Dollar Falls Sharply vs. Rivals

The US dollar tumbled against a wide range of currencies Thursday, hit by continued weakness ahead of expected easing by the Federal Reserve, and quickly accelerated by a surprise decision by the Monetary Authority of Singapore to tighten its monetary policy.

Economic News

USD – US dollar Drops after Singapore News

The US currency marked a 10-month low against a basket of currencies on Thursday, coming under broad selling pressure after Singapore widened the trading band of the Singapore dollar, letting its currency hit a new record high.

At a semi-annual meeting Thursday morning, the Singapore central bank surprised many economists by effectively tightening its policy with an increase in slope of its Singapore dollar NEER band, at the same time maintaining its policy of modest and gradual appreciation of the Singapore dollar. Traders said selling in the greenback picked up momentum after the Monetary Authority of Singapore’s (MAS) move.

The dollar also fell 0.6% against the Japanese yen to hit a fresh 15-year low of 81.28 yen, despite constant wariness about Japanese intervention. While traders think Japan could intervene to keep the yen in check at any moment, some market participants speculated that Tokyo may prefer to avoid intervention ahead of the G20 meetings.

Still, some market players have said that financial markets may have already priced in quantitative easing by the Federal Reserve early next month and that the dollar’s decline may have soon run its course, in which case, any move by the Fed could significantly raise the USD’s value.

EUR – Euro Rises to 8-Month High

The euro rose to an 8-month high against the US dollar on Thursday, in a move one trader said might be spillover from Singapore’s central bank tightening of monetary policy. The euro jumped 0.9% to $1.4086, after rising as far as $1.4095, its highest in more than eight months.

The euro also gained 0.2% against the British pound to 88.23 pence yesterday. The euro may extend gains versus the pound after surpassing 88 pence for the first time since May on speculation the European Central Bank (ECB) will tighten monetary policy before the Bank of England (BOE) does, according to economists.

The euro is the top-performing currency in the past month, beating its major trading partners with a 4.3% advance. And now, as the euro has broken above key technical resistance at $1.4050, it may now trend as high as $1.4300 in coming weeks, according to analysts.

JPY – Yen Hits 15 Year Peak

The Japanese yen rose to its highest price level in 15 years versus the US currency before reports this week may fuel speculation that the Federal Reserve will ease its monetary policy further in order to support prices.

The dollar/yen cross dropped to 81.28, the weakest since April 1995, and traded at 81.32 yen, from 81.81 yesterday. While traders think Japan could intervene in the forex market to keep the yen in check at any moment, some participants speculate that Tokyo may prefer to avoid intervention ahead of the G20 meetings this weekend.

Crude Oil – Oil Gains on Rising Global Demand

Crude Oil prices snapped a 2 session losing streak to close higher Wednesday, on the heels of increased forecasts for world oil demand and a weaker dollar.

Oil climbed for a second day, rising 0.9 percent to $83.77 a barrel , ahead of a meeting of the Organization of Petroleum Exporting Countries (OPEC) today at which the group is expected to keep production unchanged and urge increased adherence to output quotas.

The price of crude in recent months has meandered between $75 and $85 a barrel, although it has been heading higher as the US dollar continues to soften.

Technical News

It appears as if the Bollinger Bands on the 4H chart have begun to tighten in expectation of a volatile movement. Most indications show the pair floating in neutral territory, which is common before a large jump. However, the hourly and daily MACD all show bearish crosses, suggesting that a level of downward pressure does exist. Going short may be today’s preferable strategy.
The price of this pair appears to be floating in the over-sold territory on the 4-hour RSI, suggesting upward pressure. The bullish crosses on the hourly MACD support this notion. With an impending bullish cross on the daily Slow Stochastic, the upward movement may be confirmed. Going long could prove to be a wise choice today.
The daily chart is showing that the pair is still in the bearish configuration. However, the 4-hour chart’s RSI is already floating in the over-sold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops may be a wise tactic.
Exhibiting similar behavior as the EUR/USD, this pair shows a tightening of the Bollinger Bands on the hourly chart, but with a level of upward pressure. Going long on this pair could prove beneficial in the hours ahead.

The Wild Card

Gold prices have rose significantly in the past two days and peaked at $1377 an ounce. However, a bearish cross on the hourly chart’s Slow Stochastic suggests that a bearish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

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