As USD has been weakening in recent days on the belief that Bernanke won’t say anything of that sort, market took a unpleasant surprise, resulting in the long EUR/USD bearish candle (see hourly chart) which has broken the 1.338 resistance turned support and the previous lows of this week.

Hourly Chart

From a technical basis, bulls gave back 4 full trading days of gain with the move back below 1.33, which is acting as an intraday resistance. On top of that, price is also trading below the 1.328 resistance turned support which is also the onset of the rising trendline which represents the previous rally – in play just before Bernanke spoke.

Price did rebounded slightly towards 1.33 but ultimately failed to reclaim the round figure. This underlines the strong bearish undertones which is understandable given such an important news event turnout. As such, even though Stochastic readings are currently deep into Oversold territory, we cannot assume that a turnround will be likely soon especially since both Stoch and Signal line are still pointing lower. Should price manage to break 1.326, we could see acceleration towards 1.324 and potentially lower as the bear trend takes full flight. Any negation of current bear trend will require 1.33 to be cleared, if not a breakout scenario from the rising trendline will remain in play.

Weekly Chart

Things are not looking so hot for Weekly Chart right now, with price looking likely to end this week with a bearish candle. This would jeopardize current bullish quest to clear 1.35 and confluence with 50% Fib.  However, things aren’t looking as bearish as short-term chart, as price would need to break below the 38.2% Fib and preferably below 1.27 in order to invalidate current uptrend that has been in play since Aug 2012. Stochastic readings are also far from being overly extended. Should bulls in EUR/USD remain strong, it is possible that yesterday’s movement can simply be regarded as “noise” versus the broader longer-term sentiment.

However, this is where the assumption fails. EUR/USD has been rallying recently mostly due to USD weakness. In similar vein, EUR/USD was dipping during early 2013 due to USD strength on the back of stronger US stocks (whose correlation has since reversed) and rumors of Fed’s tapering in 2013 (which has just been confirmed by Bernanke). EUR in itself has been relatively lifeless as there are almost no focus on the Euro-Zone right now despite major issues coming up (Germany election, Greece and Spain insolvency). This implies that we will have more downside risks than upside risks moving forward, as it is likely many of the event risks are not yet priced in. Furthermore, without an inherent fundamental driver to push EUR higher, a stronger USD from here is more likely to pull EUR/USD lower with ease.

Finally, with Ben Bernanke pulling a shocker despite staying dovish just 1 month ago, reputations of Central Bankers have taken a huge hit. As such, Draghi’s bullish rhetoric will be likely to have lower impact and may be seen as futile embellishment by the market. This makes the outlook for EUR more bleak than ever in the short-term.

More Links:
US Market Roundup – Back into Channel after Bernanke’s Downer
GBP/USD – Limited Gains as BOE Releases Minutes, Federal Reserve Up Next
USD/CAD – Cautious Trading Ahead of Fed Policy Announcement

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

On hindsight, it was a matter of time when Bernanke would make this move. With his tenure ending in Jan 2014, it make political sense to finish up or at the very least clarify the Fed’s plans before he leaves – a technical term known us Clean Up Your Own Mess. Hence the market has it coming (especially in the past few days) for continuing to buy into speculation that a dovish Bernanke will continue to save the day, when he only has a few more months left to be “savior” which is further compounded by the fact that stock prices are heavily extended.

S&P 500 4 Hourly Chart

From a technical perspective, the bullish breakout from current Channel has been invalidated with the deep correction that has broken the 1,639/40 interim support. Price is currently sitting above the 1,625 support. There is some evidence of slowing bearish momentum from Stochastic with readings entering the Oversold region but the Signal line is still lagging far behind, which suggest that a turnaround may be in the horizon, but not necessary right here right now.

Dow 30 4 Hourly Chart

The DJI appears to be hit more heavily than S&P 500, a surprise considering that S&P 500 was looking more bearish yesterday between the 2. Similar to S&P 500, the Stochastic of DJI has also entered the Oversold region but the lagging Signal line suggest that a more probable turnaround point may be found closer to 15,000 rather than right now.

With Bernanke showing his less dovish hand, it is possible that we could see a longer-term flip in bullish sentiment. This would mean that a deeper correction may be in the works. However price will need to at the very least break current Channel floor to strengthen the case for such a scenario. Levels to watch for S&P 500 will be 1,600 round figure, while DJI bears will need to break 14,900 on top of the 15,000 as a showing of bearish resolve.

As a side note, given current disappointment surrounding Japan’s Abenomics plans. Ben Bernanke may have unwittingly wrote the death warrant for BOJ and to a lesser extent ECB. With a sudden switch of camps, it is unlikely that market will be bullish towards all the rhetoric thrown by Draghi and Kuroda for a while, and we could see Nikkei and European major indices trading lower in similar fashion with US indices at least in the short term.

More Links:
GBP/USD – Limited Gains as BOE Releases Minutes, Federal Reserve Up Next
USD/CAD – Cautious Trading Ahead of Fed Policy Announcement
AUD/USD – Quiet Ahead of FOMC Statement

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable fo

At a news conference, the central bank chief said if the economy continues to improve the asset-purchasing program could start winding down towards the end of 2013 and wrap up in 2014.

Markets sold off aggressively on the news, with major averages dropping more than 1 percent. The five-year Treasury note hit its highest yield since August 2011 while the benchmark 10-year note breached a 2011 high.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

However, the IMF warns that the outlook for the country remains tough and has urged more action by the government and European Union to boost job creation.

It expects Spain’s economy to start to grow later this year. Spain has one of Europe’s highest unemployment rates, currently standing at 27%.

The IMF also says that further moves are needed towards banking reform.

“Strong reform progress is helping stabilise the economy and external and fiscal imbalances are correcting rapidly. But unemployment remains unacceptably high and the outlook is difficult,” the IMF said in its report.

“This calls for urgent action to generate growth and jobs, by both Spain and Europe.”

The IMF said that the top priority of the Spanish government should be to reform labour laws further, making it easier for companies to change working conditions rather than dismissing employees. It also called for Spain to provide more training to young and unskilled people to help them into work.

via BBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

“On the financial regulatory side, he has got a series of misjudgements, I don’t think they were criminal by any means, but be it Northern Rock or the decision to kick supervision out of the bank of England and now start to take it back in – it’s not a great record,” he told CNBC.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Describing the economy as expanding moderately, Fed officials cited further improvement in the labor market and the housing sector, even as they noted that inflation was running below their 2 percent long-term goal.

In a statement after a two day meeting, the Fed’s policy-setting panel offered a more upbeat assessment of the risks facing the economy than they had after they last met in May.

“The committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall,” the Fed said.

U.S. stocks slipped, the dollar rose to session highs against both the yen and the euro, and U.S. rate futures fell as traders saw the statement as a small step toward an eventual reduction in the central bank’s pace of bond buying.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

“The committee sees downside the risks to the outlook for the economy and the labor market as having diminished since the fall,” the Federal Open Market Committee (TREFQE2) said today at the conclusion of a two-day meeting in Washington. It repeated that it’s prepared to increase or reduce the pace of purchases depending on the outlook for the job market and inflation.
Chairman Ben S. Bernanke is expanding the Fed’s balance sheet toward $4 trillion as he seeks to reduce a jobless rate that stands at 7.6 percent after four years of economic growth. Investor concern that the Fed may soon start to reduce the pace of asset purchases this month pushed 10-year Treasury yields to a 14-month high.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The BOE released the minutes of the most recent policy meeting of the MPC, which is responsible for the interest rate and asset purchases (QE) decisions. The voting breakdown of the MPC members, which can be a market-mover, yielded no surprises. The vote on maintaining the interest rate at 0.50% was unanimous, in contrast to the QE decision, which passed by a 6-3 vote. BOE Governor Mervyn King, in his final policy meeting, voted with two other members to increase QE to GBP400 billion, but the majority opted to maintain the current levels  of GBP375 billion. This breakdown was identical to the pattern at the previous meeting, and was expected by the market, so the release of the minutes did not affect GBP/USD.

On Tuesday, stubbornly high inflation numbers were responsible for the pound’s sharp drop. The BOE has already voiced concern that its inflation target of 2% is too low, and the robust inflation figures will only reinforce that concern. Meanwhile, the markets got their first glimpse of US key data, and the results were mixed. Building Permits came in at 0.97 million, just shy of the estimate of 0.98 million. Core CPI rose slightly to 0.2%, matching the forecast. CPI also came in exactly as expected, at 0.1%. The only disappointment was Housing Starts, which remained unchanged at 0.91 million. This was short of the estimate, which stood at 0.95 million.

The markets are keeping a close watch on the US Federal Reserve, as the FOMC releases a highly anticipated policy statement later today. The markets will be particularly interested in what the Fed has to say with regard to its quantitative easing program. Speculation has been growing that the Fed could scale back QE later in the year, and this has had a very strong impact on stocks, commodities and the US dollar. The Federal Reserve has repeatedly stated that it will stick with the current program until it sees improvement in the US economy, especially in the employment market. Currently the Fed purchases $85 billion in assets every month. If the Fed does take action or even hints at a move to tighten QE, we could see some volatility from the US dollar.

G8 summits are often photo-ops with little substance, as confident world leaders step up to the microphones and declare their unwavering commitment to take steps to improve the global economy. However, this year’s G8 meeting in Northern Ireland was more than just smiles and handshakes, as the G8 leaders used the occasion to announce the start of negotiations on a free trade agreement between the European Union and the United States. The summit’s host, British Prime Minister David Cameron, said that he was determined to seize this “once-in-a generation prize”. The stakes are indeed very high – the EU and US produce 50% of the global output, and a third of world trade. The deal would be the largest bilateral trade pact ever, and could add up to $100 billion to the economies of each side. Negotiations will get underway in Washington next month, and if all goes well, a deal could be signed by the end of 2014.

GBP/USD for Wednesday, June 19, 2013

GBP/USD June 19 at 15:10 GMT

GBP/USD 1.5662 H: 1.5677 L: 1.5604

GBP/USD Technical

The pound has edged higher in Wednesday trading, and is trading in the mid-1.56 range. The pair is receiving support from the 1.5557 line. This line appears safe for now. This is followed by support at 1.5432. On the upside, the pair faces resistance at the round number of 1.5700. This line could see some pressure if the pound continues to move higher. This is followed by resistance at 1.580o, which has remained intact since February.

• Current range: 1.5557 to 1.5700

Further levels in both directions:

• Below: 1.5557, 1.5432, 1.5309, 1.5203 and 1.5111
• Above: 1.5700, 1.5800, 1.5800, 1.5869, 1.5916 and 1.60

OANDA’s Open Positions Ratio

GBP/USD ratio has reversed directions, and is currently pointing to movement towards long positions. This is reflected in the movement of the pair, as the pound has posted some gains against the dollar. Short positions continue to retain a solid majority, indicating a strong bias towards the GBP/USD reversing course and  moving in a downward direction.

The pound has made modest gains on Wednesday, after sharp losses on Tuesday. We could see some strong movement from the pair on Wednesday, as the Federal Reserve grabs the spotlight. If there are any changes to QE, the currency markets could react sharply and quickly.

GBP/USD Fundamentals

• 8:30 British MPC Asset Purchase Facility Votes. Estimate 3-0-6. Actual 3-0-6.
• 8:30 British MPC Official Bank Rate Votes. Estimate 0-0-9. Actual 0-0-9.
• 14:30 US Crude Oil Inventories. Estimate 0.5M.
• 18:00 US FOMC Economic Projections.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.
• 18:30 US FOMC Press Conference.
• 20:00 BOE Governor Mervyn King Speaks.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

US releases were mostly within expectations on Tuesday. Building Permits came in at 0.97 million, just shy of the estimate of 0.98 million. Core CPI rose slightly to 0.2%, matching the forecast. CPI also came in exactly as expected, at 0.1%. The only disappointment was Housing Starts, which remained unchanged at 0.91 million. This was short of the estimate, which stood at 0.95 million.

All eyes will be on the US Federal Reserve later on Wednesday, as the FOMC releases a highly anticipated policy statement. The markets will be particularly interested in what the Fed has to say with regard to its quantitative easing program. Speculation has been growing that the Fed could scale back QE later in the year, and this has had a very strong impact on stocks, commodities and the US dollar. The Federal Reserve has repeatedly stated that it will stick with the current program until it sees an improvement in the US economy, especially in the employment market. Currently the Fed purchases $85 billion in assets every month. If the Fed does take action or even hint at a move to tighten QE, we can expect the dollar to move higher against the major currencies.

G8 summits are often little more than photo-ops and an opportunity for the leaders to take a short break from the workload back home. However, this year’s G8 meeting in Northern Ireland served more than the usual fare, as the G8 leaders used the occasion to announce the start of negotiations on a free trade agreement between the European Union and the United States. The stakes are very high – the EU and US produce 50% of the global output, and a third of world trade. The deal would be the largest bilateral trade pact ever, and could add up to $100 billion to the economies of each partner. Negotiations will get underway in Washington next month, with a deal expected to be signed by the end of 2014. Canada has a free trade agreement with the US, and is presently negotiating a pact with the EU.

USD/CAD for Wednesday, June 19, 2013

USD/CAD 1.0189 H: 1.0239 L: 1.0186

USD/CAD Technical

USD/CAD is testing the 1.02 line, as it has throughout the week. The pair continues to receive support at 1.0157. This line could face pressure if the pair moves lower. The next support level is at the round number of 1.01. On the upside, the pair faces resistance at 1.0229. This line is  not strong, and the pair punched past it late in the Asian session before retracting. This is followed by stronger resistance at 1.0282.

• Current range: 1.0157 to 1.0229

Further levels in both directions:

• Below: 1.0157, 1.01, 1.0058 and 1.00
• Above: 1.0229, 1.0282, 1.0337, 1.0442 and 1.0502

OANDA’s Open Positions Ratio

USD/CAD ratio continues to be subdued, and is unchanged in the Wednesday session. Traders should note that the ratio continues to be split almost down the middle between long and short positions, indicating a lack of bias as to what direction USD/CAD will take.

The markets are understandably cautious ahead of today’s Fed release. We could, however, see some volatility from USD/CAD after the Fed has spoken.

USD/CAD Fundamentals

• 12:30 Canadian Wholesale Sales. Estimate 0.5%. Actual 0.2%
• 16:40 BOC Governor Poloz Speaks
• 14:30 US Crude Oil Inventories. Estimate 0.5M
• 18:00 US FOMC Economic Projections
• 18:00 US FOMC Statement
• 18:00 US Federal Funds Rate. Estimate <0.25%
• 18:30 US FOMC Press Conference

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.