The dollar gains once again as fears that the 6 month stock market rally has outpaced earnings along with the FEDS decision and comments relating to the speed in which the US economy, and subsequently global, is recovering. Rates will remain 'exceptionally low' for an 'extended period' according to statements made from the meeting. With the G20 meeting the next key for direction for the dollar and the economy, attention turns to preventing a repeat of the worst financial crisis since the Great Depression of 1929. Bank rules and taxation standards are to be the top of the agenda in order to recoup the $9 trillion tab and to bolster the economy and to get financial institutions lending once again. Whilst housing figures in the US as well as the UK improving over the last few weeks, the jobless claims will need to come of considerably to give the indication that we are indeed out of the recession fully. Asian trading overnight saw a downturn in most of the stockmarkets, albeit Japans indexes increased as trading resumed following their three day break. The stock sell off has continued into the European session this morning along with the US equity futures looking to also open lower at time of writing. Data out this morning from Germany saw the IFO figures increase from last month although come in worse that expected. The IFO (survey from 7000 businesses on a 6 month forecast) figure a key indicator for the European economies growth and in this climate, its recovery. Cable coming off the highs of today of 1.6389 to 1.62 as stocks, oil and gold all fall on the back of the FOMC's comments not to withdraw stimulus measures along with BoE's Governor King indicating a weaker pound will only assist the UK economy. The Euro against the pound now trading at 90.90 from a high of 91 which indicates a new 5 month high. As long as commodities and stocks continue to fall, expect a further sell off towards 1.6180 ahead of the lows for the weeks trading at 1.6140. As cable has fallen 190 points during European trading, expect some retracement before the next drive south. Resistance at 1.6240 ahead of the 38.2% fib ret level of 1.6305. Eurodollar reached new highs in yesterdays trading of 1.4845 just short of the September 22nd 2008 figure of 1.4870/75. However with the FOMC meeting comments assisting the Asian and European stocks to fall, along with gold and oil sell off, it has retraced back to 1.4685 in Asian trading, now back up to 1.4660 at time of writing (38.2% fib res level for the weeks trading). The sell off also being assisted with Yen strength across the board as Japan resumes trading following a three day holiday and stockmarket sell off. Resistance against the dollar at 1.4790 ahead of 1.4825. Support now at 1.4730 ahead of 1.47. Yen trading higher against most of its counterparts in European trading having driven hard during the Asian session. Having reached a low of 91.65, dollar yen now trading at 90.50. Having reached not only a week high but a three month high of 90.35, expect a further drive southwards to 90 figure (support barrier). Should the Yen convincingly break this level, a move back towards 88.60/80 on the cards (February lows). Looking at the 3 month MACD chart against the dollar, we are very close to a crossover for further downside pressure for the dollar. Resistance at 90.90 ahead of 91.20 (38.2% ret level for the weeks trading). Expect a pullback to the 38.2% ret level (or near) for further downside pressure for the greenback as long as stocks and the key commodities continue to fall.
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