Forex Analysis Article

Daily Forex Analysis for 24 July 2012

USD

US dollar falls against major currencies

The US dollar fell against the yen, euro, Australian dollar and New Zealand dollar in the Asian trading session on Tuesday. The USD/JPY trading rate was at 78.33 at 6:35 AM London time, while the EUR/USD rate was 1.2125. The Australian dollar climbed 0.4% against the greenback, and was trading at 1.0302 US dollars. The New Zealand dollar also rose by 0.6% and was trading at 79.17 US cents.

Economists feel that the US economy is slowing down, and there is speculation that the Federal Reserve will announce quantitative easing in its next two-day meeting beginning July 31. For this week at least, the US dollar is not expected to post significant gains against its peers.

EUR

Euro trading near 11 year low against yen

The euro was again in the vicinity of an 11 year low against the Japanese yen. The primary reason for this was the concern that Europe’s debt crisis is further slowing down economic growth.

On Tuesday, at 6:35 AM London time, the EUR/JPY rate was 94.96. The euro was surprisingly stronger against the US dollar, and the EUR/USD rate was 1.2125.

Credit ratings of the Netherlands and Germany were cut by a global ratings agency on concerns that both these countries may have to assist other countries in the Eurozone. Spain and Italy will be holding a bond auction on Tuesday, so this may have an impact on the euro’s trading rate.

JPY

Yen continues to appreciate against US dollar and euro

The Japanese yen appreciated against the euro and US dollar in the Asian trading session on Tuesday. The appreciation versus the euro made the yen near 11 year highs against the common European currency. As of 6:35 AM GMT, one euro was trading at 94.96 yen. The yen was up by 0.1% versus the US dollar, and the USD/JPY rate was 78.33.

Japan’s Finance Minister has promised to take action to curb the yen’s excessive appreciation. He mentioned that the current appreciation of the yen is not indicative of Japan’s strong economic fundamentals. Traders will be looking for the Ministry of Finance and the Bank of Japan to actually implement some measures, so as to curb the yen’s high trading rates.

Crude oil

Oil prices rise on China manufacturing index indications

Oil prices gained after a manufacturing index in China indicated that the country’s economic slowdown is easing. It is worth noting that China is the world’s second largest user of crude oil. Oil prices also rose following speculation that US crude oil inventories may fall for the fifth week in a row. The estimate is that crude oil inventories probably fell by 1.5 million barrels. If that is confirmed by a government report, then oil prices are likely to rise even further.

At 4:26 PM Sydney time, oil was trading at $88.56 per barrel at the New York Mercantile Exchange. In London’s ICE Futures Europe Exchange, Brent crude oil for September 2012 settlement was trading at $103.65 per barrel, a gain of 39 US cents.

The oil market is not expected to take any cues from Europe, as the fiscal crisis there remains unsolved. Rather, the markets will look to the US and China to provide the triggers for further upward movement in oil prices.