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Currencies Update: Dollar and Pound slide on possible adding to stimulus
Written by article default Wednesday, 22 September 2010 20:31
The green currency and sterling slipped in trading today after the dovish tone of the Fed and BoE which provided possibilities of having second-round stimulus, thereby indicating that recovery not to be maintained soon.Yesterday, Bernanke left interest rate unchanged at 0.25% but stated that "The committee ... is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."
Thus, he left the door opened for additional stimulus if needed which underscored concerns that the world's largest economy is not out of the woods yet.
By the same token, BoE minutes revealed that adding to the current 200 billion pounds may be a witnessed if needed; adding to concerns after the CIB lowered 2011 growth forecasts for the British economy to 2% instead from June's projections of 2.5%, following the lowering of growth estimates for 2010 by the BoE to 3.0% from 3.6% in August's inflation report.
The persisting worries caused stocks to fall and gold to leap to a new all-time high while weighed sharply on dollar and pound movements.
The dollar index, which tracks the dollar movements versus a basket of major currencies, slipped to 79.67 after the breach of supports at 80.09 and 79.75.
Concerning the euro-dollar pair, it advanced sharply for the second day due to the weakness in dollar and boosted by successful bond selling in Portugal in addition to the upgrade of French banks by Moody's investors service today.
After piercing resistance at 1.3120 yesterday, the pair bounced to breach another strong resistance at 1.3330 while gained more momentum after surpassing 200-day moving average.
Meanwhile, the pair is trading at 1.3416 after reaching a high of 1.3440 and a low of 1.3246, while the trading range for today is among the key support at 1.3200 and the key resistance at 1.3495.
Moving to the sterling-yen pair, it fell for the third day on the daily charts after the release of the BoE minutes.
Now, the pair is trading at 132.30 after recording a high of 133.37 and a low of 132.07, whereas The trading range for today is among the key support at 1.5560 and the key resistance at 1.5930.
With regard to the dollar-yen pair, it is moving south for the second day on the daily basis ahead of the Fed's second day meeting today.
So far, the pair is trading at 84.45, reporting a high of 85.18 and a low of 84.39, whereas the trading range for today is among the key support at 84.00 and the key resistance at 87.00.