Currency Market Updates & USDJPY Chart analysis

US Policy: Aggressive Spending

Brokers trading the dollar helped it climb on Wednesday to a new six week high against the Yen an a new 2 ½ week high against the Euro as US President Obama announced a new 80 Billion Dollar mortgage bailout bill. The new bill is expected to help close to 9 million families either restructure or refinance their mortgages in order to avoid foreclosure.

At 5PM GMT, the Dollar was up 1 ¼% to the Yen at 93.56 and ½ of a percent versus the Euro to 1.2523 after hitting 1.2557 – its lowest level since early December. The US is continuing its aggressive spending policy to shore up its economic situation, a tactic that might prove detrimental to the valuation of the Dollar down the road. For now, those Investing and trading the greenback see the US doing something and is banking on the possibility that it will work to help stave off a worsened situation.

GBP: Bank of England Might Consider a Further Interest Rate Cut in March

Forex traders took the Sterling down marginally against the Euro and Dollar as the Bank of England released minutes of this past month’s interest rate meetings. The record showed that the BOE members voted unanimously for the policy of “quantitive easing” by purchasing other securities and Gilts. The fear was that based on the minutes and the unanimity of the vote, the Bank of England might consider a further interest rate cut in March.

At 5:15 GMT, the Sterling was off .33 of a percent to the USD at 1.4189 and 1/10^th of a percent to the Euro at .8824.

Chart Analysis: More USD/JPY – this time a 5 month look

As we said yesterday, the deviation of Dollar/Yen with respect to its historical patterns in terms of its connection with the risk appetite of Forex traders is a problem that could mean additional weakness for the Japanese currency. Its break above 92.40 is significant technically. This is now the new support level and the JPY/USD is setting its sights on the moving average for the past 100 days, somewhere near 94.00 as well as the 2009 high up at 94.62.

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Chart Analysis: USD/JPY

Chart - USD - JPY - 5 Day

Once a safe haven partner to the Dollar in times of economic stress, the Yen has been battling through some tough times lately. Not too long ago, speculation was that the Bank of Japan wanted the Yen to temper its strength in order to protect its export business, but recent events in Japan have caused the Yen to lose its luster amongst traders looking for security during hard times. In this real case of "be careful what you wish for", teh BOJ has seen their currency lose over 2% to the USD in less than 1 week. Looking at the Daily FX news, it seems as if Japan has more to worry about now than the goods they send to other countries - they are now faced with the prospect of returning to the gloomy 1990's.

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My Forex Analysis

I am certain you all noticed the vast opportunities in the FX markets so far. Take USD/JPY for example.

As you can see a double top (if you don't know what a double top is please drop a comment here) has formed when the graph tackled a solid resistance. I followed it, opened a short position and left it open for a couple of hours (approx):

I think those who paid attention to the moves noticed an attractive market, enriched with constant opportunities. The market will be extremely interesting tonight (CET) and throughout tomorrow's session due to the heavy releases.

Let's analyze them together and see why is tonight session (CET) and tomorrow are so attractive.

Let us first look at GBP

Nationwide HPI m/m:

It is simply the change in the selling price of homes with mortgages backed up by Nationwide. Rising house prices will appeal investors thus giving us a good picture of the housing market in The UK. So far so good, let's refresh ourselves with last November's Data:

The Graphs are available for all from The Nationwide official web site.

To summarize, the price in November fell to -0.4%, the pressure on the housing market may intensify due to poor economic conditions but big rate cuts may cushion the impact. So, we can see the high rate cut in November was supposed to cushion the impact. British mortgage approvals for house purchases fell to their lowest level in November since records began. Mortgage approvals are an important indicator for the housing market as it reflects housing demand. The Mortgage approvals fell to a shocking 27,000 in November as we discovered last Friday, which forced GBP down against a basket of currencies.

Therefore, the Nationwide HPI for December is very important. We are going to see whether the previous rate cut did the trick despite the grim expectations, which are not positive at all and have the strength to crush GBP.

Time of release: 07:00am GMT

Now lets see what is happening so far with The GBP?

One can easily note GBP is on the move, riding with the bulls. This trend may be reversed via the aid of the Nationwide HPI and Services PMI or they will not become an obstacle and ride with the GBP on the bullish trend, depending on the actual figures, worse or better then expected.

The new interest rate that will be released this Thursday may unleash a new reality to The GBP, which will definitely create a window of opportunities for us, the traders.

Now have a look at USD

ISM Non-Manufacturing PMI & Pending Home Sales m/m

If you followed the market today you would have noticed the sudden burst of USD, gaining against a basket of pairs until tackling solid resistance in some pairs, which forced the graph down although I believe those resistance levels may be to the test again.

Both financial indicators are expected to be negative; the new home sales are not expected to blossom and neither does the non-manufacturing PMI. These figures will be released simultaneously and are likely to impact all the major pairs, I will eye out JPY pairs as well such as GBP/JPY and EUR/JPY at time of release.

The Forex Broker I Recommend: http://www.finexo.com/

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