Economic News

USD

The greenback slipped all across the board on Friday as a host of negative U.S data increased speculation of another Fed rate cut in March and was another strong indication that the U.S economy is heading towards a recession. The main driver of the dollar slide on Friday was the soft Consumer Sentiment figure which released at 69.6, well below the expected figure of 76.0. This was the lowest Consumer Sentiment figure in 16 years, indicating that U.S consumer spending is in a sharp decline and this once again sparked recession fears. The U.S currency gained some ground against the majors towards the beginning of last week but its positive momentum quickly reversed on the back of growing recession fears. There was more bad news for the greenback on Friday as the Empire State Business Conditions Index, which measures the general business conditions of manufacturers in New York State, released in negative territory signaling a sharp contraction in the level of general business activity. Also the U.S TIC Report, which measures the monthly difference in cross-border foreign and domestic purchases of long-term securities, came in well below expectations thus indicating that the demand for the greenback has declined drastically. All this negative data would now justify another rate cut by the Fed and as long as the U.S economic indicators continue to disappoint, the greenback will remain under pressure. Looking ahead to today, low liquidity is expected during the New York trading session as U.S banks will be closed in observance of President's Day. Therefore, the greenback should trade relatively flat, especially since there is also no major market moving news expected from Europe or Asia. The next key U.S data release will be the NAHB Homebuilders Survey on Tuesday, which should give forex investors an indication as to how the struggling housing market is reacting to the string of aggressive rate cuts by the Fed. The short term outlook for the greenback remains grim as investors are now betting on a 0.5% rate cut at the next FOMC meeting.

EUR

The EUR continued to gain ground all across the board last week, in particular against the greenback and the Sterling, as expectations of a rate cut by the ECB all- but diminished. ECB President Trichet emphasized that the problem of inflation is of greater concern than growth thereby eliminating any room for a rate cut in the near future. Now although the strengthening EUR has been dampening exports, the Euro-zone economy has remained resilient. So with the Fed and the BoE expected to continue slashing rates, the EUR is now in the driver's seat among the basket of major currencies and it is likely to target new highs in the near future. The only way that the EUR bubble will burst is if Euro-zone growth begins to show signs of a significant slowdown that would eventually force the ECB to lower rates.

There is no real significant Euro-zone news expected today or tomorrow, so the EUR should be able to maintain its bullish movement. The short term outlook for the EUR remains bright as speculation of further rate cuts in the U.S and the U.K is resulting in the EUR being favored by global investors.

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JPY

The JPY fell sharply last week as carry trades were back in action on the back of Warren Buffet's offer to shore up more than $800 billlion worth of municipal debts. However this carry trade reversal was only temporary and as the market digested this news of the “Buffet Plan”, the JPY climbed back onto the bullish wagon because global economic uncertainty continued to heavily weigh down on investors and risk aversion once again seized the financial markets.

The most significant news from the Japanese economy last week was the Interest rate Announcement by the BoJ on Friday. The BoJ kept its key benchmark rate unchanged at 0.5%, which is one of the lowest interest rate levels in the world making the JPY a carry trade favorite. BoJ Governor Fukui stated on Friday that the BoJ will assess the downside risk to the economy more closely as global financial markets have continued to display signs of instability and the global economic outlook is still uncertain. However the Japanese economy is still on the recovery path and it seems that the BoJ intends to resume its interest rate adjustment as economic circumstances permit it to do so. Therefore the JPY should be able to maintain its bullish momentum in the near term, especially if the global economy continues to slowdown sparking further risk aversion.


Technical News

EUR/USD

The key Fibonacci level of 1.4660 was breached on the 4 hour chart indicating that locally the momentum is still strong. The daily chart is showing a bearish cross forming on the slow stochastic which implies on a possible bearish correction if validated. Taking positions for the short term might be a preferable strategy today.

GBP/USD

The cable is showing renewed bearish momentum within the bearish channel. The daily RSI and slow stochastic are floating at the 50 level which implies that the bearish move might be relevant on the daily level as well. Next target price might be 1.9500.

USD/JPY

After the much anticipated bullish break failed to touch 108.50, it appears that range trading might continue this week. The 4 hour chart is moderately bullish, and the daily RSI is showing a positive slope. Buying on dips might be the right move this week.

USD/CHF

After another failed attempt to break the 1.1100 it appears that the bearish momentum is back. The 4 hour chart is showing strong bearish momentum and the daily chart supports the notion. Next target price might revolve around 1.0900 on the first move.


The Wild Card

Crude Oil

The strong bullish bonanza appears to continue with no signs of a halt. All oscillators are indicating that this bullish trend will continue, and the daily is showing that Oil is ignoring all bearish cross on the slow stochastic. This is great timing for forex traders to swing in while the momentum is still high.

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