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Wednesday, 26 Aug 2009
Crude Oil Plummets on Profit Taking
Later afternoon trading saw the price of Crude Oil take a nose dive as traders took profit. The price of Oil stalled at the $75 resistance level and fell significantly following the failed breach. Today traders will be tracking the release of the U.S. Crude Oil Inventories data along with the New Home Sales numbers for today's market direction.
USD - Dollar Sees Mixed Results against the Majors
Yesterday, the Dollar saw mixed results against its major currency rivals. Against the EUR, the Dollar began the trading session with sharp drops, yet it managed to fully recover later on. The Dollar saw mixed result against the Yen as well.
The Dollar's recovery came as a result of the better than expected Conference Board Consumer Confidence report. The report showed that the U.S. consumers' confidence has increased in August, largely due to the labor market recovery. The report rose to 54.1, making the first gain in three months, from 47.4 in July. The most significant outcome of this result is that it shows that consumers feel their financial outlook is secure and thus allow themselves to spend more. Eventually this has the potential to elevate the economy as analysts expect.
Looking ahead for today, a batch of data is expected from the U.S. economy. Two main publications are expected to create large volatility in the market - the Durable Goods Orders indices and the New Home Sales. The Durable Goods Orders indices are expected at 12:30 GMT. Investors hold great importance to their results as they are leading indicators of production, especially the core report. The New Home Sales is scheduled for 14:00 GMT. This is one of the highest indicators of the housing sector, and thus has an immense impact on the Dollar. Analysts forecast 393K new single-family homes were sold during July, and if the end result will be similar it has the potential to boost the Dollar's recovery.
EUR - German Business Climate on Tap
During yesterday's trading the EUR saw volatile activity against the major currencies. The Euro saw mixed results against the Dollar and the Yen, beginning the day with rising trends yet dropping later on. However against the Pound, the Euro continued the bullish trend from the last few days.
The EUR's rise in early trading came as a result of the positive data published from the Euro-Zone. The German Final Gross Domestic Product showed a 0.3% rise in the inflation-adjusted value of all goods and services purchased by the German economy, marking the first positive results in 5 months. This continued the recent positive figures from both Germany and France, the two largest economies in the Euro-Zone. Also yesterday, the Belgium Business Climate report delivered a better than expected figure after dropping 18.2 points, beating expectations for a 19.7 drop. This also supported the EUR during yesterday's trading.
As for today, two main publications are expected from the German economy, the German Import Prices and the German Business Climate. The German Business Climate, published by the Institute for Economic Research, is expected to create a large impact on the EUR. It is considered to be a leading indicator of economic health because business is known to react quickly to market conditions. A positive result is likely to increase hope for an early economic recover, which has the potential to strengthen the EUR.
JPY - Yen Recovers against the Major Currencies
The Yen saw a mixed trading day during yesterday's session. The Yen began with bearish trends against both the Dollar and the EUR. However, later on it managed to recover back to previous rates. Against the Pound, the JPY continued to strengthen and the GBP/JPY is currently traded around the 153.40 level.
The Yen recovered due to concerns that financial losses will delay a recovery in the global economy, increasing demand for the Yen as a refuge. Currently, many analysts claim that the outlook for economies around the world is still doubtful. This situation is known to create risk aversion, which leads to the purchase of the Yen.
During late trading, the Japanese Trade Balance report was released, delivering a poor result of 0.19T, lower than the 0.35T expected. The Japanese economy largely relies on its exporting, and thus this result has the potential to halt the Yen's recovery.
As for the day ahead, no imported data is expected from the Japanese economy. Traders are advised to follow the leading publications from the U.S and the Euro-Zone as they are likely to set the tone in today's trading.
Crude Oil - Crude Oil Drops to $71 a Barrel
Crude Oil fell close to $3 a barrel during yesterday's trading, to the lowest price in a week, seeing the first decline in six days.
Crude Oil dropped from $75 a barrel to $71.20 on signs that reduced lending in China deceased demand for the world's fastest-growing, energy-consuming county. Another reason for oil's weakness is the recovering Dollar. Because Oil is valued in Dollars, the fluctuations in the Dollar's value tend to affect oil as well. During yesterday's trading, a U.S. Consumer Confidence report was released, providing a better than expected figure, which promptly strengthen the Dollar. This eventually had an impact on Crude Oil's value, and led to the sharp drop.
As for today, the U.S. Crude Oil Inventories is scheduled at 14:30 GMT. This report measures the change in number of barrels of crude oil held in inventory by commercial firms during the past week. Its result tends to have an immense impact on oil's value, and traders are advised to follow this report with extra caution.
The bearish cross on the daily Slow Stochastic has just been completed and the pair now appears poised for the subsequent downward movement. The bearish cross on the 4-hour MACD supports this notion. Going short might be wise today.
The downward movement over the past few days has finally resulted in a bullish cross on the 4-hour Slow Stochastic and the hourly MACD, indicating an impending upward correction. The price also floats in the over-sold territory on the 4-hour RSI, which supports this notion. Going long with tight stops might be the preferable strategy today.
With most oscillators floating in neutral territory, this pair seems to be consolidating towards the 94.00 price level. With a doji candlestick formation on the weekly chart, there is a possibility that this pair is due for an upward correction. Waiting for the breach and then joining the trend as soon as possible would be a smart tactic today.
This pair is giving off a few mixed signals. The price floats in the over-bought territory on the hourly RSI, suggesting downward pressure in the short-term. On the other hand, the daily chart's RSI is showing over-sold, and has a fresh bullish cross on the daily Slow Stochastic. Traders should watch for the small impending downward movement, but be on guard for the longer-term bullishness today.
The Wild Card
A fresh bearish cross has recently formed on the hourly, daily and weekly charts' Slow Stochastic, indicating strong downward pressure on this pair. The price also floats in the over-bought territory on the daily and weekly charts' RSI, strengthening this notion. Forex traders may not want to miss out on this opportunity by entering the downward movement at a great entry price.
|05:45||JPY||10-y Bond Auction||0.40|2.8||-||-|
|13:30||USD||Challenger Job Cuts||y/y||20.9%||-||-|
|16:30||USD||Natural Gas Storage||-||-||-|
|01:00||EUR||German Bank Holiday||-||-||-|
|03:30||JPY||Average Cash Earnings||y/y||1.3%||0.7%||-|