Dollar falls on rising tensions in the Middle East

  • The US dollar rose on Wednesday supported by FOMC minutes and positive US economic data. The Fed raised their growth forecast and slightly lowered the unemployment forecast and inflation forecast. Further supporting the dollar was data showing the US housing starts increased to 596K in January. Today, the dollar fell on news that two Iranian warships were planning to sail through the Suez Canal heading to Syria. Israel responded that such moves will not be ignored. The rising tensions in the Middle East weakened the dollar. Focus now turns to Jobless claims data and Consumer Price Index data released later today. The euro extends gains against a weaker dollar today jumping as high as 1.3608 from 1.3461. 
  • Against the Japanese Yen, the dollar fell from a nearly two-week high after the fall in US Treasury yields. The pair fell as low as 83.48 from 83.96 and it was last traded at 83.57.
  • Sterling plummeted on Wednesday after disappointing unemployment data revealed an increase of 2.4K while the market was expecting a decline of 3K. The unemployment rate in December remained unchanged at 7.9%. The Quarterly inflation report also weighed on the sterling, as the Bank of England forecasted a lower growth and that inflation will fall below the 2% target in 2012. Mervyn King's dovish speech eased rate hike expectations saying that the country is not ready to raise interest rates given the downside risk to the economy. The British pound fell as low as 1.5985 against the dollar from 1.6184. Today the pair recovered some of its losses climbing to 1.6116.
  • Gold edges higher today for the fourth straight day supported by rising tensions in the Middle East. The precious metal rose as high as 1381.93 dollars an ounce from 1368.21. 

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3525 with a preference to enter into Long positions at 1.3535
  • § The USDJPY pivot point is at 83.30 with a preference to enter Long positions at 83.35              

Today's calendar and market movers:

  • § US Consumer Price Index in January is forecasted to gain 0.4%
  • § US Initial Jobless Claims is forecasted to rise to 401K
  • § US Manufacturing Survey in February is forecasted to rise to 21.4 

Equity Markets: 

US equities were positive on Wednesday with the S&P500 trading up 0.63% and the DJIA trading up 0.50%. The European bourses are also positive with the FTSE trading up 0.80%, the DAX trading up 0.19% and the CAC up 1%. The NIKKEI at the time of writing is trading up 0.22% and the HSI is unchanged. 

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