The U.S currency Weakens ahead of Bernanke’s Testimony

The U.S Dollar edged down versus the EUR during the session as traders look ahead to key U.S. economic data and congressional testimony from Federal Reserve Chairman Ben Bernanke later today. Traders will listen closely for any hints of changes to how long the Fed may keep Interest Rates on hold.

Economic News

USD – Dollar falls vs. Yen as Trade Deficit Widens

The Dollar rose against the EUR on Tuesday after a Greek debt auction showed the market asked a high price to hold the assets and Greece’s fiscal crisis would continue to weigh on the single currency. The Dollar also gained on talk among traders that a U.S. think tank report said the Federal Reserve was closer to raising one of its key Interest Rates.

But it was a volatile session for the Dollar/Yen pair with the U.S. currency falling to its lowest in 2 weeks against the Yen in Asia trading. The U.S currency dropped against the Japanese yen as a report showed the U.S. trade deficit increased in February more than economists expected, making the greenback less attractive to investors.

However, the U.S Dollar retraced some of its losses against the Yen in early session today ahead of a slew of U.S. economic data and Federal Reserve Chairman Ben Bernanke’s testimony to Congress. Apart from Bernanke, U.S. Retail Sales and CPI numbers are due later today. Analysts say that if Retail Sales post a strong gain, they could stoke speculation that the Fed will raise rates sooner rather than later, and boost the U.S. Dollar.

EUR – Euro higher vs. U.S Dollar

The European single currency rose Wednesday after earlier falling to a session low versus the U.S dollar as results from a Greek Treasury bill auction showed the market still required a high premium to hold Greek assets. The single currency was trading at $1.3600, up 0.1% on the day and recovering from a session low of $1.3556.

On Monday, the EUR climbed to a near 1 month high of $1.3691 after Euro-Zone finance ministers agreed on a financial aid package for Greece, before paring gains as investors sought clarification about the plan. However, analysts said that although the EUR is now undergoing a rally the financial package does not change the medium-term outlook, which is that the European economy is likely to under perform other developed economies. Thus, the downtrend for the EUR/USD cross looks set to continue.

JPY – Yen Declines from 2 Week High on Risk Appetite

The Japanese yen fell from the strongest level in two weeks versus the Dollar and tumbled against the EUR as signs the global economy is recovering boosted demand for riskier assets. Japan’s currency was also softer across the board on a pick-up in demand for riskier assets on hopes of better earnings from U.S. companies.

The Yen traded at 93.25 per Dollar from 93.20 yesterday when it touched 92.58, the most since March 30. Japan’s currency was at 127.21 per EUR from 126.88 yesterday. Traders said that improving risk appetite, buoyed by solid economic data and corporate profits encourage a fund allocation shift away from the Yen.

Crude Oil – Crude Oil Trades Near $84 a Barrel

Crude Oil prices ended moderately lower Tuesday, extending losses for a 5th straight session on expectations of an increase in weekly U.S. inventories and a forecast that production in non-OPEC countries will increase. Crude hit an intraday low of $82.50 earlier.

Crude Oil prices declined as the International Energy Agency boosted its forecast for non- OPEC supplies and U.S. inventories were estimated to climb, raising concern that the markets are oversupplied. Oil fell 0.3% after the IEA outlook that output will expand in countries such as Canada, the U.K. and Russia. U.S. crude stockpiles may advance for an 11th week, the longest stretch in five years.

Technical News

The EUR’s recent rally may be seeing a correction today. The hourly, 2 hour and 8 hour RSI are floating in the overbought territory and a bearish cross is evident on the hourly, 2 hour and daily charts’ Slow Stochastic. Furthermore, a breach of the upper Bollinger Band is evident on the 2 hour chart. Going short for the day may be advised for today.
The daily and hourly RSI are floating in the overbought territory while a breach of the upper Bollinger Band is evident on the 2 hour chart indicating an impending downward movement. Furthermore, a bearish cross is evident on the 2 hour and daily charts’ Slow Stochastic. Going short for the day may be advised.
The pair is range trading at the moment, trading between 93.10 and 93.40 with most indicators floating in neutral territory. Waiting on a clearer signal for the pair may be advised for today.
The pair recent downward trend may see a correction today as hourly, 2 hour, 4 hour and 8 hour RSI are floating in the oversold territory indicating an imminent upward movement. A bullish cross is evident on the hourly and 2 hour charts’ Slow Stochastic with a breach of the lower Bollinger Band is evident on the 2 hour chart. Going long for the day may be a good option.

The Wild Card

The 4 hour and 8 hour RSI are floating in the oversold territory while a bullish cross is evident on the 4 hour and 8 hour charts’ Slow Stochastic. Furthermore an impending bullish cross is evident on the hourly MACD Forex traders may be advised to go long for the day.

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