FXdudy,

Ty for your commentary. Could you explain "collapse" ?

ES

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I meant rapid falling by "collapse"

USD Over last week, USD fell to new minimums. The decline was caused by cancellation of debts by American banks as well as the approaching meeting of the Federal Committee of the United States, which many analysts expect to reduce the interest rate by 0.5% -0.75%. Recession in the American economy led to a decline of USD value to the minimum. Particularly strong dollar has been falling over the past two weeks, when expectations of the recession began to be confirmed by fundamental data. As a result, some pairs updated their absolute maximums and deviated from balance. Fundamental analysis of the American economy shows that the interest rate in the United States could be reduced to 1%, which will lead to a decline of USD and the growth of industrial production. Among the negative factors there will be hyperinflation and raising interest rates to double quantities. The growth of inflation in the United States will be accompanied by rising interest rates leading to the strengthening of the dollar and slow growth. Among the statistics it is worth to note Friday’s issue of the consumer price index - Consumer Price Index, which in February was 0% vs 0.4% (month earlier). Reducing the index may mean that the Fed still has the possibility of reducing the interest rate, which is 3% at present. On Monday an issue about American economy will be published, which is worth to pay attention to capital inflows by data of the Treasury of the United States as well as data about industrial production. An increase of foreign capital will mean that investors believe in the imminent completion of a recession in the American economy and try to invest money in securities until they are at their minimum points, and growth in industrial production may mean “bottom” of reducing the American economy.

the source of info: PoltekFX Analytics

JPY The weakness of USD has led to a decline in USD | JPY below 100 yen per $ 1. So cheap American currency have not been since 1913. It is obviously the current mark is not provided with fundamental data. On the one hand, opening positions on Bid is very risky, as there is a high probability of entering the market at minimums, but it is too early for Ask because the price may fall further. It is expected that the price against the background of retracement will return to the area of 112 figure (50% of the descending trend), but this corrective movement is possible only in case of strengthening the American currency. By analyzing the Japanese economy, it may be noted that the interest rate will be at the minimum points most likely before the third quarter of this year, when it has become known effects of the recession in the United States. Inflationary pressures in Japan show no signs of accelerating, despite the fact that industrial production is growing steadily. The problems in the Japanese economy can arise if only the American currency will be near the current mark for a long time. Then the import of the United States will decline and taking into consideration that the United States is a major consumer of Japanese goods, we can expect it.In the short term attentions by investors will be attracted by comments of politicians. There are no important data on the Japanese economy this week, so all attention will be paid to the comments and actions of the Fed. At the Asian session Fukui comments will be of great importance that will be followed after the pair USD | JPY sets new minimums.

EUR continues to strengthen against USD. Increased inflation in the EU, which the European Central Bank is intending to continue the fight with, regardless of everything and strong growth in the European economy (which is expected to slow down slightly in 2008, but accelerate in 2009) is supporting EUR. It is expected that interest rates in the EU will remain at 4% at least until the third quarter of this year, and then as inflationary pressure in Europe reduces interest rates will fall, causing decline of European currencies as well as additional support of the growth of the European economy. Considering reducing rates in the EU and the victory over the recession in the United States EUR/USD will change the ascending trend to descending one, which will mean a new cycle of the world economy. It is expected that after the growth of EUR/USD over 6 years (since the introduction of EUR), there will be a three-year period of declining. Perhaps the absolute maximum of pair will be recorded at the current points. Difficulties in predictions have been presented by the fact that at the current positions the price has not been located yet, but chances are 1.5875 mark will be tested. On Monday any significant data on the European economy will not be published, so the emphasis will be placed on market statistics from the USA

the source of info: PoltekFX Analytics

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USD
The American currency on Asian bids set new absolute minimums, after which traders began to open the positions for the sale USD, which led to its strengthening to levels of opening.
Statistics from the American economy shown that capital inflows (according to the U.S. Treasury - Tsy Intl Capital System) have increased from $56 to $ 62 billion, that shows confidence of foreign investors in the future of the American economy.
Perhaps USD is at its minimum below which it will not be able to fall no more that pushes investors to buy American securities as they are relatively inexpensive.
Other indicators, among which it is worth to mention manufacturing production - Industrial Production and Business Activity Index - NY Fed Empire State Survey showed a slight deterioration, but it was within the permissible limits.
The market is waiting for a decision on interest rates, which will be published tomorrow at 21:15. No one doubts that rate will be lowered. The question is whether how they will be reduced. The range of opinions is verifying from 0.5% to 1%, but the majority believes that the Fed will reduce rate by 0.5%.
Besides reducing the interest rate tomorrow there will be published data on Producer Price Index. If the index stays at current points, it could cause much greater decline in the American currency because the Fed will have additional opportunities for lowering the interest rate.
In addition, investors' attention will be drawn to the start of construction of new houses -Housing Starts. This is an advanced rate indicator. It depends on many factors and therefore varies greatly, but if it shows a growing trend for the 3rd consecutive time, it will mean the completion of the negative effects in the construction sector, preceding future growth of the American economy and the strengthening of USD.

GBP
GBP is descending against USD two days running. After deviation of pair above the level of 2,008 the cost of USD expressed in terms of GBP has become very attractive for Bid and the main reason for reducing of GBP | USD.
Among the British data the main attention focuses on the inflationary data to be published before a decision on interest rates in the United States, as well as the publication of the Bank of England meeting minutes which will be published on Wednesday.
The British economy at the moment needs to reduce interest rates to support its growth, but inflation does not allow lowering them, forcing the Bank of England to keep their current levels for a long time.
At the end of trading day on Monday GBP/USD was above the level of 1.9870 (closing of the second three-year period), which is the first intermediate goal before further decline of pair. The next support is at 1.9575-1.94 (the area of closing five-year cycle). Further support is at 1.9175 (closing of a three-year period). Break by 1.94 may mean the final declining of pair, which should last for three years at least. The cause of decline will be the growth of USD and the decline of GBP, which will be caused by the needs of both economies.

the source of info: PoltekFX Analytics

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GOLD

After reaching a new absolute maximum the price of gold fell to $ 1000 per troy ounce. It was caused by technical factors and only fixation of speculative positions that were closed after reaching the level of $ 1030 per ounce.
If USD continues to decline, there will be new historical highs. In that case, growth could resume either from the level of $ 1000 or $ 980 (helpline ascending channel). However, the announcement of decision on interest rate in the United States (which will be held this evening) may cause movement in any direction. It is recommended to abstain from trading before the announcement of the decision.

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USD
USD has strengthened after the FOMC had made decision to lower federal fund rate by 0.75 bps. In general, the market will take into accounting this reduction in advance, that’s why on the threshold of its announcement many people chose to fix position.
This decrease is very useful for market participants who will take advantage of the temporary strengthening of USD for its sale.
As it is mentioned above, the FOMC cut discount rate by 0.75%. 8 members of the committee voted for this decision. 2 members voted for a decrease of 0.5% (Fisher and Plosser).
Commenting on the decision the representatives of the FOMC acknowledged that economic activity has "weakened further":
- the prospects for the economy weakened further
- the market is still "under considerable stress"
- inflation is still elevated
- downside risks to growth remain
- Fed will act in a timely manner as needed to promote sustainable economic growth and price stability
- Deepening housing contraction will weigh on the economic growth.
The president of the USA George W. Bush said: "We will continue to act, if this situation will require it. The unemployment level remains relatively low, but looking ahead long term everything will be all right. "
It is expected that at the Asian session or on Wednesday at the European one there will be turn out after which USD is under pressure again.
Today the US is absent from any significant scheduled news events, but for traders doing commodity futures trading the interest will be provided with data on the stocks of oil products, which are published at 18:30.

EUR
EUR/USD is going down after the announcement of the decision to reduce the discount rate. Reduction of pair was caused by fixation of long positions, but the price is expected to return very soon, and we will see continuation of ascending trend.
Intermediate buying of EUR | USD will start from the support line of ascending trend at around 1.56 (see chart). In the case of the further reduction the buying will increase approaching to 1.54. Counting in favor of further growth there are Bush's speech which was somewhat disturbing, as well as low inflation that allow the United States to lower discount rate to 1%.
On Wednesday Construction production as well as the trade balance on European economy will be published. The latter will be of interest because growth of EUR could affect the export of goods from the euro zone.

the source: PoltekFX Analytics

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