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Currencies Update: Dollar extends losses and investors target gold
Written by article default Friday, 24 September 2010 09:31
Throughout this week, the theme in the currency market was “dispose carrying the dollar, and preserve investments by purchasing gold.”The final day of this week carries no difference, as investors intensified their demand for the precious metal, enabling it to set a historic new high at $1,299.59 an ounce and still hovering around the newly established targets as we await the metal to strike $1,300.
The dollar extended its losses against majors, as seen on the US dollar index, which tracks the performance of the dollar against six majors currencies, where the index opened today’s trading at 80.001, to trade at a low of 79.601, while currently the index trades around 79.670 levels.
The hints from the Fed about a possible intervention in the market by providing further stimulus plans “if needed”, spread a panic attack among traders as the Fed and BoE carried the same message this month, signaling the economic conditions are sluggish, and the economic slack will continue on affecting conditions this year.
Central banks are having tough times exiting “crisis mode” as mentioned above from both banks in the US and UK, while the European Central Bank extended its liquidity measures for financial institutions into 2011.
The European common currency gained against the dollar, following the release of Germany’s IFO survey, which showed that German business confidence rose unexpectedly during September to 106.8, the highest in three-years.
The euro-dollar pair traded at 1.3412, compared with the opening levels of 1.3311, while setting a high of 1.3433 and a low of 1.3284.
The euro is expected to extend its rise against the dollar throughout today, targeting 1.3490, yet the pair must sustain trading above 1.3230 and achieve a four-hour closing above 1.3410 in order to accomplish the suggested targets.
The Royal currency extended its rise against the dollar for the fourth-consecutive trading day, where lack of fundamentals from UK intensified the demand for its currency.
The GBP/USD traded higher ahead of the release of growth data (due to next week), at 1.5712, compared with the opening levels of 1.5681, while setting a high of 1.5729 and a low of 1.5639.
Further bullishness is projected on intraday basis, where the pair stabilized above 1.5605, while a breach of 1.5725 would pave the path for the pair to target 1.5800 and 1.5875.
The Japanese Yen depreciated against the dollar earlier, as the USD/JPY pair reached a high of 85.38, but the dollar reversed its drop to force the pair to return to its opening levels at 84.36, where it’s currently trading.
Stability above 84.00 – 83.85 sustains the bullish direction for the pair, targeting levels at 84.90 and 85.30.