The U.S. dollar is facing tough resistance

As the credit crunch is working its way into the economic system, from banks to mortgages and finally to consumers, the Federal Reserve is watching events carefully. Rates should remain stable for now, but they may come downward next year with inflation moving back from the highs. The U.S. dollar, in the mean time, is facing a rough resistance and could turn down over the next days, although the short and medium term tendency stays bullish.

The Fed to maintain rates stable once again

The financial slowdown is rapidly expanding internationally, whereas the United States maintains a spirited improvement over those nations that have not acted preventively to the crises. Will it last? The courageous judgment of the reserves department to take over Fannie Mae and Freddie Mac gave a number of assistance to the depositors. Rates chop down and spread lessened in the credit market. Nonetheless, two major questions wait unanswered. How greatly will it cost to taxpayers? Who will disburse for it? Only moment will tell. In realism, customer expenses might go back in the third sector, as the profits originated by the tax rebate will fade away. In August retail sales fell 0.3 percent (+0.2 percent expected) after diminishing 0.5 percent in month of July, in spite of automobile sales jumping back (+1.9 percent) from July’s lows.

The Federal Reserve will maintain rates stable at 2.00 percent for now; however it possibly will move them downward once more, if inflation comes back from the peak reached in the center of the year. In August, the PPI fell 0.9 percent (-0.4 percent expected) after mounting 1.2 percent in July. Yearly, the PPI is at 9.6 percent from 9.8 percent and core PPI is at 3.6 percent from 3.5 percent. In realism, the financial system is not out of difficulty yet. The monetary sector is unstable with main institution, like Lehman Brothers, putting case for insolvency, whereas the housing sector is yet in a bearish market. In July, awaiting homes enthused down 3.2 percent month after month to 86.5 from 89.4. In accumulation, the trade shortfall is still at plethoric levels. In July, the US Dollar improved from 58.5 to 62.2 billion in June, as imported outnumbered exports. Imports in Petroleum rose almost 14 percent, since the standard price of imported petroleum products topped 120 dollar a barrel. A worldwide economic reduction and a strengthen dollar might weaken exports over the coming months, albeit the worldwide trade be supposed to stay one of the cornerstone of the U.S. financial system.

EURO and US Dollar meet strong hold up level

Euro and US Dollar is ruling a good hold up. It exchanged letters to the trend line of the previous 6 years and sold circumstances are developing. As a result, the bounce back from 1.39 should carry on, also considering the strapping divergence connecting the speculators and the commercial that emerge from the COT statistics report. The first positive aspect object is 1.450, finally 1.4650. However, the short and medium term tendencies stay on the negative aspect. In fact, at some stage in the past two bearish markets, 1972-1980 and 1985-1995, upside correction in dollar lasted for a propos 15 percent to 20 percent from the lows.

GBP and USD is bouncy from the lows at 1.74 and the prices might go back over to 1.80, ultimately to 1.821/.8450. The short and medium term tendency stays bearish; however, more consolidation is needed for inferior prices.

USD and JPY is once more challenging the significant hold up line at 105.00. A progress under 103.90 would mark 103.00, 102.50. A running away failure would win the price rear once more to 108.00/108.50, finally 109.70.

USD and CAD has touched the significant resistance at 107.00/107.50. This stage is at the crossroads of the superior Bollinger group and a long-term trend line. It desires a strapping drive to be out of order, bearing in mind the deviation between the existing price and the risk indicator. As an effect, the market can once more come back to 105, 104.20, finally 102.50. A move back and forth above 108.70 will in its place break the strapping resistance and lift USD/CAD to 109.50, 110.20.