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Friday, 4 Jul 2008
Crude Oil at Peak High Ahead Of the Long US Holiday Weekend
The USD appreciated against all of the major currencies during yesterday's trading session. The US Dollar gained over 160 points versus the EUR and closed at a rate of 1.5702. This happened in spite of the mostly disappointing results for the economy. . The Unemployment Rate was higher than forecasted at 5.5%. The Average Hourly Earnings did not change since last published at 0.3%. The Unemployment Claims indicator rose to 404K. The ISM Non-Manufacturing Composite plummeted to 48.2 meaning the service sector is shrinking. And the Natural Gas Storage Gauge came in 4B lower than predicted at 85B. Thus to find a better explanation for this, phenomenon traders might like to look at the crucial Nonfarm Employment Change which did came in lower than expected at -62K, however most expected a larger drop as the ADP came in a with a big disappointment and the actual Nonfarm Employment Change was fairly close to the forecast and not too far from the previous result. The USD also took advantage of its inferior counterparts yesterday.
General Motors, which is known for the 3.5-ton Hummer, might start selling a mini-car, Chevrolet Beat, in US markets. The Chevrolet Beat is more than a foot shorter than anything else General Motors sells in the U.S. They are doing this to win drivers whom are deterred by the record fuel prices. If this plan works out for GM it might help bring down oil price that in return might help strengthen the Dollar.
Today, floor trading will not take place in the US as Independence Day is celebrated. Thus volatility may be low trading versus the greenback. Investors are advised to keep in eye on news from the USD's counterparts before placing their transactions.
The EUR depreciated against most of the major currencies yesterday. This depreciation includes a 160 points loss vs. the USD. The EUR eventually closed against the USD at 1.5702. Yesterday, the indicators came in with mixed results, however the ECB Press Conference was extremely dovish. The Services PMI decreased to 49.1. The Retail Sales indicator came in higher than expected at 1.2%. The Minimum Bid Rate came in as expected at 4.25%. During the ECB Press Conference President Jean-Claude Trichet hinted that he probably won't increase interest rates anymore. He continued to state that the state of European economic-zone economy is problematic. This dovish statement seems to be the culprit of the EUR depreciation yesterday.
An issue that almost certainly will interest investors is the European energy policy. Companies in Europe are not happy with the current situation. They, the companies, would like the development of a unified energy policy for all of the European economic-zone. They believe this plan will give Europe the tolls to fight the energy cartels. If this advocated plan by the European companies is accepted, lower energy prices might come as a result.
Today, only two economic releases will be published in the European economic-zone. The French Government Budget Balance that previously was at -45.0B. And the German Factory Orders which is expected to rise to 0.8%. Given that these indicators are not expected to have a great impact on the European currency, investors ought to look for other news sources before placing there transactions.
During yesterday's trading session the JPY finished with mixed results. The Yen against the USD lost 70 points and closed at 106.72. And the JPY versus the EUR closed ad 167.59 which is a depreciation of 69 points. Yesterday, indicators describing the state of Japan's economy were not made public. Thus an explanation for yesterday's price movement needs to be found elsewhere.
Most of Japan stocks, especially the auto stocks, and bonds rose during yesterday's trading session. This rise was caused by an assumption by investors that exports from Japan will not slow down. Investors came to this assumption yesterday because of opinions expressed by the European Central Bank president that European interest rates will not increase anymore. Thus foreigners buying Japanese goods will need to buy Yen, which in the long term can help strengthen the Yen.
Today will only be a slow news day as only one indicator will come to light from Japan. The Leading Economic Index is a combination of economic indicators including employment, production, new orders, consumer confidence, housing, stock prices, and interest rate spreads. The index is forecasted to rise to 93.0% which should be good for the Yen's value. However as only one indicator is projected investors are advised to find more news resources prior to taking up new positions.
Crude Oil -
A slumping dollar has been a key driver pushing oil prices up by half this year. Many investors buy commodities such as Oil as a hedge against inflation when the USD weakens, and a falling dollar makes Oil less expensive to investors overseas. When the dollar strengthens, traders have less incentive to buy commodities.
By now, the Oil has set fresh records in each of the last six trading sessions. Yesterday, Oil prices raced above $145 a barrel for the first time as traders added to their bets on the commodity ahead of the long holiday weekend.
As to the US markets, there is little good news for Americans hitting the road for the July Fourth holiday, as gas prices set their own record near $4.10 a gallon. The surge in Oil was propelled by a report of lower crude stockpiles in the United States, lingering concerns about conflict with Iran and comments by Saudi Arabia's oil minister suggesting his country would not boost production.
The pair went through a substantial bearish correction yesterday, and is now floating around 1.5715. The Slow Stochastic on the daily chart is showing the current bearish move may further continue, and the RSI also supports that notion, indicating the market is overbought. Going short appears to be preferable today.
The 4 hour chart is showing that the pair has reached its bullish peak after crossing the 2.00 level, as the cable is experiencing bearish momentum ever since. A bearish cross on the hourlies Slow Stochastic indicates the pair may continue its downtrend. Waiting for the validated breach beyond 1.980 and swing should be a good strategy today.
After a short bearish correction, the pair seems ready to resume its bullish trend. All oscillators on the daily chart are showing bullish momentum and the Bollinger Bands are getting tighter which also indicates an additional upcoming bullish move. Going long appears to be a good decision today.
The pair has gone through a sharp bullish correction yesterday as it gained over 150 pips in one day. A bullish cross on the hourlies Slow Stochastic suggests the pair has room for further bullish move. Going long with very tight stops might do the job today, incase a bearish reversal will occur.
The Wild Card
The bearish correction which took place yesterday seems to have larger potential as all oscillators on the daily chart are showing fresh bearish momentum. Forex traders have a great opportunity to join the bearish move at a very early stage and with a great entry price.
|01:30||AUD||AIG Manufacturing Index||50.4||-||-|
|03:35||JPY||Final Manufacturing PMI||51.9||51.9||-|
|05:45||JPY||10-y Bond Auction||0.40|2.8||-||-|
|06:30||AUD||RBA Rate Statement||-||-||-|
|09:15||EUR||Spanish Manufacturing PMI||53.6||53.9||-|
|09:45||EUR||Italian Manufacturing PMI||55.3||56.2||-|
|09:55||EUR||German Unemployment Change||9K||-5K||-|
|10:00||EUR||Final Manufacturing PMI||52.4||52.4||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.7%||12.7%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.4%||12.5%||-|
|10:30||GBP||Net Lending to Individuals m/m||m/m||3.8B||3.9B||-|
|10:30||GBP||M4 Money Supply||m/m||-0.5%||0.2%||-|