Dollar Still Making Gains Following FED Statement

Following the optimistic forecast for the U.S. economy given by the Federal Reserve Bank (FED) on Wednesday, the U.S. Dollar continued to make serious gains against its major counterparts well into morning trading. The EUR/USD pair was trading at around the 1.4465 level this morning, a steep decline from only hours earlier.

Economic News

USD – Dollar Makes Big Gains Following FED Statement

The USD got another boost Wednesday evening after the Federal Reserve Bank (FED) issued a statement saying that there are definite signs that the American economy is on its way to recovery. While the FED stopped short of raising record low interest rates, the positive statement was enough to boost the Dollar against both the EUR and Yen.

Going into trading today, Dollar levels will most likely be effected by this weeks U.S. unemployment claims, set to be released at 13:30 GMT. With most analysts predicting a number around 465K, the news should be good for the greenback, as it would be relatively unchanged from last week’s figure. That being said, if the figure unexpectedly jumps and lands at around the 500K level, investors may lose faith in the pace of the American recovery. This may lead to a decline in the USD, and would result in positive gains for the EUR.

EUR – EUR Drops Below $1.4500

The EUR fell well below the psychologically important 1.4500 mark against the U.S. Dollar in early morning trading, and is currently trading around the 1.4465 level. The decline in value for the European currency can largely be attributed to continuous debt concerns among several Euro nations, as well as the upbeat news coming out of America.

Against the Yen, the EUR dropped in early morning trading, and is currently priced at 129.92. With most investors flocking to the safe haven currencies such as the Dollar and Yen, the EUR/JPY pair may decrease further today.

With no major news events regarding the Euro scheduled for today, traders will have to look to other sources to determine which way the troubled currency is headed. The U.S. unemployment figures are one indicator. If the figures come in as expected and investors are encouraged by America’s pace of recovery, the Euro will likely drop further in afternoon trading. On the other hand, the Euro does stand to make gains if the figures come in at above the forecasted number.

JPY – Yen Takes Losses Against the Dollar

The Yen was also negatively affected by the Dollar’s most recent gains and is currently being traded above 90.00 against the greenback. The Yen is looking better against the Euro, as levels fell to approximately 129.80 in early morning trading.

Looking ahead, the Yen will likely remain at its current levels, as the Japanese government is aiming to keep its value low in order to boost their export industry. That being said any negative economic indicators that may come out of the U.S. would likely lead to a positive impact on the JPY.

Crude Oil – Oil Prices Rise as Inventories Fall

Following a report from the U.S. Department of Energy showing a decline in crude oil supplies, prices shot up and are now being traded at over $74.00 a barrel. While analysts were predicting a decline in supplies, the published figure was well over a million more barrels then forecasted.

Further driving up oil prices was general instability in the Middle East, especially the continuing standoff with Iran over its nuclear program. Looking ahead, prices will likely remain at their current levels for some time, as it appears that no major breakthroughs with Iran are expected to occur in the near future. Traders should pay attention to any major news events coming out of the Middle East, as they are likely to affect the price of crude oil.

Technical News

The EUR/USD cross has experienced a bearish trend for the past 2 weeks. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the over-sold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.
The price of this pair appears to be floating in the over-sold territory on the daily chart’s RSI indicating an upward correction may be imminent. The upward direction on the hourly chart’s Momentum oscillator also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy.
The bullish trend is loosing its steam and the pair seems to consolidate around the 90.10 level. The 4 hour chart’s RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Going short with tight stops might be a wise choice.
The USD/CHF cross has been experiencing much bullish behavior in the past 2 weeks. However, there is much technical data that supports a bearish move for today. The RSI of the daily and 4-hour charts indicates that the pair floats in the overbought territory, leading to the conclusion that a downward correction is imminent. Going short with tight stops may turn out to pay off today.

The Wild Card

GBP/CHF sustained upward movement has finally pushed its price into the over-bought territory on the daily chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

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