InvestMacro FX

By Dan Eduard – The EUR/NOK pair has seen some heavy volatility over the last several weeks. After dropping as low as 7.8330 in the beginning of September, the cross has steadily gone up, and is currently trading around the 8.0420 level. As will be shown through a number of technical indicators, the euro is likely to enter into a bearish trend against its Norwegian counterpart in the near future.

We will be looking at the daily chart for EUR/NOK provided by Forexyard. The technical indicators we are using are the Relative Strength Index (RSI), Williams Percent Range and Stochastic Slow.

1. As we can see, the RSI is currently slightly above the 70 level. Typically, when a currency pair goes above 70, that pair is in overbought territory, meaning a downward correction is likely to occur.

2. The Williams Percent Range is showing a similar trend. Currently, the indicator is around the -10 level. Anything above -20 is usually seen as a sign of impending bearish movement.

3. Finally, the Stochastic Slow has formed a bearish cross right above the upper support line. Taking this into account, along with other indicators already mentioned, traders can be fairly certain that the pair will experience downward pressure soon.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

Source: ForexYard

Today’s non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday’s Non-Farm Payrolls release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.

Economic News

USD – USD Could Receive Respite from ADP Data Today

After a minor uptick against a few of its rivals, the US dollar appears to have continued its strong downturn against every major currency counterpart. For instance, the EUR/USD, after descending to as low as 1.3624 in early trading yesterday, currently trades just under the 1.3850 price level, marking an 8-month high for the pair. The USD/JPY also persists in testing its 15-year low mark of 83.00 despite efforts from the Bank of Japan (BOJ) to intervene in the forex market and weaken the yen.

Market participants have yet to lower their expectations for a Federal Reserve intervention of the forex market in the shape of quantitative easing. The greenback has been testing long-term low points against many of its currency rivals, and a large portion of data, whether positive or negative, seems to have the identical effect of weakening the buck.

This has done much to bolster the notion of a Fed intervention, but the actual planning for further quantitative easing may first require Friday’ non-farm data, which could explain the delay.

Today’s non-farm data from Automatic Data Processing Inc. (ADP) should give traders a glance into a sizeable portion of Friday’s release, since it will be measuring the private sector of the US economy. Expectations are for a rise in employment of approximately 23,000 jobs. If the actual results are in line with forecasts, the USD could pare some of its recent losses. If not, expect the greenback to continue dropping against its rivals.

EUR – EUR Climbs to 8-Month High vs. USD; 7-Month High vs. CAD

Despite the euro’s fundamental weakness over the past year, the past few days have seen strongly resurgent growth for the 16-nation single currency. The EUR/USD has recently touched an 8-month high mark just under 1.3850; the EUR/JPY and EUR/GBP are both at 5-month highs, and still climbing; and the EUR/CAD ascended to a 7-month high to currently trade at 1.4060.

Boosts to JPY and USD liquidity, combined with monetary policies from both countries, has helped increase the flow of investment towards riskier assets, such as stocks and higher yielding currencies. The euro has been a primary beneficiary of this investment migration regardless of many of its fundamental weaknesses.

The euro zone continues to show weakness in its banking sector and sovereign debt coverage, but its appeal to investors looking to escape the conventional safe-havens and enter new markets has helped drive its currency to recent heights. If today’s German Factory Orders report comes out as expected with 0.9% growth, the EUR will likely remain bullish against most of its counterparts.

JPY – BOJ Lowers Interest Rates; USD/JPY Still Falling

The surprising move by the Bank of Japan (BOJ) yesterday to lower interest rates from their record low of 0.10% has done little to support the JPY. In fact, the island currency persists in rising against a number of its primary counterparts. The USD/JPY is testing the BOJ’s intervention price level of 83.00, while the GBP/JPY also remains in a downtrend with a current price of 132.33.

Expectations for the moment seem to suggest that further BOJ intervention is on the way, but the market awaits Friday’s Non-Farm Payroll (NFP) data from the United States. Central banks may therefore be hesitant to make any serious moves on monetary policy until the market absorbs the reaction from this week’s interest rates and employment data from the world’s largest economies. It seems fair to suggest that most of these major currencies will not move too sharply in the next few days until Friday’s NFP release.

Crude Oil – Oil Prices Climb above $82 a Barrel

The price of crude oil has climbed back to the high mark of two months ago with a current market value around $82.60 a barrel. The price broke the significant barrier of $80 a barrel as the USD plummeted on increased risk taking. Currency interventions in Japan and the threat of further quantitative easing by the Federal Reserve, have both pushed traders into riskier assets and out of those two traditional safe havens.

The resulting sell-off in US dollars has pushed the price of commodities like crude oil and gold to recent highs. However, it’s not only the descending USD that has crude prices higher. A number of reports have shown that the industrial and manufacturing sectors of some of the larger economies have begun to pick up steam and add fundamental support to oil prices. This growth may also be having an impact on recent risk taking in the market since investors are perhaps feeling more confident about investment growth in those regions experiencing an expansion.

Technical News

EUR/USD

The price of this pair appears to have just entered the over-bought territory on the weekly chart’s RSI, suggesting long-term downward pressure may begin to build over the next few days. The daily chart’s RSI has the price descending down within the over-bought region as well, highlighting this growing momentum in downward pressure. The overall trend remains up for this pair, but it appears as if counterbalancing force is beginning to be applied and traders may wish to place their stop orders a bit closer as a result.

GBP/USD

The indicators on this pair’s MACD are unanimously forming bearish crosses on the daily and weekly periods. With the price floating in the over-bought region on the daily chart’s RSI, these indicators together suggest that a downward move may be imminent. Going short with tight stops could be a wise move today.

USD/JPY

The long-term downtrend on this pair appears to be continuing, with the price approaching its recent low mark of 83.00. Technical indicators seem to suggest an upward correction could be building. The price floats in the over-sold region of the daily and weekly RSI, there is a fresh bullish cross on the daily Stochastic (slow) and there appears to be an imminent bullish cross on the weekly MACD. Going long on this pair appears to be worth considering throughout the remainder of this week.

USD/CHF

This downward movement of this pair for the past few months has pushed almost every indicator into the over-sold region. Bullish crosses have either formed, or are forming in the Stochastic (slow) and MACD of the daily and weekly charts. The price also appears to have turned into an upward direction from within the over-sold region of the daily and weekly RSI. An upward correction may be pending, but traders should enter long positions with caution due to the long-term downtrend of this pair.

The Wild Card

AUD/USD

This pair’s upward movement has pushed the price to its highest resistance level since July 2008. By reaching this significant psychological barrier it has caused almost every technical indicator to show an impending correction. The daily and weekly MACD both show impending bearish crosses, as does the weekly Stochastic (slow). The price also floats in the over-bought region of the weekly RSI, which suggests impending downward movement. Forex traders can take advantage of this information by calling the reversal on this pair and going short to ride the wave for significant profit.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

By Sara Nunnally, Editor, Smart Investing Daily, Taipanpublishinggroup.com

My co-editor Jared Levy and I were sitting in the audience at this year’s 2010 Global Opportunities Summit in Las Vegas when gold hit a new record… Futures prices topped $1,300 an ounce, and Jared turned to me and said, “Now’s the time to take some profits off the table.”

Friday saw gold for December delivery hit $1,319.70, another record, and traded as high as $1,322 at one point during the day.

So what does this mean? Are gold prices too high? Will we see a correction?

Or will gold continue its climb, and possibly hit $1,500 an ounce by the end of the year, as one analyst writes?

I like gold, nearly at any price, for one specific reason: It always makes sense to allocate some portion of your investment portfolio to this precious metal, and hold it as a hedge against both currency and stock market fluctuations.

But traders might see a different picture.

Is the Gold Market Overheating?

Traders might look at how gold prices have climbed 12% in the past 60 days, shooting nearly straight up from late July. Take a look at this Kitco chart:

In the four months prior to this huge bounce, gold prices showed a lot more back and forth, ending the four months with a gain of only 5%.

This move is massive, and now we have to determine if the gold market is overheated. And for that, we have to look at exactly what’s driving this market higher, and if those factors are still in place to make this a long-term move.

The main factor behind this move is the strength of the U.S. dollar. Take a look at this U.S. Dollar Index December futures chart that compares the dollar to a basket of currencies:

View Larger Chart

This six-month chart from Barchart.com shows the dollar in a massive decline since early June. It’s this drop that’s propelling gold prices higher.

The Federal Reserve has been talking about more quantitative easing, which spells more trouble for the dollar. If the Fed cuts rates, gold prices could indeed hit $1,500 before the end of the year. This is a big, big decision that’s waiting on some key economic figures coming in the next week or so.

The Fed has clearly stated that it’s ready to “take further action” if the U.S. economy fails to show any strength. The next meeting is in November.

(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles.)

Inflation and Gold Prices

In the long term, it’s clear that the Federal Reserve’s monetary policy will lead to spikes in gold prices that we haven’t seen since perhaps the 1970 s when we lost the Gold Standard. Gold prices climbed from $37.87 in January 1971 to $183.85 in December 1984… an incredible climb of 385% in four years.

In 1971, inflation stood at 4.3%; 1972, the figure fell to 3.3%. Then in 1973, inflation popped to 6.2%, and in 1974, inflation soared to 11%.

This shows you that when inflation hits, as it surely must with the Fed keeping rates at near zero and printing money like mad, it hits hard and fast. The dollar drops and gold skyrockets. We see the same thing in the late 1970s and early 1980s with inflation at 11.3%, 13.5%, and 10.4% in 1979, 1980, and 1981 respectively.

Gold prices went from $227.27 in January 1979 to $410.09 in December 1981, topping $675 an ounce in January 1980.

What to Do in the Meantime

But in 2009, inflation was -0.4%, and 2010’s inflation is estimated to be 1.4%… That’s hardly scary compared to what happened three decades ago.

What are we supposed to do in the meantime? Heck, what are we supposed to do in the next four months?

Craig Ross, vice president of ApexFutures.com in Chicago, told Kitco that gold would likely hit $1,325 an ounce this week, and that $1,350 wasn’t out of the question. George Gero, senior vice president and financial consultant RBC Capital Markets Global Futures, told The Street a similar story, saying that gold’s next resistance point was at $1,325.

Over the next few months, we could see continued demand from institutions, investors and regular folks who buy gold jewelry (though these higher prices do dampen jewelry demand, the fourth quarter is still a strong quarter overall).

Investment demand has really picked up, though. According to Gold.org, demand for gold jumped 36% in the second quarter compared to the same time last year.

And that’s with gold prices at $1,200 an ounce!

Demand and price trends say the best time of year to buy gold is in the summer, but you might not want to wait that long.

If the Fed decides not to ease rates, we could see a slight pop in dollar strength, which could give you a momentary pullback in early November. That gives traders four weeks of possible price climbs and a potential exit point.

“Short term” buy-and-hold investors might buy and re-assess come the end of March 2011, while maintaining a prudent trailing stop.

Long-term investors, or folks that will buy now and hold gold in their portfolios indefinitely, will ignore the Fed’s decision in February, and possibly average down in summer, should gold prices move against them.

Gold ETFs like the SPDR Gold Trust (GLD:NYSE) or the iShares Gold Trust (IAU:NYSE) are easy and accessible for both long-term investors and traders, as both have options. Of course, buying coins and bullion is also an option. Beware of gold mining companies, however, as costs can sometimes trip these stocks up even as gold prices climb.

If you’re playing gold itself, or hedging your portfolio, the purer the play the better.

Don’t forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

About the Author

Sara is Co-Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country.

As Senior Research Director, global correspondent and co-editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.

By Taro Hideyoshi – Over time, experts have identified the most common biases that usually affect behavior of traders. Curtis M. Faith, who had been the most successful of Turtles, also mentioned about this in his book “Way of the Turtle“.

According to the book, people always distort perception of reality when it comes to trading. Scientists call these distortions as cognitive biases. Curtis listed some of cognitive biases that affect trading. I think it is interesting to discuss some of them that have occurred mostly among traders.

Getting know your biases is the first step to avoid them. Here are some of cognitive biases that I think many traders has experienced.

1. Loss aversion

This bias is to have a strong preference for avoiding losses over acquiring gains.

For example, traders usually feel the pain for losing of $100 more intense than they missed a trade that would have made them $100.

2. Disposition effect

It is the tendency for traders to lock in gains and ride losses.

Instead of letting profits run, many traders decide to take out their small amounts of profits. It is because of their fear to give back the profits, but when it comes to losing trades they always keep the positions until they lose large amounts of their capitals.

Traders who exhibit this tendency will face large losses and become very difficult to make up from winning trade.

3. Outcome Bias

This is the tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made. This bias causes traders to put too much emphasis on what occurred rather than on the quality of the decision.

In trading, even a correct approach can result in losses, and then they may evaluate the approach negatively because of the negative outcome.

4. Recency bias

The recency bias is placing greater weight on recent performance relative to previous performance. A trade that was made yesterday weights more than trades from last weeks.

This bias affects the trading if the outcome series of recent trades were lost, it will cause most traders to doubt their method and decision-making process.

5. Bandwagon effect

This effect is the tendency to believe things because many others believe them.

The example for this effect is the bull market. When market is going up for sometimes, it pursues many traders to believe that market and buy more. Hence the market will go further up, seemingly, unstoppable.

About the Author

Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.

If you would like to find more articles on MetaStock Tutorials, MetaStock Formulas, Trading Systems and Money Management. Please go to MetaStock Trading System.

Good day FX friends! Today, I present to you a look at the currency cross, AUDCAD. As you can see from its weekly chart, the pair has been trading very well since it touched a low of 0.8579 back in June this year. Since then, the Australian dollar was able to take the Loonie’s number as the pair hit parity (1.0000) and even went on to reach a high of 1.0023 last September 23. Technically, however, the pair’s recent uptrend maybe starting to reverse already. For one, it failed to completely overpass its previous high at 0.9915. The pair has also formed a shooting star candle pattern, indicating that the prior move up north maybe losing momentum. With the stochastics also in the overbought region, the pair could indeed weaken by either moving sideways or reverse. If can find support just above 0.9200 in case it does reverse. On the positive side, a successful breach above the shooting star’s high could propel the pair to its next notable high at 1.0550.

The Reserve Bank of Australia decision not to increase its interest rate from 4.50% to 4.75% caught the market by surprise. As a result, the Aussie lost some of its appeal. The rapid rise of the currency against most of the majors have prompted the RBA to postpone its rate hike. Still, the central bank remained somewhat hawkish stating that “If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.” Aside from this suprise, the weaker-than-expected growth in the country’s retail sales (0.3% versus 0.5%) also placed some selling pressure on the Aussie.

On Canada’s side, its latest employment figures will be out this Friday (October 8). Canadian firms are seen to have added 11,300 more jobs which would have brought the country’s jobless rate down to 8.0% from 8.1%. Improvement in the labor market, of course, would reflect positively on the economy of Canada and on the CAD at least in the short term.

More on LaidTrades.com …

By Russell Glaser – Spot crude oil has shown a propensity to range trade between Fibonacci levels but a recent rally may have momentum behind it to break the sideways movement.

Since the end of May spot crude oil prices have moved in trading ranges between the Fibonacci levels from the May high at 87.12, unable to breakout into a defined trend in either direction.

A recent sharp appreciation in the price may have the ability to carry the price of spot crude oil past a significant resistance level into a breakout play. The resistance level lies in a range between the 76.4% Fibonacci level at 82.40 and the August high of $83 (R1). Should the price make a close above this level, the next target for spot crude oil would rest at the May high near $87 (R2).

Traders should be patient and wait for confirmation of the breakout before initiating a long position. A protective stop should be placed near the support of $80 to defend against a false breakout.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

Price action during the Asia session was governed by two major policy surprises: the RBA kept the cash rate on hold despite market expectations of a +25bp hike; AUDUSD lost over 70pips on the announcement. The BoJ eased policy by much more than expected, effectively cutting the policy rate by replacing the existing policy target of 0.1% with a range of 0-0.1%. EURUSD traded 1.3637-1.3695, USDJPY 83.33-83.99. Earlier, during the US session data included a slight disappointment in factory orders mixed in with a pick-up in pending home sales. Factory orders were slightly below expectations in August at -0.5% but July orders were revised up. Our analysts note their 1.5% real GDP growth forecast for Q3 has assumed a 10% pace for real equipment and software spending, which is close to the data reported so far. Meanwhile, the pending home sales index rose more than expected in August Leading up until July, the weakness reflected payback for the expiration of the home buyer tax credits at the end of April. Looking beyond this period of volatility, we still expect support for home sales over the medium-term as the employment situation improves, mortgage rates remain near historically low levels, and affordability remains favorable. Though Fed comments were relatively limited, QE2 is still on investor minds ahead of the larger data releases this week, with non-manufacturing ISM up next.
EUR

The euro did not manage to regain lost ground during the overnight session as there was little to counteract the reports that the Irish central bank reportedly views risks to the ECB staff growth forecasts as slightly tilted to the downside and global economic uncertainty is regarded to have increased. Another report also weighed on the euro, where a major Austrian bank is looking to change existing CHF loans into EUR loans, which, if it triggers a trend, would provide the franc with structural support versus the euro.
The ECB announced that €1.344bn worth of sovereign bond purchases settled last week under the ECB’s Securities Market Program. This represents a very significant increase on the tally for the week before and clearly suggests that sovereign bonds yields amongst issuers on the Eurozone periphery would have been significantly higher last week were it not for the ECB’s intervention.
We expect EURUSD upside to become increasingly limited again by structural weakness in the periphery. We also remain cautious on risk sentiment, as a sudden return of risk aversion cannot be excluded in an environment of heightened global economic uncertainty. Going forward we expect EURUSD to approach 1.28 in the medium-term.
JPY

In a surprise move the BoJ was much more dovish than expected, and effectively cut the policy rate target by replacing the existing target of 0.1% with a range 0-0.1%. No changes were made to the BoJ’s monthly intake of JGBs which will continue to accumulate on the BoJ’s balance sheet at a rate of ¥1.8 trn per month. However, the BoJ has set up a new “temporary” facility specifically to purchase short-term assets with a maturity of 1-2 years. The aim will be to use this facility to buy ¥3.5trn in short-dated JGBs and T-bills and about ¥1trn in CP, ABCP and corporate bonds.
AUD

Against consensus expectations, the RBA held the cash rate unchanged at 4.5% for the fifth consecutive meeting. However, our Australian economics team note that the RBA maintains is tightening bias, noting that rates are “appropriate for the time being” and that “it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.” Our analysts now expect the next hike will come in November.

TECHNICAL OUTLOOK

USDCAD focus on 1.0108.
EURUSD BULLISH Bull pressure held below 1.3818/96 ahead of 1.4194. Near-term support comes in at 1.3560 ahead of 1.3381.
USDJPY BEARISH Look for a break below 82.88 for extension of bearish trend towards 79.75. Resistance remains at 84.50 ahead of 85.40.
GBPUSD BULLISH Move above 1.5999 and 1.6069 would expose 1.6276. Support at 1.5670 ahead of 1.5503.
USDCHF BEARISH Clearance of 0.9709 exposes 0.9590 and 0.9500 next. Resistance at 0.9918 breakout low.
AUDUSD BULLISH Sharp decline pressures 0.9559 ahead of 0.9463, but overall model is bullish with initial resistance defined at 0.9751 ahead of 0.9850.
USDCAD BEARISH Focus is on downside; initial support lies at 1.0108 ahead of 0.9931. Resistance comes in at 1.0380.
EURCHF NEUTRAL Following the pullback from 1.3467, model has turned neutral. Support at 1.3165 ahead of 1.2991.
EURGBP BULLISH Next resistance above 0.8738 lies at 0.8808. Support holds at 0.8563 ahead of 0.8510.
EURJPY NEUTRAL Expect gains to extend towards 116.68 and 119.33 next. Near-term support comes in at 112.98 ahead of 115.53.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: ForexYard

The yen is taking center stage today following the completion of the Bank of Japan two-day policy meeting. Traders were anticipating further calls for intervention but were surprised to hear of a cut in the interest rate and a new fund to purchase assets.

Economic News

USD – Greenback Gains on Renewed Euro-Zone Concerns

The U.S. dollar gained versus the EUR Monday as renewed concerns regarding euro zone debt problems weighed on the common currency. The dollar also strengthened versus the JPY following the announcement by the Bank of Japan to cut interest rates and the creation of a fund to purchase assets.

The greenback held on to gains despite a release of mixed economic data. While pending home sales showed an increase of 4.3% in August, factory orders fell 0.5%, a worse than expected result.

Today traders should follow the release of the ISM Non-Manufacturing PMI at 14:00 GMT which is expected to show a slightly better reading than the previous month.

EUR – EUR Falls on Expected Budgetary Concerns

The EUR fell from a six-month high against the U.S. dollar Monday declining below $1.3700, as renewed debt concerns weight on the common currency. The drop followed the release of further details about the extent of Ireland’s budget deficit as well as an announcement by the European Central Bank (ECB) regarding the extent of new government bond purchases, which was at the highest level since June.

The purchasing is intended to assist governments like Ireland and Portugal that must undertake sever budget cuts which may stump their economic recovery. According to an Irish newspaper, the government’s budget required budget cuts for December stand at EUR4.5 billion ($6.2 billion).

Late Monday afternoon, the EUR was at $1.3690 from $1.3784 from late Friday. In today’s early trading, the pair stands at $1.3660. The EUR was at Y114.20 from Y114.81. The U.K. pound was at $1.5837 from $1.5841.

JPY – Yen Weakens on Surprise Interest Rate cut

The Japanese Yen weakened against the U.S. dollar following a surprise reduction in the interest rate during the Bank of Japan policy and enacting of further credit easing measures. The bombshell announcement allowed for gains in the yen versus the major currencies and a reversal of the negative sentiment.

The USD/JPY rose to a high of 83.97 in today’s early Asian trading from 83.36 in New York yesterday, Japan’s currency is trading at 114.79 per EUR from 114.08.

The overnight call rate was reduced below 0.10%. Few analysts predicted the BOJ would cut the rate from 0.10%. The speculations surrounding the policy statement will surely make the Yen one of the most exciting currencies for trading today.

OIL – Stronger Dollar Weighs on Oil Prices

Crude- Oil futures settled slightly lower Monday as a stronger dollar and weak equity markets pressured oil prices. Light, sweet Crude Oil for November delivery settled 11 cents, or 0.1%, lower at $81.47 a barrel on the New York Mercantile Exchange after hitting an intraday high of $82.42 earlier in the day.

Futures declined yesterday after stocks fell for the third time in four days and the U.S. dollar advanced against the EUR. A stronger dollar is making the commodity more expensive to purchase as it is denominated in dollars. Putting further pressure on the commodity is the expectation that an Energy Department report tomorrow will probably show crude stockpiles rose last week.

For today traders should follow any news from the U.S. as the direction of the USD will likely affect oil prices.

Technical News

EUR/USD

After yesterday’s decline some correction may be expected for the pair in the short term. The RSI for the pair is floating in the oversold territory on the two hour chart while a bullish cross is evident on the hourly and 4 hour charts’ Slow Stochastic. Going long with tight stops may be advised for today.

GBP/USD

The pair is currently range trading between 1.5790 and 1.5830, with most indicators in neutral territory. Waiting on a clearer direction for the pair may be advised for today.

USD/JPY

The pair seems to be exhibiting mixed signals. While the daily chart’s RSI is floating in the oversold territory with a bullish cross evident on the chart’s Slow Stochastic as well as the MACD, the 2 hour chart’s Slow Stochastic is showing a bearish cross with the 2 hour chart RSI floating near the overbought territory. Waiting on a clearer signal for the pair may be advised

USD/CHF

The pair may be seeing some upward correction today as the pair’s RSI is floating in the oversold territory on the 4 hour and daily charts while a bullish cross is seen on the 4 hour charts Slow Stochastic and the hourly MACD. Going long for the day may be advised.

The Wild Card

AUD/NZD

The RSI for the pair is floating in the oversold territory on the 4 hour and 8 hour charts with a bullish cross seen on the 8 hour chart’s Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the hourly, 2 hour, 4 hour and 8 hour charts, indicating an impending upward movement. Forex traders are advised to go long for the day.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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.

Video (Part 3): Prechter – Investing in Extreme Markets

(Note: This interview was originally recorded on September 20, 2010)

In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about a technical pattern he sees forming in the Dow.

Get Up to Speed on Robert Prechter’s Latest Perspective — Download this Special FREE Report Now.