EUR/USD Pair Updates

Yesterday the pair plunged to session lows of 1.3159. Yesterday, the flag formation of the 4H chart suggested that there will be soon a resumption of the downside. The continuing patterns of the flags continue patterns that are formed following a drastic price move, and price action in general continues towards the same direction of the original trend.

As of now, EUR/USD has traded in the tight level of 1.3160:1.3186 with the predominant view at the medium term remaining bearish according to the pressure predominant in selling on the indicated Directional Movement. However, expect a temporary floor break highlighted 1.3150:1.3160 beneath that has provided support since last Wednesday. An important kind of buying comes in at these rates at least in three occasions. There will be a significant breech of this level closing at an hourly chart with more downside at a target rate of 1.3130. If there will be a repeated bounce, this level will be provided again at 1.3189/1.3215.

World Stocks Recover

world stock exchangeGlobal stocks pulled through because of treasuries while European earnings plunged this month as traders anticipated that central banks will continue to strengthen international markets.

Meanwhile, the Russian currency plummeted to the lowest point even as gold moved up.

The MSCI All-Country World Index soared two percent and Standard & Poor’s 500 Index went up 3.8 percent which were the highest since February. 10-year Treasury revenues declined 21 points which was the most since the start of 2014.

Rates for related maturity bonds from Germany, Italy and Spain slumped.

Emerging markets index (MSCI) stretched to the longest run of monthly gains dating back to 2005.

Unpredictability slackened off despite disputes in different parts of the globe as the Chicago Board Options Exchange Market Volatility Index decreased percent. This was the most significant decline in over two years.

A surplus of $1 trillion was included in the value of worldwide equities in August sending it to a best ever $66.2 trillion. S&P 500 recovered after skidding to a two-month trough three weeks ago erasing the 3.9 percent crash in July 24.

S&P 500 increased higher than 2,000 for the first time due to suppositions the Federal Reserve will maintain low interest rates even as the economy looked to become stronger.

Treasuries gained as rates in Europe fell with investors seeking higher yields.

Aussie Dollar Leaps Forward

The Australian dollar soared after capital spending by private corporations went up without prior notice.

New private capital expenditures for the second quarter displayed a gain of 1.1 percent as against an expected 0.3 percent quarter fall.

The AUD/USD currency pair traded at 0.9360. This was an increase of 0.25 percent after the data.

The USD/JPY currency pair traded hands at 103.74. It was down 0.13 percent.

The US currency traded lower against majority of primary currencies.

Likewise, data showed that German consumer climate index dropped to 8.6 in August from 9.0 last month. Analysts expected the index to remain unchanged because of the statement made by the German Finance Minister Wolfgang Schauble.

Geopolitical pressures are inclined to affect the US dollar by stirring up apprehensions that numerous armed conflicts will pull the world economy down and hold back recovery in the United States.

The US Dollar Index, which monitors the US dollar’s performance against other major currencies, was behind 0.15 percent at 82.35.

US Currency Trim Deficit against Canadian Dollar

The US greenback scaled down losses against the Canadian currency which mitigated a slump for one month because of potent US economic growth and unemployed claims reports.

The currency pair of USD/CAD moved away from 1.0837 which was the session low, to reach 1.0857 during early trading in the markets.

The pair was liable to find support at 1.0829.  Incidentally, a one-month trough and resistance was recorded at 1.0897.

Opening data underscored US GDP growing by 4.2 percent in the second quarter.

In Canada, official data highlighted current account shortfall narrowing to C$11.9 billion from April until June. The revised shortage was C$12.0 billion during the first quarter.

The Canadian dollar was higher against the common currency. The EUR/CAD currency pair was 0.21 percent to 1.4303.

Another preliminary report divulged Spain’s consumer price inflation dropping at an annual rate of 0.5 percent in August as against expectations for a 0.2 percent slight decrease in the stock markets, subsequent to a 0.3 percent decline the previous month.

Australian Dollar Soars on Business Investments

australian currencyThe Australian currency climbed to an exceptional high during the past three weeks following the strong performance of business investments in the country.

On the other hand, the US dollar was moving towards the third successive fall off against other key currencies due to the slow pace of economic growth.

The Aussie dollar went up 0.3 percent to 93.62 US cents after going up 93.72. It lost 0.1 percent to $1.3208 against the euro and fell 103.78 versus the Japanese yen from 103.88.

The Australian dollar traded above $1.10 in 2011 as the nation’s terms of trade hit the highest point. It is acknowledged as the best performer in the Group of 10 currencies for 2014 after going up 4.7 percent.

The strength of the Australian note is said to be an obstruction to efforts of policy makers to further national growth drivers. The Reserve Bank of Australia reduced overnight cash rate goals by 2.25 percent to a low 2.5 percent in nearly two years.

USD/CAD Forex Trading

Twenty points of the pair is eased to trade at 1.0964 as the dollar went down and gold went up. The Canadian dollar has disconnected from the oil market for a longer period in 2014; and it drives valuation of the currency often in flux. According to one prominent Canadian analyst, the trend could be could be a return to the situation where the movement of the oil market was feeding into the CAD. And, this is not a good sign for those who are maintaining a stronger Canadian currency.

Yesterday, the WTI crude downed to $92.50 and this makes the lowest level since middle of January.  WTI crude, as a USDCAD driver, has been gaining little by little in importance since late July. However, a BMO analyst stated that a more intense pullback lower than $90.00 could hasten the trend, and intensify the benefits from USDCAD risks emanating from more positive rate differentials.

An expectation that inflation would drop off a bit compared with the previous month bringing it closer BoC’s target level, the Canadian dollar would stay intact against most of its G10 peers. The Canadian retail sales are expected to be slightly improved from the past month and this could provide some firm support.

FOREX Updates

currency reviewsAfter taking recent gain, the dollar is taking a rest but that provided a small comfort to the struggling euro that was crashed down for 19-month lows versus the Swiss franc due to presumption of a subdued inflation reading and more currency maneuvering.

German business sentiment appeared sagging after a run in its fourth month and the French government’s resignation after an argument over fiscal policy that increased euro’s bearish mix.

On Monday, the Swiss franc’s having fallen to 1.2072, it was the single currency trading 1.20775, and it’s lowest since early January 2013 on trading platform EBS. The market close was testing the three-year pledge of the Swiss National Bank to cap its currency at 1.20 per euro.

The euro pitted with the dollar was at $1.3202, having descended to $1.3178 in Asian trade. Following the dovish comments coming from the head of the ECB at the weekend report released on Monday, the German business showed that their sentiment was sagging during a fourth month running.

Investors were awaiting the euro zone inflation data on Friday. Reuter’s analysts anticipate a yearly inflation to have decelerated to 0.3% in August from 0.4% in July. Against the yen, the dollar dipped 0.2% to 103.85, having peaked at a seven-month high of 104.49 overnight.

Sterling escalated after a five-month low of $1.6501 that struck on Monday to trade at $1.6582, slightly higher on the day.

Economic Crisis Forces French President to Dissolve Government

President Francois Hollande of France abolished the nation’s Socialist government in a bid to maintain his power amidst a deepening economic slump.

The turmoil came as Left-wing economy minister Arnaud Montebourg staged an after alleging that the president is bringing the country to serious trouble by implementing deficit-cutting measures on orders upon orders of Germany.

The minister defied the chief executive’s authority by urging Mr. Hollande to reject austerity cost-cutting measures imposed on the euro zone by the German government.

Before this, German president Angela Merkel snubbed pleas from Mr Hollande to moderate the zone’s deficit targets which France failed to comply with.

The French president Hollande asked Prime Minister Manuel Valls to create a new cabinet that will follow his direction for France.

Meanwhile, his approval rating has plummeted to 17 percent which is the lowest in the history of contemporary France.

The French economy has been dormant for the last six months while unemployment has fallen above 10 percent.

The Euro dropped to 1.3185 versus the US currency. This was the lowest since September of last year.

The British Pound was up against the Euro at 1.25 last week.

France has been called the new “sick man” of Europe without any sign of growth for two months. Another minister, Education Secretary Benoit Hamon expressed his support for Mr Montebourg.

Australian Dollar Gains

AUD DollarThe Australian dollar touched a three-week peak merely below 0.9480 in July after going through a firm period.

It advanced higher breaching the resistance level at 0.9425 before going back. Since the halfway point of June, the currency made constant attempts to penetrate the resistance point close to 0.9425.

Meanwhile, a former official of the Reserve Bank of Australia and now chief international economist of Standard Life Jeremy Lawson said houses in the country were overvalued by a high of 30 percent. The misrepresentation in valuation was generated by lax monetary policies and unwillingness of regulators to make use of the so-called macro-prudential tools to slow down price increases.

The overall financial situation may have been too unrestricting which undermined long-term financial stability, according to the former RBA executive.

It is possible to have low rates for the sake of the economy while preserving tight credit controls for risky industries.  He also assailed the fiscal policies of the central bank as well as the partiality of large banks towards the financial system.

Cycle Shows Recovery of Dollar Prior to Previous Tightening

The US Dollar always showed signs of improvement in the past when the US Federal Reserve resorted to tightening measures.

Charts indicated that the currency rose approximately seven percent several months before the three previous central-bank retrenchments started. These were in 1994, 1999, and 2004. The US note’s appreciation is inclined to sputter and performances were varied after the initial increase in the aim for value of federal funds.

The Reserve kept the standard rate at an exceptionally low of zero up to 0.25 percent dating back to December of 2008.

Meanwhile, futures’ traders are convinced that the US central bank will begin raising rates in July of 2015. The Federal Open Market Board revealed that policy makers discussed the probability of employment gains will bring about the rate increase sooner than scheduled.

The US Dollar Index gained 3.5 percent this quarter against the six major currencies based on indications that economy is picking up. Last July, the unemployment rate was 6.2 percent after declining in June to a five-year depth of 6.1 percent. This was a trough that policy makers did not expect will take place until the end of 2014.

The difference in worldwide interest rates should determine whether the dollar will continue to recover following the first rate increase.