Daily Forex Analysis by Finexo.com 16/12/2009


The US Dollar gained across the board on Tuesday in advance of the conclusion of the two day Federal Reserve meeting later on today. The Fed has been emphatic in their insistence that interest rates will remain at the near zero level for some time to come, however a recent flow of data pointing to inflationary trends has traders hoping for a policy shift. There is no expectation that the Fed will move rates at this meeting, though what is being looked for is some hint or signal that a rate hike will come sooner than Fed members have recently said. The latest piece of data that indicates inflation might be on the rise was the Producer Price Index, which rose 1.8% in November, the largest increase in three months. Analysts are predicting that with the stronger unemployment and consumer spending data, the Fed will find it difficult to remain firm in their resolve to keep rates as they are. Not raising them might be more damaging if inflation does indeed kick in.

At 11:00PM GMT, the US Dollar was trading up 1.1% versus the Japanese Yen to 89.6, up .23% against the British Pound Sterling to 1.6272, up .24% to the Canadian Dollar to 1.061, up 1.1% to the Australian Dollar to .9066 and up .92% against the Swiss Franc to 1.0402.


The Euro was hurt by a report out of Germany that showed investors were not bullish on the economic outlook right now, in fact the data points to a continued fall in investor sentiment which is now in its fourth month. Add into this mix the problems with Greece and their recent rating cut due to enormous debt, as well as Austrian Banks now causing worries and what you have is a clear picture of Euro instability. Analysts are not saying the Euro is weak, however overall sentiment in the coalition of 27 nations is declining because of a troubles in a few of them.

At 11:15PM GMT, the Euro was trading down .86% to the USD to 1.4532, down .65% to the Sterling to .8926, down .12% against the Swiss Franc to 1.5121 and down .62% versus the Canadian Dollar to 1.5422. The Euro did squeak out a gain against the Australian Dollar on Tuesday, up .22% to 1.6028.

Chart: GBP/USD

There has been three consecutive days of indecision for the GBP/USD heading into Wednesday. The recent break of the 1.6250 neckline-like area failed to generate a firmer southerly push for the pair, but neither was there a strong upside reversal. The recent low just below 1.6200 was very close to the key 0.618 Fibonacci, so that level will be in focus on any further weakness. A break could lead to a test of the 200-day moving average, which is fast rising toward the 1.6000 handle. To the upside, bears would be discouraged by any close back above the 1.6350/75 area.


Written by Finexo.com