Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Sobers Up Despite Fed PunchBowl

Currencies / Forex Trading Jan 07, 2010 - 12:43 AM GMT

By: Ashraf_Laidi

Currencies

The US dollar builds on its newly acquired robustness amid the FOMCs modest economic upgrade with regards to labour markets and the reiteration of the Feb 1st 2010 deadline as the expiry for the various liquidity operations. Although the FOMC statement maintained the phrase exceptionally low levels of the federal funds rate for an extended period, the overall tone was more than sufficient for the greenback to extend its upward trajectory, especially amid the rapid concentration of Eurozone-centric credit and banking problems cast a pall on the non-USD block.


Considering that the balance of recent US data has tipped in favour of the US (employment, retail sales and CPI), dollar bulls will content themselves with the slightest of modest of hawkish/ commentary from the Fed. Wednesdays FOMC statement was a simple step in the Feds challenging task of normalizing liquidity and credit markets amid an environment of rising yields and consolidating equities.

The combination of negative event flow in the Eurozone, year-end window dressing operations reducing USD shorts and a USD-favourable yield gap will prolong USD gains into mid Q1 2010, especially amid no prospects of a fast resolution in the Eurozone sovereign problems. Consequently, EURUSD hit the $1.4280 target issued at the Dec 10 HotChart after the pair exceeded the magnitude of its 2 prior down cycles. $1.41 should likely emerge as the next support level, but $1.38 appears to be a sturdier foundation.

USDJPY Eyes 93

It is time for JPY to take a temporary a break and allow the USD to draw most of the risk aversion plays at the next round of risk pullback. Two weeks after the Bank of Japan was pressured by the MoF to inject extra liquidity aimed at stabilizing yen strength, the central bank today altered its definition of price stability to include only positive price growth, instead of the previous definition of zero-2% annual growth. By announcing its intolerance for flat consumer price prices, the BoJ is set push against a resurgence in yen strength.

Accordingly, we would expect USDJPY to regain 92.50 until it encounters the next resistance at the 2 year trend line on the monthly chart below. Subsequent pressure point emerges at 95 before we could see a gradual turn in the pair near February. Were not yet abandoning our 5-year approach on the cyclical lows in USDJPY and so it is too early to call the bottom of USDJPY.

Sterling to Regain Whipping Boy Status in 2010

Just as liquidity withdrawal may become the buzzword of 2010, the UK economy and its currency could fall victim to an excessive reduction in stimulus. The Bank of England has already signalled its intentions to not add any more quantitative easing, the UK Treasury plans spending cuts, the VAT hike is levied in January, the scrappage incentives for used cars expires in February and the May General Elections promise to be a close race.

None of these developments are set to favour GBP or the UK economy which has yet to recover from recession. Sterling risks regaining its status as the whipping boy of FX in 2010 as these vital dosages of oxygen are removed from a still tepid economy. The 200-day MA of $1.60 is the next target for the bears over the short term, while $1.55 is seen as the next medium term average for GBPUSD after the $1.70 figure continues to hold above the monthly closes since October 2008.

By Ashraf Laidi
AshrafLaidi.com

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Ashraf Laidi Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in