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Currencies Update: Dollar drops near 83 yen, shall markets witness another intervention?!
Written by article default Wednesday, 06 October 2010 21:21
The dollar slumped Wednesday to trade at eight-and-half month low against major counterparts on possible monetary easing by the Fed aiming to bolster growth amid the current slowdown in the world's largest economy and global economies in general.The dollar index, which tracks the performance of the greenback against six major currencies, slipped to a low of 77.56 compared with the day's opening at 77.78, but it stopped its drop as it gained support at 77.60.
Looking at the USDJPY pair we can see that the pair fell to 83.10, coming close to 83 levels, which marks the level that prompted the BoJ to intervene in markets on September 15 in order to depreciate the Yen.
Also, momentum indicators are showing that the pair is currently oversold, which may suggest an upside correction.
Thus another intervention by the BoJ is not far from reality especially as Japanese policy makers mentioned that they can intervene again to depreciate the currency that is affecting their export-led economy.
Yesterday, the BoJ surprisingly lowered borrowing cost to a range between 0.0% and 0.1% and said it would establish a new fund to gather 5.0 trillion yen to be used for purchasing government bonds as well as other assets to boost the economy.
The trading range for today is among the key support at 82.00 and the key resistance at 84.00.
Moreover, the dollar also fell today against the Australian dollar that rebounded after the Australian Central Bank kept interest rate unchanged at 4.50% yesterday; missing analysts' forecasts of an interest rate hike to 4.75%.
Accordingly, gold took advantage of the dollar's decline to touch a new fresh high today at $1,349.80 an ounce.
Concerning the euro-dollar pair, it advanced on the daily charts, touching a high of 1.3880 where it found resistance that pushed the pair to 1.3835, whereas the trading range for today is among the key support at 1.3700 and the key resistance at 1.3980.
Today, European data did not have an impact on the euro as the first report showed that euro-zone economies grew 1.0% in the second quarter, in line with expectations, while second news showed that German factory orders improved to 3.4% in August compared with the revised -1.6%.
Moving to the sterling-dollar pair, it also pared its earlier advance when it reached a high of 1.5937 falling to 1.5885 in the absence of economic fundamentals from the UK today ahead of tomorrow's rate decision.
The trading range for today is among the key support at 1.5775 and the key resistance at 1.6070.