U.S Dollar Up ahead of Bernanke Testimony

The U.S. Dollar briefly stayed higher versus the EUR on Monday and near an 8-month high versus other major currencies as traders await Fed Chairman Ben Bernanke’s testimony on Wednesday and Thursday that would set the tone for the greenback in the coming days and possibly highlight future decisions regarding interest rates following the recent rise in the discount rate.

Economic News

USD – Dollar Gains vs. EUR on Rate Increase News

The U.S. Dollar rose against the EUR on Monday as investors worried about the sustainability of the economic recovery in the wake of last week’s discount rate rise by the Federal Reserve. The U.S Dollar also pared some of its losses on the Yen, rising to 91.25 yen, from 91.11 yen. According to analysts, near-term resistance is seen around 92.15 yen; the 1-month high struck last week.

This week, all eyes will be on Fed Chairman Ben Bernanke’s testimony in Congress on Wednesday and Thursday. Investors will be looking for clues on rates after the Fed surprised many by raising the discount rate last week Economists have said that any such signal from Bernanke in the coming days could lead to some unwinding of huge long positions built on the U.S. Dollar in recent weeks. Still, traders say, any fall in the Dollar is likely to be short-lived on the back a growing belief that the Fed was likely to move first amongst the major central banks in tightening interest rates.

Traders are apparently expecting the greenback to trade in a range ahead of Bernanke’s testimony and a slew of other U.S. economic data. U.S. housing prices for December are due today at 14:00 GMT as is the Consumer Confidence survey for February shortly thereafter.

EUR – EUR Stays Low against Dollar on Greece Concern

The European currency traded near a 9-month low against the U.S. Dollar as speculation that Greece’s fiscal woes will worsen reduced demand for the 16-nation single currency. The EUR fell on concern that the debt crisis among the Euro-Zone’s smaller nations will slow the region’s economic recovery, forcing the European Central Bank (ECB) to keep its main refinancing rate at a record low.

The single currency was down at $1.3594 from $1.3596 yesterday. It touched $1.3444 on Feb. 19, the lowest since May 18. Against the Japanese yen, the EUR inched up to 124.12 yen, having lost over 0.6% on Monday after a German Finance Ministry spokesman said that the country has made no decisions on a lifeline for Greece.

Weekend reports had suggested that a 20-25 billion EUR package was being prepared, providing a brief boost to the EUR earlier in the trading day. Concerns about heavily indebted Euro-Zone countries, and worries whether they will be bailed out, continue to hurt the EUR, with the single currency shedding around 5% so far this year.

JPY – Yen Weakens vs. Rivals

The Yen fell against higher-yielding currencies on prospects that Japanese investment trusts will send funds overseas this week. The JPY fell against 15 of its 16 most-traded counterparts on a speculation that Japanese investors may be preparing to buy overseas assets. The Yen fell to 124.21 per EUR from 123.92 yesterday. Against the U.S. Dollar, the Japanese currency weakened to 91.26 to from 91.14.

Finance companies are seeking to raise at least 3.8 trillion yen ($41.7 billion) for so-called Toshin mutual funds focused on higher-yielding securities this week, according to analysts. There is a concern among investors that a lot of these mutual funds are being set up this week, and it’s a factor for the Yen to be sold, they said.

Crude Oil – Spot Crude Oil Tops $80 a Barrel!

Crude Oil traded above $80 a barrel on Monday as a 2-week rally had prices of the commodity hitting little resistance in their ascent. Further support came on short-covering ahead of the expiration of the March U.S. Crude Oil contract and from buying up of U.S. RBOB gasoline futures as the market gears up for the summer driving season in the United States.

Oil’s gains came even as the Dollar edged up against the EUR as markets remained anxious about unresolved debt problems in Greece and a surprise rise in the Federal Reserve’s emergency lending rate. Traders are now trying to anticipate whether the upward movement can sustain itself.

Technical News

It appears as if yesterday’s upward movement pushed this pair into the over-bought territory on both the hourly and 4-hour RSI, indicating some downward pressure. An impending bearish cross may be forming on the hourly Stochastic (slow), suggesting that a down-turn is being anticipated for mid-day. Going short appears to be today’s preferable strategy.
The price of this pair has recently entered the over-bought territory on the 4-hour RSI, but the indicator remains pointing upward. An impending bearish cross on the hourly Stochastic (slow) suggests that the 4-hour RSI may turn downward in the nearest future, putting added pressure on this pair. Going short after the down-swing may be a wise tactic in today’s trading.
This pair seems to be giving off a few mixed signals. Mid-term indications are showing a possible upward movement. This is supported by the recent bullish cross on the 4-hour Stochastic (slow). However, the daily RSI shows the price of this pair cascading out of the over-bought territory, highlighting longer-term downward price movement. Buying on lows and selling on highs within today’s range may be a smart decision.
The USD/CHF appears to be showing some indication of a continuation to its recent bullishness. Both the hourly and the 4-hour RSI have the pair just exiting the over-sold territory, suggesting upward pressure. Going long may not be a bad choice today.

The Wild Card

Crude Oil
Looking at the weekly chart for this commodity shows a very distinct bullish channel with clear peaks and troughs. The $80 a barrel mark seems to represent the most significant price barrier for this commodity. As the price currently sits on this barrier, forex traders would be wise to note the recent bearish cross on the daily Stochastic (slow) and the over-bought indication on the daily RSI, both suggesting that the $80 mark is indeed putting heavy pressure on the price of oil. Going short and capturing the downward price move may be a wise decision.

Written by Forexyard.com