MasterForex: Eurozone currencies enter high positions, focus on the Germany-France summit tonight - Foreign Exchange Trading Platform

by master0722 on 2011-08-16 21:08:41

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In general, the market trend aligns closely with the previous analysis. The euro reached the target price of 1.40, and the pound provided a very safe and stable entry opportunity after retracing following its moving average breakout. Overall, the results were good. Tonight's summit between Germany and France has become the focal point of the market, which could significantly impact the exchange rate trends of the euro and the pound. It is also likely to favor bearish sentiment. Therefore, yesterday's profit-taking positions should be reduced today.

From a fundamental perspective, yesterday Bank of England Monetary Policy Committee member Miles stated that there might be a need for further quantitative easing in the UK, but the economy currently does not require additional stimulus from quantitative easing measures. If demand and production prospects are too bleak, leading inflation to possibly fall significantly below the target level and remain so, he would vote in favor of launching a new round of quantitative easing measures.

Essentially, his meaning is that only if inflation expectations quickly drop below the government's target of 2%, would he support further easing. The issue is, in an era of dollar abundance, controlling inflation isn't that simple. Therefore, this speech actually supported the upward movement of the pound.

Yesterday, the U.S. manufacturing index was much worse than expected, increasing investors' concerns about the U.S. economic outlook. Specifically, the U.S. August New York Fed Manufacturing Index was -7.72, compared to an expectation of 0, and the previous value of -3.76. In terms of sub-indexes, the U.S. August New York Fed Manufacturing Employment Index was 3.26 (July +1.11); the New Orders Index was -7.82 (July -5.45); the Price Obtained Index was 2.17 (July +5.56); the Price Paid Index was 28.26 (July +43.33). Meanwhile, under the influence of Google acquiring Motorola, the rapid rise in U.S. stocks also pressured the U.S. Dollar Index, resulting in the euro and pound rising against the dollar by over 100 basis points.

Euro/USD:

The euro's movement aligns basically with expectations. Investors who took profits at 1.40 do not need to rush to replenish their positions, as there will be more data releases in the Eurozone today, and the tone of the German-French summit is yet to be determined. Moreover, the euro faces some pressure above at 1.4460. Unless the data is exceptionally good or the summit exceeds expectations, the euro is likely to experience a pullback to confirm support at 1.40. Waiting for stabilization before re-entering is advisable.

USD/JPY:

Yesterday, Japan's Cabinet Office announced that Japan's second-quarter GDP fell by 0.3% quarter-on-quarter, less than the analysts' median forecast of a 0.7% decline, while the first quarter GDP declined by 0.9%. At the same time, a policy summary report approved by Japan's Cabinet Office stated that the government vows to take decisive action on excessive yen exchange rate volatility when necessary, as it can harm economic and financial stability.

However, the market reacted mildly, and the yen remains strong. The MACD daily chart shows that the upward momentum of USD/JPY has weakened somewhat. In reality, the biggest risk factor remains whether the Japanese government will intervene. Without direct intervention in the market, USD/JPY is likely to hover at low levels due to consecutive weak U.S. economic data until Japan's economic fundamentals worsen. Therefore, we recommend investors wait for possible interventions by the Japanese government, keep an eye on the yen, but avoid participation.

GBP/USD:

Yesterday, GBP/USD also showed a steady upward trend. After effectively breaking through the resistance mentioned yesterday, it continued to advance. Although it eventually reversed after peaking, the upward breakout trend was clear. Positions entered yesterday can continue to be held. Consider reducing positions to lock in profits above 1.6420.

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