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Monday, 27 Oct 2008
An Interesting Week for Trading
The USD may in fact lose its direction this week from the opposing forces affecting it. The EUR may see a reversal emerge from world data worse than its own, and the Japanese economic slowdown is cutting into the value of the JPY. This week, traders should expect some intense volatility in the market as these elements play off one another and generate one of the more interesting weeks for investors. Don't miss out!
USD - Indicators Play Tug-o-War with USD
Over the weekend the USD became entangled in a push and pull movement emerging as a result of contradicting data. On one hand the USD saw bullishness because of the positive figure released for Existing Home Sales last Friday. On the other hand, this weekend revealed that U.S. GDP is down 0.5% from last quarter, a strong indicator of a recession and subsequent devaluing of the USD. As an impact of this contraction in the nation's economy, analysts are now forecasting the Fed to cut Interest Rates once more, which will then boost the value of the greenback.
Dipping below 1.25 against the EUR last week, the Dollar has only moved a small amount since the opening of this week's market. This price flotation arose from the positive and negative economic data emanating from the United States' financial and housing sectors. The forecast for today's New Home Sales figure is set to be lower than its last figure and if true will indicate a further damaged housing sector.
The prediction for a cut to Interest Rates is an indicator of two factors. First, it shows the Fed is willing to take the necessary steps to keep liquidity high, as well as continue to allow the market to be flooded with cash until it regains some of its vitality. Second, it illustrates the weakness the U.S. economy is facing. If economic growth were taking place, rate cuts wouldn't be necessary. Since they are becoming more of a necessity, it is safe to say that this is because of the weakness the Fed sees in the market and the national economy. Generally speaking, this is not a good thing as it spells recession quite clearly.
Looking ahead, every day this week will witness the release of a major economic indicator. Starting with New Home Sales and Consumer Confidence today and tomorrow, respectively, and ending the week with the Federal Funds Rate and Advanced GDP on Wednesday and Thursday. This will be one of the more important weeks of the year for traders to watch the news and follow the market closely. Some major price shifts are in the making!
EUR - Finally Some Good News Reaches Europe
With the Ukraine and Hungary receiving aid to help stave off financial collapse, the Euro-Zone is making up some of its losses at last. However, these corrections don't appear to be developing into long-term trends. The EUR is merely buoyed against its currency counterparts as it bobs up and down in the market without any clear direction. Some analysts would call this a bad thing, but it can't be worse than the plummeting in value it experienced these past weeks. Any move that isn't bearish for the EUR is a good thing at this point.
The EUR has gone through some tough times lately and, unfortunately, they are not over yet. Germany is set to lead this week's economic releases and, to belabor the point further; almost every indicator to be released by the Euro-Zone's largest economy is forecast to be lower than its last figure. The positive aspect of this information is that the rest of the world's economic news may in fact boost the EUR into a reversal from last week's trends.
Important to remember this week is that the EUR is expecting negative news releases to arrive one after the other, but this news does not carry as much weight as the news expected from the rest of the world, particularly the U.S. As a result, traders may in fact see a small reversal from the EUR over the next few days, but should not anticipate this reversal to last very long. Get in on the upward movement whenever it starts but watch it closely for any changes as they may come quickly, and without warning. This is a great week to be trading!
JPY - JPY Running out of Steam
Japan recently stated that it would allow for up to 10 trillion yen to be injected into its banks. The initial amount of this rescue package was just 2 trillion yen. The reason for the increase is that the recent financial turmoil and housing crisis has dampened the economy to a point where 2 trillion yen simply would not do the job to fix the anticipated problems.
After climbing as high as 91.80 versus the USD last week, the JPY has started a slight correction to its recent bullish run and now stands close to the 94.00 mark. As Japan's economy begins to feel the effects of the global recession, its currency is not predicted to gain as much as it has in recent weeks, and will likely see a stronger correction in the near future.
OIL - No End in Sight for Crude Oil's Bearish Run
Taking one look at the anticipated production cuts, the price of Crude Oil turned its back and continued its descent. This move came after only a short period of hesitation at the end of last week. Recessionary fears and worsening economic indicators are driving demand for Crude Oil lower and lower lately.
Traders witnessed a golden opportunity these past few weeks as the price of Crude Oil still had not ceased its month-long bearish run at the end of last week's trading sessions. Today's early trading sessions don't appear to be any different either. Generally good advice for those trading Crude Oil in today's market: taking a sell position might be wise.
The pair crossed the key psychological level of 1.2500 for the first time since last year, further demonstrating how strong the current downtrend is. On the daily chart, the pair is still floating beneath the Bollinger Band's lower border, indicating that the pair might extend its bearish move. Going short with tight stops might be the right choice today.
The Cable is in the middle of a very intensive downtrend that started a week ago and shows great momentum that on a bigger scale appears to have more room to run. Currently, all oscillators on the hourly chart are pointing down and it seems that going short will be the right choice today.
There is a very accurate bearish channel forming on the daily chart as the pair is now floating in the middle of it. Currently, as all oscillators on the daily chart are pointing down, it seems that the downtrend will extend. Going short might be a good strategy today.
The daily chart is showing that the pair is still in the bullish configuration; however, the RSI is already floating in the overbought territory. On the contrary, the hourly's and the 4-hour chart's Slow Stochastic are both showing a bearish cross. It appears that the possible next move might be a bearish one. In that case traders are advised to swing in after the break.
The Wild Card
There is still a bearish configuration on the daily chart, indicating that the momentum is still down. The Slow Stochastic flows high supporting the notion that there is still room to run for this trend. In the shorter time frame there is a bullish cross forming on the hourlies indicates that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a currently bearish trend.
|15:55||USD||Revised UoM Consumer Sentiment||89.4||90.2||88.8|
|15:55||USD||Revised UoM Inflation Expectations||2.6%||2.8%|
|16:00||USD||New Home Sales||467K||471K||458K|
|16:00||USD||Pending Home Sales||m/m||0.3%||0.9%||-1.1%|
|16:30||USD||Crude Oil Inventories||2.6M||0.4M||1.9M|
|18:00||USD||Natural Gas Storage||-17B||-|
|00:00||AUD||HIA New Home Sales||0.0%||-||-|
|00:00||EUR||German Prelim CPI||m/m||-0.3%||0.0%||-|
|00:00||EUR||Italian 10-y Bond Auction||2.44|1.5||-||-|
|01:30||AUD||Private Capital Expenditure||q/q||1.1%||-1.7%||-|
|09:00||EUR||Spanish Flash CPI||y/y||-0.1%||-0.3%||-|
|09:55||EUR||German Unemployment Change||-22K||-1K||-|
|10:00||EUR||M3 Money Supply||y/y||2.5%||2.6%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.5%||12.4%||-|
|13:00||EUR||GfK German Consumer Climate||8.5||8.6||-|