated, resulting in a selloff in gold due to the precious metal’s negative correlation to the Dollar. However, Bernanke attempted to quell speculation yesterday by stating that the U.S. economy still faces headwinds, implying the Fed is not likely to raise rates in the foreseeable future barring very positive data confirmations over the near term. That being said, Bernanke’s comments helped gold recover some of Friday’s losses.

Unfortunately for gold bulls, the Dollar is appreciating again after Moody’s warned that the U.S. and UK could test the patience of their resepective Aaa ratings. Additionally, more uncertainty concerning Dubai’s debt issue arose today. As a result, investors are favoring risk-averse investment vehicles , boosting the Dollar and sending gold back below its psychological $1150/oz level. On a positive note, gold remains above Friday lows, indicating near-term supports remain intact for EUR/USD and AUD/USD. Hence, investors should keep an eye on these currency pairs should they interact with key supports because another wave of Dollar strength could knock gold back towards its psychological $1100/oz level.

Technicaly speaking, gold has multiple uptrend lines serving as technical cushions along with 12/07, 11/19, and 11/12 lows. Furthermore, $1100/oz could prove to be a strong psychological support should it be tested. As for the topside, we’re still not able to confidently place a downtrend line due to the lack of hisorical perspective. However, gold does face technical obsticales in the form of intraday, 11/23, and 11/26 highs along with the psychological $1175/oz and $1200/oz levels.

Present Price: $1145.75/oz

Resistances: $1149.18/oz, $1153.67/oz, $1161.84/oz, $1165.11/oz, $170.01/oz, $1173.69/oz

Supports: $1143.46/oz, $1138.56/oz, $1134.47/oz, $1129.98/oz, $1126.71/oz, $1123.03/oz

Psychological: $1150/oz, $1175/oz, $1100/oz, $1200/oz

Market Commentary provided by Fast Brokers.

December 8, 2009

USD/JPY Trades Lower with Risk Aversion

By Fast Brokers – The USD/JPY is continuing Monday’s selloff as investors opt for risk aversion following disconcerting comments from both Bernanke and Moody’s. Yesterday Bernanke stated that the U.S. economy still faces considerable headwinds. It seems Bernanke is attempting to dampen investor optimism stemming from Friday’s enouraging U.S. employment data. In addition to Bernanke’s caution statement, Moody’s warned that the U.S. and UK may be testing the patience of their respective Aaa ratings. The fear of U.S. and UK debt exposure has increased investor uncertainty, thereby resulting in risk averse money flows. Hence, the USD/JPY is being hit by a combination of negative psychological developments from the West.

Meanwhile, the DPJ announced the implementation of a $81 billion stimulus package to help buoy a beleagured Japanese economy. Although the DPJ’s new stimulus package should give a positive boost to the nation’s economy, analysts are already debating whether the $81 billion is enough to turn deflationary pressures. The Yen initially strengthened in reaction the DPJ’s announcement, highlighting investor skepticism in regards to the effectiveness of the stimulus package in regards to tempering deflation. In addition to the DPJ’s announcement, Japan reported that its Trade Balance widened more than expected, suggesting global demand for Japanese exports continues to recover.

Technically speaking, the USD/JPY is trading back below its highly psychological 90 level in addition to multiple downtrend lines hanging overhead. Therefore, the currency pair still has its fair share of topside techncials to deal with before cementing a more formidable uptrend. As for the downside, the USD/JPY does have a couple new uptrend lines hanging nearby alonng 12/04 and 12/03 lows. Hence, while the USD/JPY does face strong downside pressures, the currency pair has at least gained a little breathing room from October lows and the psychological 85 level.

Meanwhile, investors are awaiting tonight’s Final GDP figure. If Final GDP prints positive as a result of an increase in export demand, then the USD/JPY may face further downward pressure as inverstors favor the Yen over the Dollar as a safe haven.

Present Price: 88.38

Resistances: 88.62, 88.86, 89.03, 89.12, 89.34, 89.54

Supports: 88.34, 88.18, 88.01, 87.82, 87.72, 87.49

Psychological: 90, November Highs and Lows

Market Commentary provided by Fast Brokers.

Month: December 2009

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