FOREX TRADING

After having a mild reverse coming after the press release of yesterday’s Federal Funds Rate policy statement, the USD today looks poised for a come-back. At the opening of the US Forex market today at 12:30 GMT, traders will get a look of US retail sales and unemployment claims which are both expected to show a continuation of growing in the United States helping the USD recover some of yesterday’s losses.

USD – Dollar Down on All Currencies Except Japanese Yen Following Fed Statement

The U.S. Dollar brought down in the beginning losses versus major currency on Wednesday after the Federal Reserve allowed Interest Rates unchanged, near zero percent. The Dollar pared in the beginning losses against the EUR in the first 20 minutes after the Fed’s statement on optimism that the end of the purchase program would bring down the risk of inflation, which erodes the buying power of the greenback. Nevertheless, the USD resumed its decline afterwards as stocks gained.

Versus the Japanese yen the U.S. Dollar kept broad gains afterward the Federal Reserve painted a less gloomy outlook for the U.S. economy, an assessment that led investors to bring back to commodity-linked currencies in droves. The Federal Reserve has also said it would slow the pace at which it buys Treasuries by extending the duration, but not the size, of its $300 billion program to buy long-term government securities.

Analysts have said that when sentiment toward riskier assets has bettered, there was a general degree of caution on the Fed’s move to extend the time-frame of asset purchases as it indicated that the economy was even tender. Now, forex traders will get a look into US Retail Sales and the weekly unemployment claims report. If sales keep going to grow in the US, as is forecast, the USD perhaps able of going bullish later in the day.

EUR – The Pound Sterling stays under Downward Pressure

The European currency advanced for a 3rd straight day versus the U.S Dollar before the European Union’s statistics office releases its 2nd quarter Gross Domestic Product numbers in Luxembourg. GDP in the 16-nation Euro-Zone shrank 0.5% after a 2.5% contraction in the 1st quarter, according to economist forecastings.

The EUR also gained versus 13 of the 16 major currencies before the release of a U.S. report that could show retail sales gaining for a third consecutive month, prompting investors to seek higher-yielding assets.

The British currency had weakened yesterday before the release of the Bank of England’s (BOE) quarterly inflation report. The Pound drop versus the Dollar after the BOE said it may miss its inflation target amidst a slow recovery. Fear of undershooting the target means the central bank is more probable to hold off on increasing rates, analysts have said.

Britain’s currency also felled against the Japanese Yen later the central bank’s governor stated it was more potential that inflation will slow below 1% this year and unemployment may reach a 14-year high.

JPY – Yen Falls on Low Safe-Haven Demand

The Yen drop for a 2nd straight day versus the EUR later on the Federal Reserve stated economic activity is leveling out, sapping demand for Japan’s currency as a refuge. The Yen depreciated to as low as 96.23 from 95.51 vs. the US Dollar at the close of Tokyo stock trading. A weaker domestic currency increases the value of abroad sales at Japanese companies when repatriated.

The JPY also weakened versus all 16 major currencies as Asian stocks extended a U.S. equity rally on signs the global slump is abating, encouraging investors to buy higher-yielding securities. For now, most attention will be paid to the New Zealand Dollar (NZD) following the evening release of its retail sales reports. With a recently bullish NZD, this report has the possible of making a reverse to this trend if it appears worse than forecast.

Crude Oil – Oil Prices Rebound above $70 a Barrel

Crude Oil ended higher Wednesday as a rally on Wall Street and sudden Dollar weakness overshadowed government data showing a bigger-than-expected rise in crude supplies. When the fundamental picture is bearish, Crude is being supported by a weaker U.S Dollar and stronger equity markets. Traders appeared to shrug off government data showing a build-up in crude supplies. Oil’s strength came in spite of a report from the U.S. Energy Information Administration (EIA) showing U.S. Crude Oil Inventories rose 2.5 million barrels in the week to August 7, well over analysts’ outlooks.

Oil trimmed gains after the U.S. Federal Reserve in its policy statement said the U.S. economy is leveling out and that it was extending purchases of long-term U.S. Treasury debt to the end of October. Crude also rose as the International Energy Agency (IEA) boosted its oil-demand outlook for this year and next. In its report yesterday, the IEA said that the world will need 85.25 million barrels of oil a day next year, 70,000 barrels more than previously estimated.