Earlier this month Fed decided to print $600Bn over next several months in anticipation that it will likely to aid US economy. Most analyst are worried that these dollars will trickle through to emerging economies and cause asset bubbles, appreciate their currencies and increase inflation.

EURUSD this week is going to be affected by decision from Ireland if they are going to need help from EU to deal with debt issue. Other EU countries are insisting on Ireland to accept bailout to increase confidence.

Looking at weekly charts EURUSD dropped sharply from Weekly upper trendline last week and looking to head lower. If Ireland refuses to accept help then EURUSD could fall below 1.3500 and find support at 1.3300

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EURUSD

4 hour EURUSD closed below trendline yesterday and kept moving lower as we discussed in yesterday’s analysis. Right now it is looking to head lower towards Support at 1.3800. It is likely to head upward from this level. In an even where it breaks and close below 1.3750 then it can open room for further down move.

G20 summit is the key news items this week. While countries are talking about ending currency wars, rift between China and US is increasing. US has blamed China for keeping Yuan low to gain competitive  advantage. On the other hand  FOMC decision to implement QE2.0 in turn will devalue Dollar, which won’t go down well when US tries to convince other economies to stop manipulating their currencies. It will be interesting to see how it plays out later in the week.

By the way keep an eye out for update later today regarding our services.

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Looking at EURUSD 4 hour chart, pair bulled back from resistance from Daily chart at 1.4300 and currently testing upper trendline. EURUSD can bounce from here and continue moving higher. If it breaks and close below the trendline then we can look for shorts.

US Dollar index is till bearish and most likely to head lower. For a sustained upside move it need to go past 78.40 area.

Market Analyst are split with their view regarding usefulness of QE2.0. Some says QE2.0 funds spent to  better U.S. economy will help global recovery, other says if funds somehow invested indirectly into emerging economies then it will create new bubbles in those countries.  In my opinion, a declining dollar and lower interest rates will eventually cause capital to flow to emerging countries, which in turn will appreciate their currencies and hurt their economies by reducing export potential.

This week there are not many important news releases except for  G-20 summit which could be the biggest driver in currency markets.

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Today Nonfarm Payroll numbers are going to be released and most likely market will drift sideways until then . We will continue to watch market in Live Trading Room as usual and look for good setups only.

Yesterday EURUSD gained strength after European Central Bank (ECB) signalled it will likely to stick with its “stimulus-exit” strategy even though Federal Reserve will buy $600 billion of bonds. Dollar lost ground against all its peers and US Dollar index fell below the point we discussed yesterday.

Chart below shows US Dollar Index broke below 76.00 level and next support is at close to 74.00. I’ll be keeping an close eye on this level

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(click on image to enlarge)

As we mentioned yesterday, 1.4300 level acted as resistance. Weekly upper trendline is closing in at 1.4350, a break above will send EURUSD to 1.4550

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EURUSD

On the technical side, EURUSD daily candle closed above the upper trendline, signalling further upside movement to come. If you are looking to buy then wait for price to re-test 1.3990-80 level. Institutional and bank traders  who are already long from yesterday are more likely to add more to their position on this dip.

(click on image to enlarge)

(click on image to enlarge)

I won’t be surprised if market move sideways until the FOMC announcement later in the day. However if see momentum prior to the news we will trade as usual.

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EURUSD

Later in the week Bank of England (BoE) and European Central Bank (ECB) will also announce their move. This week is quite big in terms on news event. Not to forget NFP news on Friday. As usual Elite members can view all news announcement in real-time.

(Click On Image To Enlarge)

(Click On Image To Enlarge)

Daily chart shows a triangle taking shape with price  moving a narrowing range. Breakout in either direction could lead into good trend moves and which will help us in both Swing and short term trading.

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Australian Dollar has fallen 26% against USD  and  36% against JPY this year. Is this the end of the downfall or there is more to come?

Australian financial system no doubt has similar problem as the rest of the world but analyst say that it is in better shape than Japan or US.  Analysts are hoping that China’s demand for new infrastructure would greatly help.  China remains the Australia’s biggest import and export partner and all eye are on the new $500 billion plan to create more roads, railways and bridges. Further interest rate cuts in Australia is only going to further help the economy.

Estimate by Bloomberg survey says AUD may further weaken to 64 US cents by the end of the year and rally back up to 68 US cents by end of 2009. International Monetary Fund predicts Australia’s growth to expand only 1.8% by June 2009, not bad considering  U.S., Japan, U.K. and the euro region are headed for their first simultaneous recessions since World War II.

Australian Stock Index also dropped 42% this year resulted mainly from decline in Commodity demand.  BHP Billiton Ltd., the world’s largest mining company, fell 36 percent as steel mills in China asked to defer iron ore deliveries because of slowing demand.

There are tough times ahead for most economies however Australia may be the dark horse we all looking for.

Source: Bloomberg

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In last 24 hours Brazilian Real and  Mexico’s Peso rebound as much as 5%  Is it the beginning of global central bank intervention? Lets Talk…

Brazilian Real has fallen 28% in last two months, causing big Latin American companies to brink of bankrupcy. Apprantly companies lost more than USD 2.2 Billion in derivatives. It is about time for someone to step in and take control.

Brazil’s central bank will pump the equivalent of $50 billion into currency markets, its boldest move yet to stop the tumble. The real soared after the announcement, climbing 5.2 percent and erasing an initial slump of as much as 5.8 percent. Authorities said the injection will be in the form of contracts that will allow investors to protect against further declines in the Brazilian currency.

Mexico’s Central Banks took the similar actions and bought $1.1 billion worth of pesos causing it to rebound from a record low, snapping a four-day losing streak. Banco de Mexico’s purchase at two auctions today added to the $12 billion of pesos it has bought over the past two weeks to stem a rout in the currency.

The peso gained 3.3 percent to 13.4170 per U.S. dollar from 13.8790 yesterday. It rose as much as 4.7 percent, its biggest intraday gain since Oct. 13. Earlier the peso touched 14.3017, the weakest level since Bloomberg began tracking the data in 1971.

Venezuela’s Bolivar however made 10 month record low. Its decline arising from falling demands in Crude oil due to slowing economy. Crude oil still remains the biggest export for Venezuela. The bolivar has plunged 44 percent since mid-August to 5.9 per dollar.

I think that we are due to see some action from USD, perhaps a rebound to 1.4000 in coming days. I would love to hear your thoughts on this article, please feel free to comment.
Source: Bloomberg

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