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Thursday, 10 Jul 2008
Can The USD Fight Off The Bears?
The Dollar lost versus all of the major currencies yesterday. The USD lost 62 points against the EUR and closed at 1.5742. Traders should also note that the USD lost 148 points vs. the GBP, ultimately closing 1.9834. Yesterday, the Crude Oil Inventories was the only news to come out of the US market. This indicator came in lower than expected at -5.9M , however it failed to have a clear effect on the greenback.
Looking further today, three indicators will be published. The Unemployment Claims are forecasted to decline to 397K after being recorded at a surprising high of above 400k last week. The Fed Chairman Bernanke and Treasury Secretary Henry Paulson are also scheduled to testify on financial market regulation before the House of Representatives Committee on Financial Services. After a hawkish speech previously, Bernanke will need to repeat such a performance to help the struggling USD.
The Natural Gas Storage, which is also scheduled for today, is expected to rise and set the figure of 95B as apposed to the last month's figure of 85B. Overall we may expect the USD to appreciate slightly versus its currency pairs.
Traders should note a new response by consumers to the high gasoline prices. Given the currently record high Oil prices, the US consumers decided to avoid spending money on gasoline that is not necessary for their daily lives. Thus a 5 year low of gasoline expenditure developed. This probably will slowly decrease Oil prices which in the long term should affect U.S. dollar prices as well.
As only a few indicators are expected to affect the USD during today's trading session, investors are advised to follow the news of its counterparts.
The EUR experienced mixed trends versus the major currencies yesterday. The EUR gained 62 points against the USD and closed at 1.5742. However the EUR declined versus the GBP, eventually closing at 0.7964. The German Trade Balance and the French Trade Balance indicators were published at 14.4B and -4.7B respectively. In addition, the European Central Bank President Trichet spoke about economic and monetary developments that helped increase volatility. Overall, yesterday's indicators had a minor effect on the European currency; therefore we should look deeper into the EUR's counterparts for the explanation.
Looking further today, only a few indicators are projected to shed light on the state of the Euro-Zone economy. The French Industrial Production is forecasted to fall from a positive figure to -0.5%. The ECB Bulletin will reveal the statistical data which the European Central Bank Governing Board reviewed when formulating the last Interest Rate decision on the 3rd of July. The Bulletin will also provide detailed analysis of inflation and current economic conditions in the European economic zone. Similar to the French Industrial Production, the Italian Industrial Production is also expected to drop to -0.5%. In addition, the European Central Bank President Trichet, will deliver a speech on the Euro's 10th anniversary conference in Munich.
The Yen saw bullish trends against all of the major currencies during yesterday's trading session. The JPY gained 77 points against the USD and closed at 106.75. A possible explanation can be found in yesterday's news events. The Machine Tool Orders was the only indicator to decline to -2.7%. However the other two indicators contributed to the strengthening of the JPY. The CPGI, an indicator which measures the change in the price of goods sold by corporations, appreciated to 5.6% and the Japanese Current Account gained 0.13T coming in at 2.03T.
Japan's Pension Fund has lifted its hedge fund investments 6 fold in less than a year as part of the efforts to boost returns from a wider range of holdings. The fund has put $2.8 billion into hedge funds and aims to increase that to about 4% of its total assets. Traders should note that if a small sum of this money enters the forex market it will probably cause sharp increase in volatility in the market.
Today there are no news expected to come out from Japan. Thus investors are advised to follow news releases from the Yen's counterparts.
Yesterday's trading session was very volatile for Crude Oil. Oil has firstly resumed climb, crossing the $138 a barrel. The main reason for that price growth must have been global news arriving from the Middle East, claiming that Iran has test-fired nine missiles that could reach Israel and U.S bases in the region, and warned it was ready to retaliate for any attack over its nuclear projects.
However, data released later has generated a reversal, as the U.S Crude Oil Inventories declined twice as much as expected, decreasing by 5.9M barrels in the week ending July 4, dropping oil prices back to $136 a barrel.
The US, as a major world Oil consumer is trying to reduce its dependency on that commodity. As such, the US consumers decided to avoid spending money on gasoline that is not necessary for their daily lives. Thus a 5 year low of gasoline expenditure developed. This probably will slowly decrease Oil prices which in the long term should affect U.S. dollar prices as well.
The pair has been going through a choppy sessions with mixed trends for the past 7 days. The Bollinger Bands on the 4 hour chart are tightening, suggesting that a bearish breach is impending. A fresh bearish cross on the Slow Stochastic also supports that notion. Going short with tight stops might be a good strategy today.
The 4 hour chart shows that the cable is in the midst of a strong upward trend, as the pair gained over 100 pips in one day. The Slow Stochastic is showing a bullish cross on the daily chart, indicating that the bullish tend may further continue. Going long appears to be preferable.
The pair is in the middle of a strong bearish corrective move which appears to have more steam in it. All oscillators on both the 4 hours chart and the daily chart are indicating a further bearish move. The next target price of 106.50 appears to be valid.
The typical range trading on the daily chart continues. There is a bearish cross on the daily chart's Slow Stochastic; however, all other indicators are floating in neutral territory. Good strategy might be to wait for a clearer signal before entering the market on this pair.
The Wild Card
The bearish corrective move appears to be over, as the gold is resuming its upward trend. All oscillators are pointing up, indicating the bullish momentum is very strong. This is a great opportunity for forex traders to join in a very promising trend.
|01:50||JPY||Prelim Industrial Production||m/m||1.1%||-||-|
|02:30||AUD||MI Inflation Gauge||m/m||0.2%||-||-|
|03:00||AUD||HIA New Home Sales||m/m||0.5%||-||-|
|03:00||NZD||ANZ Business Confidence||-15.3||-||-|
|03:30||AUD||Company Operating Profits||q/q||0.2%||-||-|
|03:30||AUD||Private Sector Credit||m/m||0.4%||-||-|
|09:00||CHF||KOF Economic Barometer||99.8||-||-|
|10:00||EUR||Italian Retail Sales||m/m||-0.1%||-||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.2%||-||-|
|11:00||EUR||Italian Prelim CPI||m/m||-0.1%||-||-|