Greenback sustains its bearish trend

Wednesday, February 24, 2010

Consumer confidence in the U.S fell sharply in February, plugging to its lowest level since April 2009. After reaching a 16-month high, of an upwardly revised of 56.6 this past January, the CB Consumer Confidence index sank a record 11 points to 56.0, as Americans turned more pessimistic about job prospects and the U.S economy.

For the seventh consecutive month, home prices in 20 U.S cities rose in December, signaling that the housing prices, concerned to be at the center of the worse economic recession since the Great Depression, are begin to stabilize.

Yesterday’s S&P/Case-Shiller Indexes showed that home prices increased 0.3% from the previous month on a seasonally adjusted basis- increasing more than expected, and matching gains seen in last November. While the index reports that housing prices were down 3.1% from December 2008, this decrease is has been the smallest yearly change seen since May of 2007. The S&P/Case-Shiller indicator came one day ahead of New Homes report.

Two months ago, this leading indicator took a dive, plugging to a new low showing everybody that the housing sector is heavily depended on government aid- since then, it has not been able to return to its previous levels. Last month’s low number of new homes sales is predicted to be followed by a slight increase this month, analyst predict sales to edge up to 354K. While the New Homes sales indicator generally has a big impact on the market, the report will most likely be overshadowed by Bernanke’s testimony.

Despite a drastic fall in consumer confidence yesterday, the greenback was able to maintain its bearish trend against its European counterpart, hitting as low as 1.34952. Although throughout the course of the day, the highly traded currency pair managed to bounce back slightly, the closing at 1.35118, down 0.65% from its opening daily price of 1.36001. Conversely, the greenback dropped a total of 1.09% against the Yen as investors flocked to the safe haven status of the Japanese currency in trading sessions yesterday. The USD/JPY plugged a drastic 1.4% before leveling out and closing at 90.194.

With the most significant economic indicators being released today revolving around the U.S. economy; the Dollar is likely to see some heavy volatility against its major currency counterparts, especially against the Euro and Yen.

Today, forex online investors will want to pay careful attention as US Federal Reserve Chairman Ben Bernanke is set to begin his two will begin his two day annual Humphrey-Hawkins testimony on monetary policy before Congress. In anticipation of the speech, the dollar index, which measure the US unite against a trade-weighted basket of six major currencies, fell to 80.788 in today’s Asian afternoon session from 80.874 in late North American trading Tuesday.

Following last Thursday’s unexpected rate hike for emergency bank loans, anticipation is high for any new news regarding the state of the U.S. economy. Positive sentiment will likely lead to major gains for the greenback, while If Bernanke’s statement “discourage an early monetary tightening policy” the dollar may likely be forced to forfeit some of last week’s heavy gains.



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