Forex

Daily Forex Analysis (August 10, 2010)

Contributed by Finexo

By Finexo

Morning Forex Review – Will the Fed adopt new easing measures?

Last Friday’s report of unemployment data for July, along with weak indicators for housing and consumer spending, show a slow recovery of the US economy.

Due to this less than promising situation, the Fed is expected to maintain the current federal fund rate. Should the Fed announce new stimulus measures, the dollar could fall again. On the table, the Fed is likely to discuss restarting asset purchasing programs in order to secure the long term goal of lowering interest rates and stabilizing the economy.

Global stock markets slightly climbed yesterday as investors expected new stimulus measures and the dollar stabilized against the sterling, the euro and the yen. Coming up, watch the Bank of Japan for signs that it may take steps to control recent gains on the yen as USD inches toward the Y85 mark.

EURUSD

Depending on the outcome of the FOMC statement the pair can take two directions. An announcement of further monetary easing measures might encourage risky investment, favoring equities and volatile currencies, resulting in a drop in the dollar. If the Fed chooses to sustain its current position, higher US yields and a stronger dollar should become evident.
Support/Resistance: 1.3115/1.3240

GBPUSD

Staggering below the 1.6000 resistance level last Friday, it looks like the pound has lost some of its strength against the dollar. This may be due to the effect of investors leaning towards the euro in preparation for the release of the Bank of England Quarterly Inflation Report on Wednesday.
Support/Resistance: 1.5725/1.5865