Investors targeted low yielding assets in their investments throughout the day, and more specifically targeted the US Dollar and the Japanese Yen as most Forex traders reversed their risky positions and headed to safety, this comes as the FOMC meeting is approaching, where it is less than an hour away. Expectations suggest that rates will remain unchanged at historic lows between 0.00% and 0.25%, along with announcing new measures and policies that target monetary easing.
The US Dollar maintained a bullish wave since the beginning of today, as investors felt the risk is huge in the shadow of the unknown FOMC meeting results, which is why they ditched high yielding assets including basic materials and precious metals. Today’s released data by the US economy also contributed in the general heading towards less risky investments.
This FOMC meeting has a distinguished importance more than the usual as it comes in a very sensitive timing where the economic activities are slowing down across the country, and now that the recovery process is enduring serious risk of shutting down. Confirming the urging need for new monetary easing measures and policies as the Federal Reserve Chairman, Ben Bernanke, signaled in his words in front of the Senate Banking Committee as he described the current US economic status as “Unusually Uncertain”.
Data released by the US economy today disappointed investors around the world, were Preliminary reading for the Non-farm productivity during 2010’s second quarter came out worse than both expected and previous readings showing a fall of -0.9%, reversing the rise in previous quarter worth 3.9% after revision, and worse than the expected reading of 0.1%. The preliminary reading for the Unit Labor Costs during the second quarter of 2010 climbed by 0.2% reversing the previous revised fall of 3.7%, yet the figure did not live up to the expected 1.5% rise. In the coming hours the US economy will release the Wholesale Inventories Figure for the month of June, while markets expect the figure to come out at 0.4%, lower than the previous reading of 0.5%.
Moving to the other edge of the world, and specifically South-East Asia, China announced today that its trade balance reached an 18 month, where excess in the balance reached $28.7 Billion in July, this excess is also the result of lower levels of oil import into China which raises question marks about global oil consumption.
The Dollar index which measures the USD's performance versus six major currencies climbed from today's opening level of 81.09 to currently trade at 81.29 recording its highest level at 81.53 and its lowest at 80.75. Gold prices fell reaching $1195.15 per ounce from the opening price of $1199.9. Oil also fell reaching $79.70 after opening at $81.53 per barrel.
The Euro/Dollar pair weakened even further, to trade below the opening level of $1.3219 at $1.3104 recording an intraday high at $1.3233 and a low at $1.3072, the pair broke the $1.3115 support level and technical analysis suggest the pair is heading towards support levels at $1.2990 while resistance levels remain at $1.3115.
The Sterling/Dollar pair also weakened today, to trade below the opening level of $1.5891 at $1.5793 recording a high at $1.5904 and a low at $1.5708, the pair did not succeed in braking the $1.5700 support level while resistance remain at $1.5785 level and technical analysis suggest the pair is heading upwards in a correctional wave according to the four hour Stochastic graph, yet the pair will stay in a bearish wave so long it remains below the $1.6070 level.
The Dollar/Yen pair fell during today's trading to trade below the opening level of ¥85.92 at ¥85.78 recording a high at ¥86.23 and a low at ¥85.61, resistance level remain at ¥85.90 and support level remain at ¥85.30.