{"id":14233,"date":"2010-10-20T08:15:17","date_gmt":"2010-10-20T12:15:17","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=14233"},"modified":"2010-10-20T08:15:17","modified_gmt":"2010-10-20T12:15:17","slug":"will-the-usd-be-able-to-maintain-yesterdays-gains%e2%80%8e","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/10\/20\/will-the-usd-be-able-to-maintain-yesterdays-gains%e2%80%8e\/","title":{"rendered":"Will the USD Be Able to Maintain Yesterday’s Gains?\u200e"},"content":{"rendered":"

Source: ForexYard<\/a><\/strong><\/em><\/strong><\/span><\/p>\n

Following yesterday’s volatile trading session, in which the US dollar gained around \u200e\u200e300 pips against the euro, analysts are questioning whether the dollar gains were a \u200etemporary occurrence or the beginning of a larger trend. Today, news out of the UK \u200eand Canada will likely determine which direction the market moves.\u200e<\/p>\n

Economic News<\/h2>\n

USD – USD Gains Big Following Surprise Chinese Rate Hike<\/h3>\n

Yesterday, the dollar saw significant gains against virtually all of its main currency \u200erivals, following a surprise Chinese interest rate hike that led to increased risk aversion \u200eamong investors. The dollar was able to gain approximately 300 pips against both the \u200eeuro and UK pound. Currently the EUR\/USD pair is trading around the 1.3755 level, \u200ewhile the GPB\/USD pair stands at 1.5715. While the greenback initially made gains \u200evs. the fellow safe-haven yen, the USD\/JPY pair has since fallen and is currently \u200earound the 81.30 level.\u200e<\/p>\n

Analysts are unsure regarding how long the USD will be able to maintain these gains. \u200eAny future moves by China to tighten economic policy will likely benefit the \u200egreenback, as investors are likely to revert to safe-haven currencies as a result. That \u200ebeing said, with the Fed set to unveil its latest quantitative easing measures as early as \u200enext month, investor confidence in the US economy is quite low. As long as the US \u200econtinues to release negative economic indicators, investors are likely to keep opening \u200eshort positions for the greenback.\u200e<\/p>\n

Today, a lack of significant economic indicators out of the US means that dollar \u200evalues will likely be determined by news from the UK and Canada. Traders are \u200eadvised to pay attention to the UK Spending Review and the Canadian BOC Press \u200eConference, scheduled for 11:30 and 15:15 GMT respectively. Both sterling and the \u200eloonie took losses against the dollar yesterday. Positive news today will likely help \u200eeither currency recoup its losses. \u200e<\/p>\n

EUR – EUR Set to Reverse Yesterday’s Losses<\/h3>\n

In addition to the 300 pip drop the EUR\/USD took yesterday, the safe-haven yen was \u200eable to record significant gains against the 16-nation single currency. EUR\/JPY \u200eplummeted some 210 pips yesterday before staging a minor recovery in the overnight \u200esession. Currently the pair is trading around the 111.90 level. Analysts attribute the \u200edrop to a decrease in risk taking following China’s surprise interest rate hike \u200eannouncement. \u200e<\/p>\n

Whether or not this trend will continue today is unknown, but traders will want to pay \u200ecareful attention to any major announcements out of China just in case. In addition, \u200enews out of the UK is likely to influence the euro today. The EUR\/GBP pair dropped \u200eclose to 100 pips yesterday. Today’s UK Spending Review is expected to reveal that \u200ethe Bank of England is set to inject a significant amount of capital into the economy, \u200ewhile keeping interest rates at their record low. If so, investor confidence in the UK \u200eeconomy will likely remain low, and could lead to significant gains for the euro in \u200eafternoon trading. Traders may want to jump on this impending trend before it is too \u200elate. \u200e<\/p>\n

JPY – Yen Manages to Gain on USD in Overnight Trading<\/h3>\n

After losing close to 60 pips against the US dollar in yesterday’s trading, the yen has \u200emanaged to correct itself and is currently trading around the 81.40 level. \u200eAdditionally, the Japanese currency has gained some 130 pips against the UK pound, \u200eand 75 pips against the Swiss franc. Analysts attribute the yen’s gains to a return to \u200erisk aversion following the surprise announcement out of China yesterday. Whether \u200eor not these gains are temporary depends on a number of factors.\u200e<\/p>\n

First, today’s UK Spending Review is unlikely to help generate investor confidence in \u200ethe British economy. Should the Bank of England announce a new stimulus plan, as \u200epredicted, the safe-haven yen is likely to see more gains. At the same time, traders \u200ealways want to pay attention to any moves the Bank of Japan may make in order to \u200edevalue its currency. The yen’s recent gains have not been good for Japan’s export \u200eindustry, and a move by the BoJ is not out of the question. \u200e<\/p>\n

Crude Oil – Oil Prices Tumble As the USD Moves Up<\/h3>\n

Crude oil prices fell close to 400 pips in trading yesterday, as investors abandoned the \u200ecommodity in favor of the safe-haven dollar. While oil managed to stage a slight \u200ecorrection in overnight trading, the trend is still very much down. Currently prices \u200estand at $80.55 a barrel. Crude oil is typically viewed as an alternative investment to \u200ethe US dollar. It appears for as long as the dollar is making gains, oil has the potential \u200eto drop down further.\u200e<\/p>\n

Today, in addition to the direction the USD takes, traders will want to pay attention \u200eto the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Analysts are \u200eforecasting an increase in inventories this week. Should the figure come in at its \u200eforecasted level of 1.5M, crude has the potential continue its bearish trend. Typically, \u200ean increase in inventories signals a decrease in demand which causes oil to fall, at least \u200ein the short term. \u200e<\/p>\n

Technical News<\/h2>\n

EUR\/USD<\/h3>\n

Following yesterday’s downward spiral, the Williams Percent Range on the 8-hour \u200echart indicates this pair is in oversold territory. This theory is supported by the \u200eStochastic Slow on the 4-hour chart, which has formed a bullish cross. Traders are \u200eadvised to long with tight stops today.\u200e<\/p>\n

GBP\/USD<\/h3>\n

The Relative Strength Index on the 8-hour chart indicates that this pair is in oversold \u200eterritory and may see an upward correction. In addition, the Stochastic Slow on the \u200esame chart shows that a bullish cross has formed. Now may be a good time for \u200etraders to open up some long positions in order to jump on the impending upward \u200etrend.\u200e<\/p>\n

USD\/JPY<\/h3>\n

Virtually every technical indicator shows this pair trading in neutral territory at the \u200emoment. Usually this means that a clear direction has not yet presented itself for the \u200eday. Traders may want to take a wait and see approach in order to better judge which \u200eway the pair is moving. \u200e<\/p>\n

USD\/CHF<\/h3>\n

The Relative Strength Index on the 8-hour chart shows this pair entering overbought \u200eterritory, meaning that a downward correction could occur today. Traders may want \u200eto go short with tight stops today, as a bearish correction may take place.\u200e<\/p>\n

The Wild Card<\/h2>\n

Platinum<\/h3>\n

After tumbling in trading yesterday, technical indicators are showing that the \u200ecommodity may be due for an upward correction. The Slow Stochastic on the 8-hour \u200echart has formed a bullish cross, while the Relative Strength Index on the 4-hour chart \u200eis in oversold territory. Forex traders may want to go long with tight stops for some \u200epotentially serious profits today.<\/p>\n

Forex <\/strong>Market Analysis provided by ForexYard.<\/a><\/strong><\/em><\/p>\n

\u00a9 2006 by FxYard Ltd<\/p>\n

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.<\/p>\n","protected":false},"excerpt":{"rendered":"

Following yesterday’s volatile trading session, in which the US dollar gained around \u200e\u200e300 pips against the euro, analysts are questioning whether the dollar gains were a \u200etemporary occurrence or the beginning of a larger trend. Today, news out of the UK \u200eand Canada will likely determine which direction the market moves.\u200e<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14233","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14233","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=14233"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14233\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=14233"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=14233"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=14233"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}