The USD/JPY pulled back to 91.77 after touching a high at 92.09

Varengold Bank Research Team from Varengold Wertpapierhandelsbank AG at 02/19/10

Welcome to Varengold’s Daily FX Report. Today, we will be focused on the USD after the Federal Reserve’s decision yesterday has boosted the nations’ money against a basket of major currencies. We hope you had a great week and wish you a nice trading day.

The USD reached a nine-month peak versus the EUR after the Federal Reserve increased the discount rate charged to banks for direct loans for the first time since more than three years. The AUD and the NZD fell both for a third day versus the USD on concern that higher U.S. borrowing costs will weaken the yield advantage of the South Pacific nation’s assets. The Fed increased its discount rate to 0.75 percent from 0.50 percent. Gains in the USD were tempered after Fed Policy makers boosted speculation that the central bank will raise interest rates this year. The President of Fed Bank of St. Louis James Bullard said “the financial markets’ view that borrowing costs will increase later this year is overblown.” The EUR/USD reached its low at 1.3444, which is the lowest peak since May 18th of 2009. The AUD/USD fell to a low at 0.8888 while the NZD/USD reached a low at 0.6940. The only major currency that did not fell against the USD is the JPY. After the Fed’s discount-rate change pushed Asian stocks lower having a drop of 1.8 percent in the MSCI Asia Pacific Index, the USD/JPY pulled back to 91.77 after touching a high at 92.09. The second most-traded pair is trading near unchanged at the moment.

During the past ten days, the AUD/USD has been moving inside a bullish trend channel. On February 16th, the market touched the upper line of the channel before pulling back and cross the 0.8920 support level, which is outside of the bullish channel. As you can see the MACD also signals a bearish movement. That may be a sign that the market could fall towards the lower support levels around 0.8790 and 0.8600.

After crossing the mid-term bearish trend channel, the USD/JPY pulled back from its resistance level around 93.90 before trading below the resistance level around 91.80. It depends, whether the market breaks this resistance level or not. If yes, we may see more gains towards the red resistance around 93.90. If not, we probably could see a market recovery in direction to its support level around 88.20.