Currency Market Updates & USDJPY Chart analysis

US Policy: Aggressive Spending

Brokers trading the dollar helped it climb on Wednesday to a new six week high against the Yen an a new 2 ½ week high against the Euro as US President Obama announced a new 80 Billion Dollar mortgage bailout bill. The new bill is expected to help close to 9 million families either restructure or refinance their mortgages in order to avoid foreclosure.

At 5PM GMT, the Dollar was up 1 ¼% to the Yen at 93.56 and ½ of a percent versus the Euro to 1.2523 after hitting 1.2557 – its lowest level since early December. The US is continuing its aggressive spending policy to shore up its economic situation, a tactic that might prove detrimental to the valuation of the Dollar down the road. For now, those Investing and trading the greenback see the US doing something and is banking on the possibility that it will work to help stave off a worsened situation.

GBP: Bank of England Might Consider a Further Interest Rate Cut in March

Forex traders took the Sterling down marginally against the Euro and Dollar as the Bank of England released minutes of this past month’s interest rate meetings. The record showed that the BOE members voted unanimously for the policy of “quantitive easing” by purchasing other securities and Gilts. The fear was that based on the minutes and the unanimity of the vote, the Bank of England might consider a further interest rate cut in March.

At 5:15 GMT, the Sterling was off .33 of a percent to the USD at 1.4189 and 1/10^th of a percent to the Euro at .8824.

Chart Analysis: More USD/JPY – this time a 5 month look

As we said yesterday, the deviation of Dollar/Yen with respect to its historical patterns in terms of its connection with the risk appetite of Forex traders is a problem that could mean additional weakness for the Japanese currency. Its break above 92.40 is significant technically. This is now the new support level and the JPY/USD is setting its sights on the moving average for the past 100 days, somewhere near 94.00 as well as the 2009 high up at 94.62.

US, Japan and Europe Daily FX Update

It was fascinating to watch yesterday, as President Obama was signing the 800 Billion Dollar economic stimulus package, the US stock markets were falling – I guess the traders and investors on Wall street were not too happy with the idea of severe regulation combined with massive spending on nonsense. Forex brokers trading in the USD though had a different kind of a day. The US dollar, while it should be falling based on all this spending that the government is doing, was rising – sharply in some instances.

The problem around the world is that there are problems around the world – and they keep getting worse. Japan, for a while looking to hamper the strength of Yen to offset losses to the export business it thrives on, sobered up when they realized that their economy has fallen more than at any point in 35 years – which is scary because they are still feeling some effects from their 1990’s prolonged recession. Those investing and trading in the Yen have been hit hard as the Yen has fallen to even the lowly Euro recently.

Speaking of the Euro, yesterday the EU got word from not one, but two rating agencies letting them know that the sovereign debt of many EU members states is in jeopardy of having a ratings cut. This is not a shock considering that many Western European states are the primary debt holders for much of the Eastern bloc countries who have been hard hit as of late. President Obama had said yesterday, I guess to cover himself when this plan does not do what he says it will, that “the economy is going to get worse before it gets better” – in the EU’s case, Forex traders are wondering if it will ever get better or is there some major restructuring of the way they do things that needs to get done. I expect the Euro to continue its slide.

Chart Analysis: USD/JPY

Chart - USD - JPY - 5 Day

Once a safe haven partner to the Dollar in times of economic stress, the Yen has been battling through some tough times lately. Not too long ago, speculation was that the Bank of Japan wanted the Yen to temper its strength in order to protect its export business, but recent events in Japan have caused the Yen to lose its luster amongst traders looking for security during hard times. In this real case of "be careful what you wish for", teh BOJ has seen their currency lose over 2% to the USD in less than 1 week. Looking at the Daily FX news, it seems as if Japan has more to worry about now than the goods they send to other countries - they are now faced with the prospect of returning to the gloomy 1990's.