FOREX TRADING

On yesterday’s trading, the Yen kept going to be the dominant currency in the forex market. When almost of the major currencies attended fluctuate without marking a sustained trend, the JPY strengthened on all fronts, and currently looks to be this week’s top investment. On today’s trading, the most fascinating data will come at 18:15 GMT, as the Federal Funds Rate for August will be announced. The main question is whether the Fed will hike rates in light of recent positive economic data. Such a turn of events could create mayhem in the market, and traders are advised to be prepared.

USD – USD Sees Mixed Trading Ahead of FOMC Statement

The US. Dollar saw a mixed trading day Tuesday ahead of today’s FOMC meeting, keeping going its rally versus its commodity based counterparts while falling away slightly versus the EUR and falling sharply versus the Yen. The Dollar traded at 95.80 Yen early this morning, from 95.99 yesterday, after falling 1.2%. The U.S. currency was at $1.4161 per EUR from $1.4149 yesterday.

The highly anticipated FOMC meeting statement is due to be released today at 18:15 GMT. Breaking with its trend throughout the recession, the Dollar unexpectedly climbed up Friday following a amazingly strong U.S employment data release. This was seen as a signal that the recession is coming to an end and the Dollar might start benefiting from positive U.S data. This statement will be the first test of whether this trend will stay and the Dollar’s strength can be maintained on positive economic data.

When no interest rate changes are expected, any clues as to the progress or end of the quantitative easing program will probably cause great market volatility. The statement is expected to allow an assessment of the current economic condition in the world’s largest economy and more importantly provide an economic outlook, hence, probably setting short-term direction for the USD.

EUR – EUR Continues its Decline versus the Yen

The EUR keeps going to decline against the Yen pushing its loss to 1.9%. The decline was worsened after consumer prices in Germany posted their first annual decline in more than 22 years in July, promoting speculations the European Central Bank (ECB) will keep interest rates at a record low. The EUR was at $1.4154 from $1.4142 late Monday and was at 135.74 Yen, down from 137.32.

The British pound keeps going its decline versus the Dollar, reaching a low of $1.6476. Pushing down on the Pound was a worse then expected trade balance as well as falling stock markets, prompted by declines in financial stocks. With the financial sector being the largest sector in the British economy, equity market movements tend to have major affects on the GBP’s value. Furthermore, investors are remaining cautious ahead of today’s BOE inflation statement.

A heavy news day is expected today from the U.K which will probably set the direction for the Pound for the rest of the week with the Claimant Count Change to be released at 8:30 GMT along with the Average Earnings Index and the BOE Inflation statement. at 9:30 GMT. These will provide an assessment of the current economic conditions in the U.K as well as provide an outlook on the prospects of recovery. The Euro-Zone Industrial Production report is also due to be released at 9:00 GMT, worse than expected results will likely put further downward pressure on the EUR.

JPY – The JPY Gains versus all Major Currencies

The JPY traded at its highest level in a week versus the EUR yesterday on concern the improvement in financial companies’ earnings will stall. The Yen traded at 135.82 per EUR early today, following a 1.1% gain yesterday. Japan’s currency traded at 95.96 per USD and 158.17 versus the Pound, both up from yesterday’s figures.

Unsatisfying Chinese economic data and falling stock prices on global exchanges soured risk appetite. Expectations that the Japanese economy will pull out of the recession ahead of the U.S have also helped push up the JPY against the greenback as investors turned to Japanese assets.

With no major news releases from Japan today, the Yen’s short term direction will probably be set by the news coming from the U.S and Europe, mainly the FOMC statement minutes.

Crude Oil – Crude Falls below $70 a Barrel

Light Sweet Crude for September delivery settled down $1.15, or 1.6%, at $69.45 a barrel on the New York Mercantile Exchange (NYMEX) yesterday as U.S. equities dropped ahead of a government report forecasting an increase in crude supplies in the biggest energy consuming nation. This was the lowest settlement since July 31. It was the fourth straight daily decline and the first time oil settled below $70 this month.

While global economic recovery is impending, demand is still contracting sharply, collapsing faster than anyone expected. Traders should follow today’s release of U.S Crude Oil inventories as any bearish number could prompt a further decline in prices.