Bearish Pressure Growing on US Dollar

Forex traders, who had been hesitant to short the greenback due to a variety of reasons last week, found many justifications to push heavily against the greenback these past two days. The EUR/USD has now risen to a three-year high, reaching towards 1.4900 in yesterday’s session. The AUD/USD witnessed a similar bull run, climbing to a 29-year high of 1.0920. The USD/JPY joined the chorus, despite weak fundamentals in Japan, and fell to 81.52 from 82.17 yesterday.

Forex Market Trends

Daily Trend no down down no no up
Weekly Trend up up down down up up
Resistance 1.4940 1.6760 82.40 0.8825 1.1000 0.9000
1.4910 1.6740 82.20 0.8800 1.0970 0.8975
1.4880 1.6715 81.90 0.8770 1.0940 0.8945
Support 1.4800 1.6615 81.10 0.8700 1.0865 0.8860
1.4765 1.6580 80.80 0.8665 1.0830 0.8830
1.4745 1.6550 80.60 0.8640 1.0800 0.8810

Economic News

USD – US Dollar Dropping Fast as Sell-Off Gains Momentum

The US dollar has continued to plummet since yesterday after statements from the Federal Open Market Committee (FOMC) removed all doubt about US monetary policies remaining unchanged. The record low interest rates will persist for the foreseeable future, according to the FOMC report and subsequent statement. What market participants are witnessing now is the aftermath.

Forex traders, who had been hesitant to short the greenback due to a variety of reasons, found many justifications to push heavily against the greenback; especially since little resistance should be seen in the days ahead. The EUR/USD has now risen to a three-year high, reaching towards 1.4900 in yesterday’s session. The AUD/USD witnessed a similar bull run, climbing to a 29-year high of 1.0920. The USD/JPY joined the chorus, despite weak fundamentals in Japan, and fell to 81.52 from 82.17 yesterday.

Yesterday’s Advance GDP report gave dollar bears yet another reason to dump on the greenback as it fell just shy of its expected 1.9%, coming in at 1.8%; well below last quarter’s adjusted 3.1%. There does not appear to be any reason to resist the bear session on the USD for the remainder of the week. Dollar traders should look to short the greenback against all of its currency rivals until this bear session loses a bit of its current momentum.

EUR – EUR Making Substantial Gains vs. USD

The euro has been a top performer against the US dollar after statements by the US Federal Open Market Committee (FOMC) regarding US monetary policy reaffirmed the disparity in monetary policies between the Atlantic rivals. The statement reaffirmed the notion that the Fed would hold interest rates at their record low for the foreseeable future, driving traders away from the greenback en masse and into higher yielding assets.

With Europe and Great Britain on track to tighten their monetary policies, currency traders have been pouring their investments into the region with expectations for a surge in value in the coming weeks. Though debt concerns loom in the euro zone, and industrial production falters globally, the higher yielding assets like the GBP and EUR appear positioned to gain despite poor fundamentals. This trend appears to have little opposition as dollar traders shift substantial value into other assets.

As for Friday, the euro looks to be gaining against the greenback as traders find additional reasons to pull out of their dollar positions in exchange for higher yields. Germany will publish its retail sales data today, along with the euro zone’s unemployment rate. These factors, however, will likely be outweighed by the shift in sentiment towards the buck after yesterday’s FOMC statement. Look for long positions on the EUR to continue through to next week.

JPY – USD/JPY Bearish after Japan Holds Rates and Purchasing Program Steady

The USD/JPY has been trading lower recently as investors flee the greenback on the coattails of the Fed’s monetary policy statements. After reaching upwards of 82.75 on Tuesday, the pair quickly dropped to a daily low of 81.61 Wednesday, and dipped farther in Thursday’s sessions after the Bank of Japan (BOJ) decided to hold rates steady and maintain present levels in its Asset Purchasing Program.

While the yen suffers from its own economic concerns, shifts in consumer sentiment have helped lift yen values against a number of its rivals. The pair also looks to be continuing this movement for the foreseeable future given the massive shift away from the US dollar. As the week comes to a close, traders shouldn’t see much change in JPY values directly correlated with its own economic news. As global investors digest the impact that the recent sell-off in US dollars will have on their portfolios, we should look to some stability and consolidation prior to this week’s closing.

Crude Oil – Despite Weak Industrial Data, Oil Prices Rise

Oil prices ended yesterday trading slightly higher on the day as traders largely moved away from the US dollar, lifting commodity values. As investors bailed out of their long positions with the USD, oil prices found support, pushing the commodity back towards $113 a barrel with a closing price of $112.86 yesterday.

As for today, crude oil traders may want to consider that commodities, which are linked to the value of the US dollar, are likely going to continue receiving a boost in the immediate future due to recent monetary policy statements out of the US. Hawkish statements about economic growth may suffice to hold prices stable between $112 and $115, but many speculators are beginning to anticipate another bull run in commodity prices and traders would be wise to watch for the bounce after the price corrects from yesterday’s movement.

Technical News

After climbing about 700 pips in the past couple of weeks, the pair’s bullish trend was slightly halted yesterday. In addition, as the RSI on the 4-hour chart has dropped below the 70-line, it seems that a bearish correction might proceed today. Going short with tight stops might be the right strategy today.
The cable saw a mild bearish correction yesterday, and fell from the 1.6740 level to as low as the 1.6625 level. Nevertheless, as a bullish cross takes place on the 4-hour chart’s Slow Stochastic, it appears that the pair might resume the bullish trend today, with potential to reach the 1.6750 level.
The USD/JPY pair saw a relatively peaceful trading session yesterday, trading around the 81.60 level. Today, as the daily chart’s MACD continues to point downwards, it appears that the pair might once again face a bearish session. Going short seems to be the right choice today.
After bottoming at the 0.8690 level, the pair saw a minor bullish correction yesterday, and is currently trading near the 0.8730 level. However, a bearish cross on the 4-hour chart’s Slow Stochastic is suggesting that another bearish session could be expected today, with a key-target level of 0.8650.

The Wild Card

Gold continues to rally at full steam and yesterday it gained about 1,400 pips to reach as high as $1,538 an ounce. Currently, as all oscillators on the weekly chart are providing bullish indications, it seems that gold might break a new-record high within the next few days, providing a great opportunity for forex traders to join a very popular trend.

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