The U.S. currency continues to strengthen given the recent demand for riskier currencies. Falls in equity markets have driven traders to reduce their positions in riskier, higher yielding currencies. Many of the uncertainties in the currency markets are due to earnings season on Wall Street.

This week brings quarterly results from a number of financial companies, including
U.S banks Citigroup and JP Morgan Chase. And the markets are waiting for the U.S.
corporate earnings season to get into full swing. Some market players think this
week’s reports could show signs that the worst of the financial crisis is over,
which means that the USD may still surpass its major counterparts before the end of
this trading week.

Last week, the USD rose against the Yen, buoyed by a rally in U.S. shares after
positive earnings guidance from U.S. bank Wells Fargo. Analysts’ expecting that if
U.S. earnings results show signs that the U.S. is pulling away from the worst of the
economic downturn, risk appetite is expected to grow, putting more pressure on the
Yen and also providing a lift to the Dollar.

* EUR
The European Currency Rebounds against the Dollar
In yesterday’s trading the European currency extended its gains vs. the greenback,
rising 1.4% to $1.3363. The British pound also took more ground, rising 1.3% to
$1.4842. Against the Japanese yen however, the EUR declined the most in a week
before Germany’s Federal Statistics Office releases its report on wholesale prices
Wednesday, supporting the case for the region’s central bank to cut Interest Rates.
The price figure is expected to slump 7.1% in March from a year earlier.

However, Europe’s single currency may weaken during the next few days on concern
European Central Bank (ECB) officials this week will signal they may keep lowering
rates to support growth. ECB President Jean-Claude Trichet already said last week
the central bank is studying unorthodox ways of boosting the European economy. Some
in the market continue to hold the view that the EUR remains laden by expectations
of another Rate cut and the prospect of unconventional monetary easing, and the EUR
is likely to halt its gains versus the Dollar, in the nearest future.

* JPY
Carry Trade has is Again a Trader’s Favorite
The Yen has begun to strengthen from a 5-month low versus the Dollar last week as
fears of a prolonged recession are driving traders to the Yen. The currency is often
seen as safe haven plays in the forex market. Traders may have been a bit premature
in driving up higher yielding currencies as global equity markets went on a tear the
past month and a half. There has been very little concrete evidence of a sustained
economic turnaround. This in turn has once again provided a boost to the Yen as a
safe haven currency.

The return of the carry trade is again becoming widely popular. Japanese Interest
rates once again are in the basement and there are other nations providing
significantly higher rates of returns. Due to the weak Yen, many traders have jumped
back into this type of strategy and it has provided healthy returns the past two
months. This could be a signal of the global economy returning to the previous
economic cycle.

* Oil
Crude Oil Inventories to be Released Today
The commodity is still recovering from its 5% plunge in price after the
International Energy Agency slashed its forecast for Crude demand in 2009. The
Agency predicts a drop of 2.8% in global demand for Oil. Crude Oil has not been able
to steadily trade above the $51 price level, though Oil has risen over 10% this
year. It appears traders are waiting for signs of a significant economic recovery.
Many analysts have claimed a bottom has been reached in Crude Oil trading, though
that remains to be seen. A fair value for Crude Oil may be $45.

Today the market is anticipating the release of the weekly U.S. Crude Oil
inventories report from the Energy Information Agency. Traders are expecting Crude
stocks to rise by 2 million barrels this past week. A reading above this mark may
help to send the price of Crude lower, perhaps below the $50 mark once again.

Technical News
* EUR/USD
The typical range trading on the 4-hour chart continues. Both the daily RSI and Slow
Stochastic are floating in neutral territory. However, the pair currently sits near
the bottom border of the hourly chart’s RSI, suggesting an upward correction may be
imminent. When the upwards breach occurs, going long with tight stops appears to be
preferable strategy.

* GBP/USD
The price of this pair appears to be floating in the over-bought territory on the
daily chart’s RSI indicating a downward correction may be imminent. The downward
direction on the 4-hour chart’s Momentum oscillator also supports this notion. When
the downwards breach occurs, going short with tight stops appears to be preferable
strategy.

* USD/JPY
The daily chart is showing mixed signals with its RSI fluctuating at the neutral
territory. However, the 4-hour chart’s RSI is already floating in the oversold
territory indicating that a bullish correction might take place in the nearest
future. When the upwards breach occurs, going long with tight stops appears to be
preferable strategy.

* USD/CHF
The pair has been range-trading for a while now, with no specific direction. The
Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on
the 4 hour chart do not provide a clear direction as well. Waiting for a clearer
sign on the hourlies might be a good strategy today.

The Wild Card
* Crude Oil
Oil prices are once again dropping, and a barrel of oil is currently traded around
$49.26. And now, all oscillators on the 4-hour chart are giving bullish signals,
indicating that oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.

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