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Reacting to the Fed

Posted on April 30, 2009 at 2:58 in Editors Pick by David AranzabalNo Comments »

Source: CNBC

U.S. DOLLAR: FED BRINGS RISK BACK ON

Posted on April 30, 2009 at 2:53 in Editors Pick by David AranzabalNo Comments »

Do not underestimate the Federal Reserve. Even though the U.S. central bank made no changes to their asset purchase program or to their target range for interest rates, they still managed to trigger volatility in the currency market. The less pessimistic tone of the FOMC statement triggered a sharp rally in the U.S. dollar against all of the major currencies. The central bank went out of their way to say that the recession appears to easing which should have lasting impression on the currency market. The equity and currency markets did close off its highs, which suggest that the positive sentiment may be waning. The end of day retracement was tied to the comment made by Brazil’s Health Minister that the World Health Organization has increased the swine flu pandemic alert level to 5 (WHO confirmed this about 30 minutes after the market closed).

Source: Fx360.com

Quote of the day

Posted on April 30, 2009 at 2:49 in Quote of the day by David AranzabalNo Comments »

I honestly think it is better to be a failure at something you love than to be a success at something you hate.
George Burns

Majors at a glance 30/04/2009

Posted on April 30, 2009 at 2:40 in Starting the day by David AranzabalNo Comments »

This is a quick review about EUR/USD and GBP/USD:

EUR/USD

You can see quite clearly on the hourly charts the Double Top formation. This resistance comes in at 1.3340. The break lower from this formation should set the tone for today.

Intra day support is located at 1.3246. If sellers decide the market needs more correction they will drive it below here possibly looking for the 50% fib level of 1.3151. Buyers will have had enough of losing out by then and will come out and defend this support. Now the 50% line is always a tricky one so look for some form of struggle at these lower levels. However do expect the buyers to win initially and drive the market up to 1.3246 once more.

Now if buyers do defend 1.3246 initially, and break this higher above 1.3340 then the top formation would be negated and Euros will carry on with upward move with 1.3381/1.3393 looking to be your immediate attraction.

EUR/USD

Buyers bounded into the market yesterday taking on defiant sellers and won the day. Overnight you have seen the market reach 1.3199 and its trying for the longer term 1.3207 38% Fib level. Now given the overnight strength this level may just hold first attempt, giving way to profit taking and sellers who have been left out in the cold.

However this is looking stronger overall, and any sellers at these higher levels will be disposed off if a break above 1.3230 occurs. Buyers will be back in the limelight and should thrust their way forward through to 1.3300. Now this level ties in nicely with the longer term 50% Fib level and also previous resistance, so profit taking will certainly occur at these higher levels. Sellers will try again to push this lower from here as they did before, and they won. However do not under estimate the buyers persistence and above 1.3324 sellers will be left standing as buyers push this to 1.3381/94.

Now if sellers manage to halt the advance ahead of 1.3207 losses back to 1.3116/1.3090 should not be ruled out. Buyers will once ore be waiting to scoop up bargains at these lower levels and would only wobble if the market lost 1.3070.

GBP/USD

Sterling broke support yesterday and traded down to 1.4515. Buyers bought at these lower levels pushing it to 1.4695 before failing and trading lower once more.

1.4576 is the level on the downside to watch. If sellers can once more drive this through here look for 1.4521/15 to entice. Sellers will be short covering to here. As this level held previously, buyers should come out to defend it. Sellers however will make a stand and below 1.4500 buyers will be wiped aside as the sellers take the reins and drive this lower with 1.4390 to 1.4350 looking to entice.

If buyers stand fast at current lows of 1.4575 look again for 1.4695. Profit taking will be evident to here. Buyers will try and outwit sellers here and buy above 1.4722 for 1.4778/80.

EUR/USD

Euros have edged lower overnight and are currently trading at the short term 50% fib level of 1.3152. Buyers are out to defend this support and try and stem the downward moves. If this support can hold look for the market to come higher with 1.3230 the buyers first objective. Profit taking should be evident a these higher levels. Now it is a question of whether buyers can hold onto gains and ease the downward threat that seems to be unfolding.

Above 1.3230 at least gives encouragement to the market for 1.3295/1.3324 where sellers will once more take over.

Now if the sellers get their way this morning and push the market lower through 1.3150 buyers will stand aside as the market falls to 1.3090.Short covering will apply here. Buyers are expected to defend this support and will only wobble if sellers force this through 1.3060.