The USD may further extend its gains against the EUR today; on speculation that growing evidence of a global slowdown will increase the appeal of the U.S currency to traders as a safe-haven.

The Dollar closed at $1.2889 per EUR from $1.3120,
rising over 230 pips, the biggest gain in three weeks. The Dollar was broadly
supported on Thursday as risk aversion came to the fore and optimism rose over the
latest U.S. monetary and fiscal stimulus measures, which pushed the U.S currency
higher.

The greenback also advanced after the Federal Reserve made its announcement about
buying Treasuries to help boost the U.S economy. On Wednesday the Fed kept Interest
Rates near zero as widely expected, and said it was prepared to buy long-term
Treasury debt if that would help improve credit conditions. Moreover, a separate
report revealed sales of new U.S. homes plunged 14.2% last month to a record low,
further dulling the appeal of higher-risk currencies and assets such as stocks and
boosting safe-haven flows into the Dollar. Apparently, bleak U.S. economic data and
falling share prices kept investors wary of risk, even as countries embraced further
monetary and fiscal stimulus to boost their economic growth.

Against the JPY however, the dollar was down 0.7% at 89.73 Yen yesterday. The
greenback’s decline came as a result of the Federal Reserve unwillingness to provide
more information about buying Treasuries, fueling speculation investors will favor
Japan’s currency over the USD. The Dollar and Yen have been viewed as safe-haven
currencies amid the global financial crisis, and both of these currencies often
fluctuate depending on perceived shifts in investors’ tolerance for risk.

* EUR
EUR Falls on Weak Economic Data
The European currency retreated from gains made earlier in the week against its
major counterparts. Against the USD it was down about 2% at $1.2889, after hitting a
session low of $1.2875, and versus the Japanese currency, the EUR was down over 2%
at 115.18 Yen. The EUR currency slipped on comments by European Central Bank (ECB)
President Jean-Claude Trichet, who said that the ECB could cut key Euro-Zone
Interest Rates below the current 2%, in addition to more unconventional measures.

The weak economic figures which came out of the Euro-Zone reversed any significant
gains that the EUR made against the Dollar in recent days. The underlining weakness
in the European economy was data showing that German unemployment posted its biggest
increase in nearly four years in January. In addition, the European Commission said
its index of executive and consumer sentiment declined to a record in January. The
index fell to 68.9, the lowest level since it was started in 1985. Analysts say that
for many investors, the strategy appears to be simple: to avoid risk; which means
funds are flowing out of the EUR and back into the Dollar and the Yen. The slowing
economic growth of the Euro-Zone has prompted investors to repatriate funds from
higher-yielding assets that might cause the EUR to decline further.

Looking ahead to today, there are 2 important economic data releases coming out of
the Euro-Zone. The CPI Flash Estimate and the Unemployment Rate figures are set to
be published at 10.00 GMT. If these figures are better than expected, then the EUR
may reverse some of yesterday’s declines. However, if the figures are in line with
forecasts or worse, then the EUR may make additional losses today vs. the Dollar,
Pound, and Yen. Forex traders are advised to pay attention to GDP figures coming
from the U.S., and Consumer Confidence data coming from Britain later today, as this
may determine the Euro’s strength against the GBP and USD into the middle of next
week.

* JPY
Yen to Rise Further Due to Government Insufficiency
The Japanese Yen may rise further through the end of the country’s fiscal year on
March 31, as exporters buy the currency to hedge revenues, and money managers bring
funds home amid the global slump. Analysts forecast that the market should expect
even further Yen appreciation as the Japanese fiscal year comes to a close, as both
corporate hedging and investor repatriation flows support the currency. The Japanese
currency closed at 89.34 per Dollar from $89.68 yesterday. The Yen has gained 1%
against the greenback this month, following a 23% rally last year. The JPY may
continue to strengthen as investors unwind so-called carry trades, where they
borrowed in the currency to invest in nations where benchmark Interest Rates exceeds
Japan’s 0.1%.

Recently, some important market players have called for more aggressive government
measures to halt the Yen’s rise. It’s important to note that the strong Yen has
significantly hits exporters profits. Even though the world is currently in a deep
recession, it seems the Japanese government’s policies are totally insufficient,
according to many leading industrial leaders. Japan’s Finance Ministry is unlikely
to shield the country’s exporters from a rising currency by ordering the Bank of
Japan to intervene and sell the Yen. Some analysts predict that the structural Yen
appreciation has yet to run its course as there remains scope for investors to
unwind more carry trades, and they believe that JPY will appreciate further versus
the USD, possibly to the 84 Yen within 3 months.

* OIL
Crude Oil Floats on Weak U.S Economy and Strong Dollar
The Crude Oil prices failed to strengthen on Thursday, due to the release of another
round of gloomy U.S. economic data, the world’s top energy consumer. The failure of
Oil to reverse recent losses was also owed to a strong U.S. Dollar in yesterday’s
trading. This came about largely due to reports showing U.S. unemployment rose to a
record peak in mid-January, while new orders for long-lasting manufactured goods
fell for a 5th month. The deepening U.S. economic recession has cut demand for fuel
and contributed to the biggest 4-month buildup in U.S. crude stockpiles since 1990.
Prices for Crude has dropped more than $100 since its peak last summer, ringing
alarm bells for the Organization of Petroleum Exporting Countries (OPEC) nations
dependent on Oil revenues. This has resulted in OPEC cutting output by 4.2 million
barrels per day since September.

Crude Oil prices, however, were little changed yesterday, after settling at $41.56 a
barrel. This was largely due to the fact that OPEC Secretary General Abdullah
al-Badri said that the group would not hesitate to act again if the Oil price
remained low, when speaking at the World Economic Forum in Davos, Switzerland. Oil
producing nations are foresee that Oil will add to this weeks losses by the end of
next weeks trading, as Thursday saw a potential U.S. Oil refiner strike and traders
are speculating that a potential strike could affect supplies of refined products.

Technical News
* EUR/USD
The price of this pair appears to be floating in the over-sold territory on the
hourly chart’s RSI indicating an upward correction might be imminent. The upward
direction on the 4-hour chart’s Momentum oscillator also supports this notion. Going
long with tight stops might be the right choice today.

* GBP/USD
The typical range trading on the 4 hour chart continues. Both the hourly RSI and
Slow Stochastic are floating in neutral territory. However, there is a fresh bearish
cross forming on the daily chart’s Slow Stochastic indicating a bearish correction
might take place in the nearest future. In that case traders are advised to swing in
after the breach takes place.

* USD/JPY
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.

* USD/CHF
The daily chart is showing mixed signals with its Slow Stochastic fluctuating at the
neutral territory. However, the Hourly Chart’s RSI is already floating in the
overbought territory indicating that a bearish correction might take place in the
nearest future. When the downwards breach occurs, going short with tight stops
appears to be preferable strategy.

The Wild Card
* Gold
The bullish trend is loosing its steam and the price is consolidating around the
$906 for an ounce. The daily chart’s RSI is floating in an overbought territory
suggesting that a recent upwards trend is loosing steam and a bearish correction is
impending. This might be a good opportunity for
forex traders to enter the trend at a very early stage.