The Forex Daily Digest – August 25, 2009

The dollar strengthened against major world currencies, recovering from recent declines after signs this past weekend that most of the world’s key central banks backed a policy of keeping interest rates low for the foreseeable future even as the global economy appears to be mending. Analysts continue to expect that signs of strength in the U.S. economy will eventually be read as a positive for the USD, ending a contrary connection since the credit crisis began when downbeat news triggered safe-haven buying of the dollar.

Gold futures overturned earlier gains, declining from a one-week high as the USD improved which decreased gold's charm as a hedge against a weaker currency. Also affecting gold is regulatory data which shows a lessening in buying positions held by gold speculators.

Oil prices hit a 10-month high near $75 a barrel yesterday, part of a broad global rally in commodities and equities markets driven by prospects for an economic recovery. Supplying hope that the recession is abating, reports also showed new industrial orders in the euro zone rebounding in June. Plus, U.S. economic activity improved again in July. A string of positive economic reports from a number of other countries and improving stock markets helped lift oil prices by 9.5 percent last week. Crude is up more than 65 percent in 2009 and analysts think that it may head even higher still.

The GBP fell to an 11-week low against the EUR over speculation increased asset purchases by the Bank of England will depress yields on gilts, bonds issued by the U.K., making the U.K.’s assets less attractive to foreign investors. The currency dropped against all of the most-actively traded currencies as U.K. two-year gilts yielded near the least relative to equivalent German notes since January.

And the CAD reached its strongest level in more than two weeks after a Canadian government report showed the nation’s retail sales increased in June five times as fast as economists expected. Sales at Canadian retailers increased 1 percent in June after increasing a revised 1.1 percent the previous month.

U.S. economic reports to expect today are the ICSC- Goldman Store Sales, the S&P/Case Schiller Home Price Index for June and Consumer Confidence for August.

Earnings scheduled for release today include Bank Of Montreal, Staples, Corinthian Colleges, Sanderson Farms, and Borders Group.

There’s never a lack of news affecting the Foreign Currency markets around the world. Whether it’s fundamental international events of the day or the economic posturing of the major world capitals; the Forex is constantly being affected by various actions. Watch your charts, listen to the trading professionals on JDfn and then make your choices. This is an exciting time; make sure you are prepared when the charts start to move.

Happy Trading,

James Dicks