Yen Sinks against Majors

The yen hit a three-month low against the dollar and 5-1/2 month against the EUR, as the JPY remained pressured by persistent speculation that the Bank of Japan may decide on more monetary stimulus at a policy meeting next week.

Forex Market Trends

Daily Trend no no up no no up
Weekly Trend up down up down up up
Resistance 1.3125 1.6095 80.70 0.9360 1.0400 0.8225
1.3105 1.6075 80.50 0.9340 1.0380 0.8205
1.3075 1.6045 80.20 0.9310 1.0350 0.8175
Support 1.3015 1.5985 79.60 0.9250 1.0290 0.8115
1.2985 1.5955 79.30 0.9220 1.0270 0.8085
1.2965 1.5935 79.10 0.9200 1.0250 0.8065

Economic News

USD – Dollar Hits 3-Month High versus the JPY

The dollar hit a three-month high against the yen on Monday, as the yen remained pressured by persistent speculation that the Bank of Japan may decide on more monetary stimulus at a policy meeting next week. The dollar climbed to as high as 79.82 against the yen, its highest level since mid-July.

Traders have started to focus more on fundamentals such as economic growth and short-term interest rates. That shift, just getting underway, could take the shine off the soaring USD in the coming months. A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation’s record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.

With no major news events regarding the United Sates scheduled for today, traders will have to look to other sources to determine which way the troubled currency is headed. The Canadian Retail Sales figures are one indicator. If the figures come in as better than expected and investors are encouraged by Canada’s pace of recovery, the dollar will likely to rise further against the JPY in afternoon trading.

EUR – EUR Hits 5-1/2 Month High Against the Yen

The euro rose against the dollar and hit a 5-1/2 month high against the yen on Monday after a victory for Spain’s prime minister in regional elections removed a potential obstacle to him asking for a bailout. The euro rose more than 1% to 104.40 against JPY, its strongest since early May.

Expectations that Spain will apply for a bailout, prompting the European Central Bank to start buying its bonds, have helped support the euro in recent weeks, although uncertainty over the timing of such a move was also seen limiting its gains.

As for today, the calendar is lacking any major economic data releases from euro-zone. As such, traders will want to follow the movements of the major equity indices as the dollar has recently been trading in an inverse relationship to equities. Strength in stocks could propel the EUR/USD to its next resistance line which rests at 1.3150.

JPY – Yen Sinks against Majors

The yen slid against most of the major currencies during yesterday’s trading. The yen corrected some of its gains vs. the U.S. dollar as the USD/JPY pair gained 60 pips. The yen fell against the euro and the British pound as well.

The yen fell broadly after data showing Japan’s exports tumbled in September added to growing expectations of more policy stimulus from the Bank of Japan when it meets next week.

As for today, Japan will be absent from the economic calendar. The JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today.

Crude Oil – Crude Oil Rises Above $90.50 a barrel

Oil rose slightly to around $90.50 on Monday as fighting in Beirut and Gaza intensified fears of widening conflict and the security of fuel supplies from the Middle East, helping stem a four-day decline in prices.

Looking ahead, traders are advised to watch carefully the global stock markets and the major economic indicators which will be published from the U.S. and Euro-Zone in order to predict the next movements in oil prices.

Technical News

There is a fresh bearish cross forming on the weekly chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the daily chart’s Momentum oscillator also supports this notion. Going short with tight stops might be the right strategy today.
The GBP/USD cross has experienced a bearish trend for the week. However, it seems that this trend may be coming to an end. The Williams Percent Range of the weekly chart shows the pair floating in the oversold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice.
The cross has been dropping for the past week now, as it now stands at the 0.9260 level. The Slow Stochastic of the weekly chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by Williams Percent Range. Going long might be a wise choice.

The Wild Card

The EUR/GBP sustained upward movement has finally pushed its price into the over-bought territory on the daily chart’s Williams Percent Range. 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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