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Tuesday, 29 Sep 2009
Bearish Sentiment Persists in Trading
The USD and JPY maintain their rallies over their riskier counterparts as traders try to decipher officials' comments regarding exit strategies and interest rate hikes for the near future. Today sees the first day of important economic news form the U.S since the G20 summit, which will likely cause volatility for the Dollar and set its course for the week.
USD - USD Advance Continues; JPY Still Outpacing Dollar
The USD has continued its advance from last Friday and currently trades near the 1.4620 level against the EUR, and near the 1.5900 mark versus the British Pound. The only currency to gain against the greenback so far has been the Japanese Yen, which saw an 8-month low of 88.22 at the start of this week's trading. The USD/JPY is currently trading just below the 90.0 price level.
Rising optimism in the American economy was fueled by the recent rise in futures on the stock market, which highlights the growing tendency to buy American in times of crisis. The only currency, as mentioned earlier, which has outpaced the Dollar has been the JPY. Statements made by Japanese Finance Minister Fujii have many traders wondering if Japan will follow through on its promise not to intervene in its currency's recent appreciation. If it chooses not to, the target for the USD/JPY may be close to 82.00 in the coming weeks, according to a number of analysts.
The most important event to watch today, however, will be the Conference Board's (CB) release of their Consumer Confidence report at 14:00 GMT. As the trend is currently pointing towards rising optimism in the US, there is the potential for a bearish USD session following such positive news. Risk appetite has been on the flutter, and a boost of this kind, coupled with the confidence in Europe associated with Angela Merkel's recent victory in Germany, could return investors to the riskier currencies such as the EUR, and even the Pacific and Scandinavian currencies.
EUR - EUR Sliding Against Rising Safe-Havens; Near Parity with GBP
While the electoral victory for Angela Merkel's Christian Democratic Union party in Germany had the EUR on a short bullish run, the momentum has apparently shifted back in favor of the safer currencies such as the Dollar and Yen. The EUR/USD dropped as low as 1.4563 in yesterday's early morning hours, before correcting slightly back towards 1.4620. The EUR continues to outpace the Pound, which is getting closer to parity with each passing day.
The currency markets appear to be awaiting the string of important US employment data due this week before jumping into a clear direction. In such times of uncertainty, the traditional safe-havens begin gaining ground, as many traders have witnessed these past few days with the USD and JPY. Risk appetite has started waning as last week's housing data from the US kicked off a retreat from higher yielding currencies. The slump in commodity prices also put downward pressure on the riskier European currencies.
Today's data releases are aimed more at the British Pound and US Dollar than anything else, so the EUR will likely take a passenger-side role in today's market. Traders should not be deceived, however, as no news in such uncertain times can often appear as good news. Current trends for the day do not appear to be threatened by today's releases, and traders should feel safe to jump into current trends but stay safe by getting out by day's end. Tomorrow kicks off the hectic forex schedule regarding the first week of a new month's employment reports from the US.
JPY - Finance Minister Fujii's Statements Implicate Future Yen Movements
Many traders are anxious to see if Japanese Finance Minister Hirohisa Fujii can follow through on his commitment to keep the Bank of Japan (BOJ) out of any interventionist policies on the recently rising Yen. In official statements, he declared that the recent surge in the island currency is a natural fluctuation of the market, yet made a remark about the one-sided nature of the rise to a smaller, more select audience.
Few can doubt the Yen's recent rise, hitting such marks as 88.22 against the USD, an 8-month high, and 129.82 versus the EUR, a price not seen since mid-July. But Japan's economy is heavily dependent on exports, which depend on a weak currency. With Japan being one of the worst-hit economies in the recent recession, a non-interventionist stance on this issue appears contrary to Japan's needs. However, if Fujii can follow through on his promise, then the Yen may hit as high as 82.00 against the USD, according to some analysts.
Crude Oil - Oil Prices See Minor Upward Correction, but Still Bearish
Many traders were not expecting much pressure to be on Crude Oil prices following the flare-up of 2 oil refineries in California, and the test firing of mid-range missiles in Iran, over the weekend, but the recent upward movement has left few inspired. Many analysts now claim that Crude Oil prices may indeed be in for more slumps as there appears to be little demand in the market to justify prices over $68 a barrel.
With prices hovering just under $67, this week's prominent employment data from the US - the Non-Farm Payroll report - may carry the biggest impact on oil prices. Last week's rise in inventories helped lower oil prices in the short-term, but longer-term implications may be carried by the growth, or contraction, of the world's largest energy consumer. It appears as if USD trends are going to affect Crude prices more this week than the few weeks prior and any indication of a continuation for USD strength may help lower the price of oil towards $60 a barrel in the near future.
The pair appears to be trading within its recent range on the hourly charts; however, a bullish cross is forming on the daily Slow Stochastic as well as the MACD chart. Going long for the day may be a good option.
The pair is showing several mixed signals. A bearish cross is forming on the hourly, 2 and 4 hour Slow Stochastic as well as a breach of the upper Bollinger Band on the hourly chart. Furthermore, both the hourly and 2 hour RSI are floating in the overbought territory. The 4 hour MACD, however, is showing a fresh bullish cross forming, as well as the daily Slow Stochastic with the daily RSI floating in the oversold area. Going long with tight stops may be a good choice for today.
The 2 and 4 hour Slow Stochastic shows a fresh bearish cross forming. A bearish cross is also apparent on the 4 hour MACD while the hourly RSI is floating near the overbought territory. Going short for today may be advised.
The pair is floating in neutral territory on the hourly charts. The daily chart, however, the daily chart is showing a bearish correction on the MACD chart as well as an impending bearish cross on the Slow Stochastic. Going short for today may be advised.
The Wild Card
A bearish cross is evident on the hourly, 2 and 4 hour Slow Stochastic charts, with a bearish cross also evident on the 4 hour MACD. Furthermore, the hourly and 2 hour RSI is floating in the overbought territory. Forex traders are advised to go short for today.
|09:15||EUR||Spanish Manufacturing PMI||54.5||54.2||-|
|09:45||EUR||Italian Manufacturing PMI||54.1||54.6||-|
|09:50||EUR||French Manufacturing PMI (p)||49.6||49.6||-|
|09:55||EUR||German Manufacturing PMI||51.5||51.5||-|
|10:00||EUR||Final Manufacturing PMI||52.2||52.2||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|15:45||USD||Final Manufacturing PMI||53.8||53.8||-|
|16:00||USD||ISM Manufacturing PMI||53.5||53.6||-|
|16:00||USD||ISM Manufacturing Prices||49.5||49.5||-|
|16:50||USD||FOMC Member Powell Speaks||-||-||-|
|03:00||NZD||ANZ Commodity Prices||m/m||-3.1%||-||-|
|03:30||JPY||Average Cash Earnings||y/y||0.7%||0.9%||-|