Forex Trading TV Video Blog

After taking a beating last week, the USD is beginning to show some small signs of recovery. Starting the week clouded by uncertainty and straining under market anxiety, the USD sustained blow after blow from the impact of deliberations about a U.S. economic rescue plan, and worse-than-forecasted economic indicators. The verdict is almost out as news from Washington is indicating that a breakthrough was made over the weekend and the bailout package is almost set to be passed into law, giving the U.S. Treasury more authority over the financial workings of domestic banks and financial institutions and, in theory, stabilizing the recent financial crisis.

Generating less volatility than expected, the market last week was characterized more by lack of direction than anything else, as analysts struggled to predict the movement of the major currencies. The $700 billion rescue plan, the largest financial bailout since the Great Depression, if enacted, could put an end to this currency flotation and send traders en masse back to regular trading. Fed Chairman Bernanke and Treasury Secretary Paulson are both pushing Congress to pass this legislation as quickly as possible. But is this bailout package a blessing or a curse? With the potential to correct the economic woes of today’s market, it also pushes the U.S. financial system closer to socialism and farther away from the capitalist economy which gave it its most powerful boost following the Great Depression and World War II. Analysts are divided about the short- and long-term costs and benefits of this package, but only time will tell which side was right.

Looking at the expectations for today, traders can anticipate less volatility with the USD as few major indicators are set to be released and the bailout package is still being discussed. Unless a major decision is passed regarding the bailout, the USD is expected to remain rather stable versus its currency counterparts. Looking at the rest of the week, traders may look for larger amounts of volatility come Wednesday as ADP Non-Farm Payrolls are expected, followed by the actual Non-Farm Payrolls figure to be released Friday. These indicators typically generate high trading volume, as well as market volatility, as traders anticipate their impact on the market. Traders should start the week looking to set up beneficial positions for what could be a big week in the Forex market.

The U.S. economic rescue plan of Bernanke and Paulson, as well as the Existing Home Sales figure, has caused frenzy in the market recently. Yesterday, the greenback underwent a volatile trading session against most of its currency counterparts. Starting the early trading sessions off rather flat, the USD’s value suddenly dropped following the 14:00 GMT announcement of the Existing Home Sales indicator as it came out worse than forecasted. Correcting this move, however, was the jump in value directly after Paulson and Bernanke’s testimonies late yesterday afternoon. It finished the day around the 1.4670 level against the EUR, slightly stronger than it was the day before.

The trading day began with small downtrends and low volatility for the USD as investors realized that the U.S leadership is having second thoughts regarding the financial bailout plan. Yesterday, Federal Reserve Board Chairman Ben Bernanke testified to the Congressional Joint Economic Committee stating that global financial markets were under extraordinary stress and threatening an already weak U.S. economy. He also testified that lenders are still more likely to remain cautious about extending credits to households and businesses, and described a gloomy economic outlook for the near future. However, it seems that Bernanke’s decision to urge Congress to confirm the rescue plan was enough to trigger an uptrend for the USD later in the afternoon. This uptrend was strengthened by a continuation of the steady decline in Crude Oil prices, which fell to $105 a barrel after spiking to as high as $109 after the USD’s early-afternoon weakness.

As for today, a batch of data is expected from the U.S. economy. So long as no crucial decisions regarding the bailout plan are made, these figures are expected to set the tone for the USD’s pairs and crosses. Special attention should be given to the New Home Sales survey because if it delivers unfavorable figures later today, it will validate a problematic landscape in the U.S. housing sector, and the USD is likely to weaken as a result. Also today, the Core Durable Goods Orders and Unemployment Claims are scheduled which should also have an impact on the market.