UFXBank Daily News: Operation Twist Increases Appeal of USD as Safe Haven Currency

Posted by admin on September 22, 2011 under forex market | Be the First to Comment

USD Dollar (USD) – In forex trading, the US Dollar strengthened against most of the major currencies after the Federal Reserve’s plan to shift holdings of treasuries to keep the economy from falling into recession. This increased the refuge appeal of the currency. In addition, the FOMC left the rate benchmark unchanged at <0.25%. The Fed plan, called Operation Twist, involves buying $400 billion of bonds with maturities of six to 30 years through June and selling an equal amount of debt maturing in three years or less. It was mentioned in the Fed statement that “There are significant downside risks to the economic outlook, including strains in global financial markets”. As a result the safe-haven currency rose. Earlier today Moody’s Investors Service downgraded the debt rating of Bank of America Corp and Wells Fargo & Co. Moody’s analysts wrote in the report that U.S. support has become less likely if lenders get into financial trouble. Wall Street closed negative as the NASDAQ fell by 2.01% and the Dow Jones declined by 2.49%. Crude oil fell by 2.50% and closed at $84.70 a barrel on concern that slowing economic growth in the U.S will crimp fuel consumption by the world’s biggest crude oil consumer. Gold (XAU) declined by 1.40%, closing at $1,784 an ounce as the US Dollar’s rally eroded demand for the metal as an alternative investment. Today, the Unemployment Claims are expected to rise by 419K vs. 428k previously.

Euro (EUR)–The Euro fell against the U.S Dollar due to a decrease in risk aversion after the Fed announced Operation Twist, which includes measures to support the mortgage market. Trading below the resistance level of 1.3800 will keep the momentum of the pair negative, but if the pair breaks above this resistance level, it may reach the 1.4060 level again. Overall, the EUR/USD traded with a low of 1.3556 and with a high of 1.3796. Today, the German Flash Manufacturing PMI is expected to show 50.20 vs. 50.90 previously. The Flash Manufacturing PMI is expected to show 48.60 vs. 49.00 previously and Industrial New Orders are expected to decline to 1.10% vs. -0.90% previously.

EUR/USD – Last: 1.3540

Resistance	1.3600	1.3680	1.3750
Support	1.3480	1.3430	1.3380

British Pound (GBP) – The British Pound fell to an 8 week low against the Greenback after Bank of England officials said they may need to buy more bonds to keep borrowing costs capped as the recovery falters.The trend for the pair remains bearish if the pair maintains its resistance level of 1.5670, but if the pair breaks that resistance it may reach the 1.5950 level again. Overall, the GBP/USD traded with a low of 1.5475 and with a high of 1.5688. Today, the CBI Industrial Order Expectations are expected to show -5 vs. 1 previously.

GBP/USD – Last: 1.5450

Resistance	1.5500	1.5600	1.5670
Support	1.5400	1.5320	1.5200

Japanese Yen (JPY) – The US Dollar strengthened against the Yen after Japanese Finance Minister, Azumi, told reporters in Tokyo today that he’s closely watching markets and will take “bold” action on currencies if needed. Technically, trading above 76.60 will keep the trend bullish. No economic data is expected today.

USD/JPY-Last: 76.80

Resistance	77.20	78.00	78.50
Support	76.60	76.30	76.00

Canadian Dollar (CAD)–The Canadian Dollar fell to its weakest level versus its U.S. counterpart since January after the Fed announced Operation Twist. The currency, which is linked to Commodities, lost ground as risk aversion has been the theme of the day amid weak stocks and crude oil losses. The trend for the pair will continue to be bullish if the pair maintains its support level of 1.0000. Today, Retail Sales are expected to fall to -0.20% vs. 0.70% previously.

USD/CAD – Last: 1.1030