Daily Forex Analysis by Finexo.com 21/12/2009


As the end of the year approaches, investors who sold off the Dollar during the year seem to be returning with a fury. The Dollar rose, albeit slightly on Friday, hitting eight month highs against the Euro and capping a good week overall for the USD. Investors who shorted the Dollar earlier in the year and helped it fall for most of it was now buying it back, locking in profits before the new tax year began. The week was highlighted by the Federal Reserve’s promise on Wednesday night to wind down its quantitative easing policy by February of 2010, and while it was far from the interest rate hike investors wanted, it was a sign that things are rebounding and gave traders hope for the New Year.

At the close, the Dollar traded up .11% to the Euro to 1.4335, up .23% against the Japanese Yen to 90.45, up .09% versus the British Pound Sterling to 1.6158, up .08% against the Australian Dollar to .8905 and up .11% to the Kiwi to .7114. The Dollar did fall by .98% to the Canadian Dollar to 1.0665 and .66% versus the Swiss Franc to 1.0424.

What’s in store this week?

This week is one of the shortest in terms of economic data reporting so look for it to be quite slow and uneventful, unless some country has a major crises. The next two weeks of trading for that matter are going to feature very thin liquidity as they contain the Christmas and New Years holidays. Sometimes these days transpire very quietly, but there are plenty of examples of very exaggerated moves, especially in the week between Christmas and the New Year, so be careful out there as always.

Chart: EUR/JPY

A massive reversal from an attempt at the lows as the market at first ran stops and then rallied on the Bank of Japan’s new determined deflation-fighting stance. The moves in interest rate spreads do not support the rally – so it will be interesting to see if JPY crosses can continue to rally on JPY-negative sentiment or some inscrutable new theme. In any case, Friday’s candlestick on the daily charts looks like an impressive bullish reversal and draws an emphatic line in the sand on the chart.


Written by Finexo.com