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Friday, 20 Mar 2009
Bernanke Speech to Impact Dollar
Today, U.S. Federal Reserve Chairman Ben Bernanke is scheduled to speak at 16:00 GMT. Whatever the content, the Dollar is likely to record a great amount of volatility as a result of Bernanke's speech.
USD - Dollars Tumbles on Increasing Money Supply
The has continued its weekly demise this week , as it reached close to a two month low against the EUR on Thursday. The greenback also saw significant downtrends against the GBP and the JPY as well. The Federal Reserve's decision to expand the supply of Dollars by buying government debt, which was announced 2 days ago, is continuing to severely damage the U.S currency. Yesterday the USD lost a staggering 200 pips against the EUR to close at 1.3659. Against the JPY, the Dollar dropped a staggering 150 pips or 1.5% to close at 94.55. The Dollar's losses against the Pound were notable, as the greenback lost nearly 300 pips on Thursday to close at the 1.4489 level.
In general it can be said that the Federal Reserve's decision has had two different effects, both weakening the Dollar. Firstly, the Fed's actions were received quite enthusiastically among analysts across the world, which had an instant reaction among investors that now have more confidence that the U.S will manage to pull out of the current recession. Thus, as was proven recently, good news for the U.S economy signifies even better news for the rest of the western world, as these countries rely greatly on U.S consumption. The second effect is, as was described above, is a process in which the supply of Dollars increases, and thus makes the USD more available and cheaper in the long-term.
The other important factor that added to the Dollar's misfortune yesterday was the release of U.S Unemployment Claims data. Despite being slightly better-than-expected figures of 646,000 individuals filed for unemployment insurance during the past week, as opposed to the expected 652,000 individuals, these figures are still very disappointing. The next publications of this indicator could be the leading measurement of the U.S. economy's condition, and prospects for recovery. Traders are advised to follow it very carefully when it is published at 12:30 GMT next Thursday.
Looking ahead to today, the only significant event on the U.S calendar is the speech of the Federal Reserve Chairman Ben Bernanke, which is expected to take place at 16:00 GMT. After the reaction to Bernanke's announcement from 2 days ago, traders cannot afford to overlook his speech today, as it could impact the market dramatically once again. The result of the speech may incite a modest correction to the last days' trends in USD weakness.
EUR - EUR Soars vs. the Dollar
The EUR continued its bullish rally yesterday. The EUR saw its most dominant uptrend against the USD, as the EUR/USD reached over the 1.37 level, to eventually close up 200 pips at the 1.3659 level. Against the JPY, however, it finished yesterday's trading session virtually unchanged at 129.15, as the Yen continues to uphold its value. The EUR did gain over 50 pips vs. the British Pound to close at 0.9423, as the EUR/GBP pair heads for parity yet again.
It appears that the European Central Bank's (ECB) reluctance to match the Federal Reserve plan to rescue the Euro-Zone economy by buying government's debt is one of the main factors that have led to the European currency towards such high ranks against the leading currencies. However, it is widely accepted that the ECB won't be able to sustain the public demand for a rescue plan, and will soon launch a plan of its own. The plan will probably be more modest than the American one, but could have similar effects on the European currency.
A significant economic rescue plan for the Euro-Zone economy may lead to the current bullish trend in the EUR reaching its end much sooner than expected. Traders should stay extremely alert in the coming days and weeks, as an opportunity to profit from a reversal in the EUR's fortunes, spurred by the case that the ECB will indeed announce its desire to implement a rescue plan might be a rare opportunity to catch a trend in its first steps. Therefore, forex traders may be able to make large profits by employing this trading strategy.
As for today, a batch of data is expected from the Euro-Zone. The most significant indicators will be the German Producer Price Index at 07:00 GMT, which is expected to drop by 0.2% as opposed to the previous month. The European Industrial Production figures at 10:00 GMT is expected to drop by 3.8% from the last publication. If forecasts will indeed come true, traders might witness a relatively bearish trading day for the EUR. However, it is advised to follow economic news coming from the U.S., as this may change the course of trends today
JPY - Yen Climbs Against the Dollar
The Yen soared against the Dollar yesterday, mainly as a result of the weakening USD, and not as a result of high demand for JPY. The Dollar's weakness was largely owed to the Federal Reserve's decision to keep Interest Rates near 0 at 0.25%, and announcing a mass buying of debt, by dramatically increasing the Dollar supply. The Yen's strength is also owed to the Bank of Japan's (BoJ) extremely pessimistic line by stating that Japan's economic conditions have deteriorated significantly, and are likely to keep worsening. In other times, such a saying would have generated a massive bearish trend for the JPY, but as of late, it appears that all the currencies will appreciate against the Dollar without any relevance to their local economic conditions. In the long-term, if the BoJ will continue with its desire to see a weak JPY, the Yen is very likely to depreciate over time, and traders should take this under consideration.
The JPY saw mixed results against the major currencies in yesterdays trading. The JPY rose against the USD by a dramatic 150 pips or 1.5%, as the USD/JPY cross reached as low as the 93.53 level, before finishing at the 94.55. The Yen lost 60 pips against the GBP to close at 137.01, reversing some of the GBP's losses against the Japanese currency. The EUR/JPY currency cross finished Thursday's trading session virtually unchanged to close at 129.15, as both currencies made significant gains against the greenback. As for today, Japanese banks will be closed in observance of Vernal Equinox Day. Traders are advised to follow the economic news coming from the leading regions, such as the U.S., Euro-Zone and Britain.
Crude Oil - Crude Oil Hits the $52 Level
Crude Oil rose to over $52 yesterday, before closing at $51.39, an increase of 150 pips or 3%. This marks a massive weakly gain for Crude Oil of about 13%. This is largely owed to signals of a possible economic recovery from the U.S. It appears that OPEC's unusual high level of discipline, is one of the other reasons for the high value of Crude Oil. OPEC managed to keep up to their estimations of the right amount of barrels produced per day, and as a result managed to halt the ongoing erosion in Oil prices.
High Crude prices are also owed to the significant drop in the Dollar. Thus Crude Oil is valued in Dollars, and as such, any downtrend of the USD is likely to generate a bullish trend for Oil. As for today, traders are advised to follow economic data, especially from the U.S, and even more importantly, follow the USD's movements against the leading currencies, in order to predict Oil's trend for today. If the Dollar will continue to slide, Crude Oil might reach $55 a barrel before the week ends.
The price of this pair appears to be floating in the over-bought territory on the daily chart's RSI, indicating a downward correction may be imminent. The downward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.4460 level. A bearish cross on 4-hour chart's Slow Stochastic implies that a downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The 4-hour chart's is showing that the pair is still in the bearish configuration. However, the RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The hourlies chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour Chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The Wild Card
Gold prices rose significantly in the last two days and peaked at $956 for an ounce. However, there is a bearish cross on the 4- hour chart Slow Stochastic 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.
|23:30||JPY||Tokyo Core CPI||y/y||2.3%||2.2%||-|
|23:30||JPY||National Core CPI||y/y||2.7%||2.6%||-|
|23:50||JPY||Prelim Industrial Production||m/m||-0.5%||1.3%||-|
|00:05||GBP||GfK Consumer Confidence||-4||-2||-|
|00:30||AUD||Private Sector Credit||m/m||0.5%||0.5%||-|
|07:00||EUR||German Retail Sales||m/m||1.0%||0.4%||-|
|07:45||EUR||French Consumer Spending||m/m||0.4%||0.4%||-|
|08:00||CHF||KOF Economic Barometer||98.7||94.8||-|
|08:00||EUR||Spanish Flash CPI||y/y||-1.1%||-1.5%||-|
|08:00||EUR||Spanish Flash GDP||q/q||0.5%||0.5%||-|
|09:00||EUR||Italian Monthly Unemployment Rate||13.4%||13.4%||-|
|09:30||GBP||Net Lending to Individuals m/m||3.3B||3.2B||-|
|09:30||GBP||M4 Money Supply||m/m||0.0%||0.5%||-|