Today’s sample of Forex Analysis from ForexHound.com
The strong recovery in the U.S. Dollar late in the week and the inability to break it sharply lower could be a sign that a short-covering rally is imminent. Rumors the Fed may begin to raise interest rates earlier than expected, a poor U.K. economy and fear of intervention all helped boost the Dollar on Friday.
The uptrend continued on the daily USD JPY chart as rumors swirled that traders are betting the Fed will raise interest rates sooner than expected. Traders who sold Dollars and bought Yen when U.S. interest rates became the lowest in the world are not being forced to buy back their positions. This is helping to boost the USD JPY. There will come a point when the Yen once again becomes the world’s carry trade. The Dollar should rally substantially and equities should break hard when this occurs.
The GBP USD erased all of this week’s gains on Friday following the release of a report which showed that the U.K. recession is continuing. Traders had been betting that the 3rd Quarter GDP would show that the U.K. economy was expanding itself out of the recession. In addition, recent comments from a Bank of England official hinted that the BoE would end its asset-purchase program early. Today’s GDP news forced traders to rethink those positions which led to a massive sell-off. Look for the liquidation to continue into next week as it is clear that the BoE is going to leave its benchmark interest rate at very low levels for a prolonged period of time. The poor economic number is also a sign that the BoE is not in a position to end its stimulus program either.
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Week’s Forex Price Action Indicates Dollar
Posted - October 24 2009 : 00:50:10
