Daily Review 23.6.09

 

FX Daily

Written by RetailFX Dealing Desk

 The week opened with the Greenback getting stronger as the market anticipated the statements coming from the Fed rate decision due on Wednesday June 24^th.As the Fed is not likely to raise rates the market’s focus will be on the Fed’s outlook for the US economy and most importantly the Fed’s commitment to hold rates low for as long as necessary. In addition some updates are expected on the Fed’s treasuries repurchase program which is meant to ease credit markets. The Fed is generally expected to remain cautious in regard to the state of the economy as the Fed wants to avoid speculations of an interest rate hike by the end of the year.  Such speculation might have a strong effect on treasury yields and will evidently raise the effective rates in the credit market, a process which could produce significant pullbacks in the battered real estate market and the economy as a whole.

   In Japan the BSI business sentiment index rebounded strongly from -66 in Q1 to -13.2 in Q2.Although the Business Climate index still points to a contraction, the major rebound from last quarter’s figures raises assumptions that the Japanese economy is either bottoming or very close to it. The latest allocation of $2.2 trillion in worldwide stimulus alongside the $586 billion allotted to the stimulus of China – one of Japan’s biggest trading partners – is expected to lift consumer demand worldwide. As the Japanese economy is heavily dependent on exports of consumer goods, the worldwide stimulus is expected to ease Japan’s worst recession since WW2 and make investors more willing to bet on a Japanese recovery story.

The World Bank has lowered its GDP outlook on global economy from -1.9% in its previous forecast to a -2.9% contraction YoY. Another downgrade was implemented to the growth forecast of global economy in 2010 from 2.3% in the earlier forecast to a mere 2%. Although the IFO readings which reflect the status of the business climate in Germany – Europe’s biggest economy – was better than expected, the growth downgrade by the World Bank alongside the anticipation for the fed statement on Wednesday weighed heavily on the trade, with equities and most commodities falling sharply and the Greenback gaining ground as risk appetites were subdued.

 The Daily Trade

EUR/USD- This Pair which has been In a consistent bullish trend since bottoming around the 1.29 mark, is gearing up for another cyclical bearish correction. The pair now finds itself in a steadly corrective mode with falling peaks at 1.43,1.42,1.4. When comparing to the last cyclical correction from 1.38 to 1.29 we can estimate the currenct correction potential at around 1.36-1.34. A break of the 1.40 level upwards could signal that the pair is aming for another attempt to break the 1.43 mark and the bearish correction has taken a halt.As the area of the 1.36 is close to the trendline, a bounce is quite probable at that price area and those continuing to trade the bearish correction risk catching a strong  upward swing.

Daily Events

 

Support/Resistance

 

 

 

 

 

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