MasterForex: Severe fluctuations in the financial market may allow shorting the US dollar at higher levels - Forex simulated trading account.

by master0722 on 2011-08-09 16:13:41

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Yesterday, the overall performance of the foreign exchange market was basically in line with expectations. The USD/JPY pair experienced a decline as the risk-aversion factor outweighed the Japanese government's intervention. Meanwhile, the US Dollar Index (DXY) also rose due to the increased risk-averse sentiment. Yesterday, global stock markets saw widespread declines, with the UK FTSE 100 index dropping by 3.39% to close at 5068.95, and the S&P 500 index falling by 6.66% to close at 1119.46. In the bond market, despite Standard & Poor's downgrade of U.S. debt the previous day, the yield on 10-year treasury bonds fell again due to market demand for safe-haven assets, reaching its lowest point since last year at 2.33%. This demonstrated the absolute dominance of the United States, as even when the crisis occurred within the U.S., risk-averse funds still flowed back into the country.

Additionally, yesterday the European Central Bank (ECB) unexpectedly issued a statement indicating that it would actively implement a government bond purchase plan to combat the Eurozone debt crisis. This implied that the ECB might purchase Italian and Spanish bonds. Furthermore, G7 finance ministers held an emergency meeting to attempt coordinated measures to soothe financial market anxieties. However, judging from yesterday's trends in both the stock and foreign exchange markets, these efforts clearly did not achieve the expected results.

Dollar Index:

From a daily chart perspective, the medium-term trend of the Dollar Index is fluctuating and consolidating, with the exchange rate crossing above and below the moving average system. However, it did not break below the upward trendline mentioned yesterday, retaining hope for further upside movement. Currently, the short-term trend is near the upper boundary of the range, and today the Dollar Index is expected to primarily consolidate within this range. Strong resistance lies at the 75 integer level, and the outcome of the battle at this price will determine the direction of the Dollar Index.

Euro to USD:

Yesterday, the Euro-to-Dollar exchange rate fell mainly because the European Central Bank did not explicitly state that it would purchase Italian and Spanish bonds. This led to unstable emotions in the market. However, considering the turmoil in the financial markets, it is likely that the ECB will soon announce the purchase of bonds from these countries. Therefore, if the Euro can stabilize near 1.417, there could be potential for an upward move. Investors need to closely monitor developments from the European Central Bank.

USD/JPY:

Yesterday, Japanese Finance Minister Yoshihiko Noda expressed his expectation that the Bank of Japan (BOJ) would continue to support the economy through ultra-loose monetary policies. He reiterated the close monitoring of foreign exchange market fluctuations and hoped the market understood that the G7 would collaborate on actions. However, unlike last week, he did not propose direct intervention in the foreign exchange market. Consequently, the USD/JPY regained all the gains lost during the market intervention.

From a technical standpoint, it will be difficult to reverse the downward trend of USD/JPY in the short term. It is recommended that investors consider selling USD/JPY on rallies. Before the USD/JPY approaches its previous low, it will be challenging for the Bank of Japan to intervene in the market again.

GBP/USD:

Yesterday, the GBP/USD exchange rate declined, ranging from a high of 1.6471 to a low of 1.6295. Similar to previous analyses, although the GBP/USD broke below short-term moving average support, the 100-day and especially the 250-day moving averages remained relatively strong. Given the current volatility in the market, it is suggested that investors adopt a strategy of selling high and buying low within the range of 1.6200-1.6350.

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