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Wednesday, 17 Jun 2009
British Pound May Dominate Today's Market
As the USD shows unclear signals about where it is heading, and the EUR appears to be following the lead of the greenback, the market's primary currencies seem to be confusing the bulk of forex traders. On the other hand, the British Pound has shown strong signs of life and Britain is scheduled to release significant economic data today which may cause the GBP to be the main subject of today's trading.
USD - USD Erratic from Mixed Signals
The USD dropped against most of its major currency rivals yesterday, pressured by Russian angling for a new global reserve currency. By yesterday's close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.3835. The Dollar experienced similar behavior against the GBP and closed at 1.6402.
Concerns that the pace of economic recovery may be more tepid than initially thought forced a retreat in a broad equity advance in the United States. While U.S. housing starts in May rebounded and producer prices rose less than expected, suggesting inflation pressures were muted. But not all investors were convinced that the economy is on a path to recovery, and global stocks turned lower as the strong rise in U.S. housing starts was outweighed by a slide in industrial production.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Core CPI at 12:30 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Federal Reserve Chairman Ben Bernanke's speech at 13:00 GMT. This speech is very important as it is very likely to impact the Dollar's volatility. This may set the pace for the Dollar going into the rest of the week.
EUR - EUR Rises on Positive Economic Data
The EUR experienced a bullish day of trading yesterday against the USD, mainly due to the German ZEW economic expectation figure. The ZEW indicator jumped to 44.8 in June from 31.1 in May. This suggests that analysts and investors were not as grim about the economy as before. In other words, the improvement in this consumer sentiment signals that the worries about a further aggravation of the economic recession may be limited by the end of the year. The reading is now firmly in positive territory, which indicates that optimists far outnumber pessimists.
Since the release of this important figure earlier yesterday the EUR has climbed against the USD, and continued during today's trading session and closed at 1.3835, as trader confidence returned back to the EUR. A strong EUR may continue in the coming days if the European economy continues to release better-than-expected economic figures. If this does occur, the confidence of investors may continue to return back to the EUR in the short-term.
Looking ahead to today, the Euro-Zone and Britain are set to publish a number of important data releases. These include the British Claimant Count Change at 8:30 GMT and the Euro-Zone Trade Balance at 9:00 GMT. These figures are likely to determine the GBP and EUR's strength going into end-of-week trading. Forex traders are also advised to closely follow the speech coming from U.S. Fed Chairman Ben Bernanke, as the forex market is likely to be very volatile while he speaks.
JPY - Yen Experiences Mixed Results against Major Currencies
The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 133.50 level. The JPY also saw bullishness against the USD and closed at 96.50.
The Yen rose and stocks slumped the most in more than two months on concern a global recovery may be delayed. While the Bank of Japan (BOJ) said earlier that the nation's worst post-war recession is easing, BOJ Governor Shirakawa said that the economy is improving because of three temporary factors: replacement of stockpiles at home and abroad, global fiscal stimulus measures, and improving confidence. It's unclear whether a recovery in demand will take hold.
Crude Oil - Crude Oil Prices Stable near $70
Oil fell during yesterday's trading session and closed around $70.60; giving back early gains as worries about the ailing world economy persist.
Oil prices have risen steadily during the past two months, going above $70 a barrel and causing concern that high energy costs could slow the economic recovery from recession. Slowing production has contributed to the price increase, but weakness in the U.S. dollar may be the main cause.
As for today, traders should pay attention to the U.S Crude Oil Inventories report scheduled, as it tends to have a large impact on Crude Oil's prices recently, especially for the short-term.
This pair has been range-trading between 1.4150 and 1.3750 for the past few days and doesn't seem to have much clear direction. After a short upward movement, the Slow Stochastic on the hourly chart is signaling an impending bearish cross which means the range-trading is set to continue. Buying on lows and selling on highs might be a good choice today.
This pair shows no clear indication of direction for the moment. Nevertheless, there is one signal which does appear clearly. The Bollinger Bands on the hourly chart are beginning to tighten and the MACD on all charts is near 0, indicating a volatile movement is impending. When the price jump occurs, entering positions to ride the wave will be a wise choice.
The volatility this pair has seen recently has created a number of contradictory signals. The hourly chart shows a bearish cross on the Slow Stochastic, indicating a downward movement may be coming. Contrary to this is the bullish cross on the 4-hour chart, signaling an impending upward movement. Waiting for a clear signal might be wise today.
The consolidation trend in this pair, which began with the low price near 1.0600, has started to reach its threshold. The latest downward movement will likely be followed by a quick correction before making a significant price jump. The short term oscillators point upward, signaling the impending correction. Forex traders can benefit greatly by calling the direction of the breach and riding the wave which is sure to follow.
The Wild Card
This pair has been trading very flat these past few weeks, but has now begun to show signs of life. The MACD on the hourly and 4-hour chart shows clear bullish crosses, signaling an impending bullish move. The daily chart also has a bullish cross on the Slow Stochastic, which supports this notion. Forex traders can join this upcoming trend by entering early buy positions and riding the upcoming spike for profits this week.