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Thursday, 12 Mar 2009
Crude Oil Plunges over $2 a Barrel; USD Weakens
During yesterday's early afternoon hours, Crude Oil received a hasty sell-off when investors unwound their positions for riskier assets. With a recent boost to equity markets, the USD has also found itself losing strength to a number of its currency rivals, particularly the EUR. If this stock rally can continue, we may see these trends persist throughout the rest of the week.
USD - Equity Gains Reduce Demand for the Dollar
The USD traded significantly lower yesterday against most of its major crosses. The heavy selling of the Dollar continued for the second day in a row as a rise in risk-taking was seen when global equity markets rose from a 12-year low. However, when U.S. equity markets began to drop in the late afternoon, the Dollar showed a bit of strength, though it was not enough to counter the influx of additional risk taking.
U.S. equities made their largest gains of the year two days ago, spurring the selling of the Dollar. Positive market sentiment will hurt the USD. This has been a leading trend in the forex market; a reverse correlation between the USD and a higher level of risk.
The EUR/USD rose to a session high of 1.2862 from yesterday's closing price of 1.2666. The GBP/USD also was higher at 1.3837 from 1.3789.
The USD may to continue to show weakness in the short-term. Economic forecasts for both U.S. unemployment numbers and retail sales are grim. The economic indicators are set to be released today at 12:30 GMT. While these two reports may make a big impact on today's trading, the indicators are lagging. Therefore, traders should not forget about the monthly Business Inventories. This data may shed a better light on U.S. economic trends. If the report misses forecasts, the EUR/USD may return to the 1.3000 mark.
EUR - German Manufacturing Data Plummets
A report released yesterday showed that German manufacturing orders tumbled in the month of January as the global economic slowdown took its toll on Germany's exports. The manufacturing industry saw orders plunge 8% in the month of January. The mark was more than 4 times below the forecasted value by global economists.
It is apparent that the global recession is having a catastrophic effect on the German economy. As other nations slope into a recession, Germany's reliance on exports to fuel their economy has triggered a massive slowdown. Germany is the European Union's largest economy and many view it as a gauge for pan-European economic performance. These reports could begin to impact the trading of the EUR.
Traders will be anxiously expecting monthly German Industrial Production figures today. The report may not be the one to set the trend for today's EUR trading, however high price volatility will be expected during the time of the report's release. Forex traders may want to look for a continuation of poor manufacturing data from Germany to perhaps sink the EUR during inter-day trading.
JPY - Better GDP Numbers Helps the Yen Rise
The JPY gained strength for the second day in a row and continued its gains into the Japanese trading session. The release of Japanese Final GDP came out better than expected. This helped to increase the bullishness of the JPY. The USD/JPY was trading lower near the 96.20 level early this morning.
The updated 4th quarter GDP numbers were greeted with cheers. Japan's economy has been one of the most negatively impacted economies during the global recession. Any sign of positive news could provide a boost to the Yen which has seen considerable weakness the past month. Traders may want to run with the bullish correction of the JPY today as this may continue with the release of poor U.S. economic indicators later today.
Oil - Higher than Expected Inventory Data Sinks Crude
The price of Crude Oil dropped sharply yesterday as the demand for the commodity continues to fall. U.S. Crude Oil inventories posted a sharp increase in the amount of Crude stocks in storage. The report failed to meet market expectations, helping to drive the price of Crude lower. At the end of the trading day, the price of Crude Oil held at $42.64. The price was down more than $3 on the day.
The lack of any price appreciation has market participants forecasting further production cuts by OPEC later this month. The cartel is next scheduled to meet on March 15th. However some skepticism remains if more supply cuts will have any affect on current Crude prices due to bleak demand forecasts for global economic growth. Many see the fair market value of Crude Oil trading in the range of $45-$50.
The recent upswing seen in this currency pair has the price floating near the upper border of the Bollinger Bands on the 4-hour and daily charts, signaling moderate downward pressure. The recent bearish cross on the 4-hour chart's Slow Stochastic adds weight to the notion of an imminent downward correction. Going short with tight stops might be a wise choice today.
This currency pair is currently giving off mixed signals. With the RSI on the hourly chart showing the price floating in the over-bought territory, there may be a downward correction in the nearest future. However, with the price floating in the over-sold territory on the daily chart's RSI, the longer-term movement will likely be in an upward direction. Capturing the imminent downward correction and then riding out the uptrend may be a wise strategy today.
The price of this pair appears to be floating in the over-sold territory on the RSI of the hourly and 4-hour charts, indicating an upward correction to the recent downtrend may be imminent. There appears to be a bullish cross forming on the 4-hour chart's Slow Stochastic which supports this notion. Going long might be a good choice today.
This pair appears to be consolidating to the price level of 1.1575 in anticipation of a volatile movement. The Bollinger Bands on all charts appear to be tightening, which supports this notion. With the RSI on the hourly and 4-hour charts hovering close to the over-sold territory, the sharp movement may be in an upward direction. Going long might be a wise choice today.
The Wild Card
After the recent drop in value, the price of this pair appears to now be floating in the over-sold territory on the RSI of both the hourly and 4-hour charts, signaling an upward correction may occur in the nearest future. The recent bullish crosses on the 4-hour chart's Slow Stochastic heavily support this notion. As the Bollinger Bands on the hourly chart begin to tighten, a volatile upward correction may be occurring in today's early trading hours. Forex traders can take advantage of this imminent volatile movement by setting an early long position with tight stops.
|14:30||USD||Crude Oil Inventories||1.4M||2.1M||6.2M|
|17:01||USD||10-y Bond Auction||2.80|2.5||*||-|
|18:00||USD||Federal Budget Balance||-10.4B||-223.2B||-|
|20:00||NZD||Official Cash Rate||2.50%||2.75%||-|
|20:00||NZD||RBNZ Press Conference||*||*||*|
|20:00||NZD||RBNZ Rate Statement||*||*||*|
|20:00||AUD||RBNZ Monetary Policy Statement||*||*||*|
|23:50||JPY||Core Machinery Orders||m/m||-15.7%||7.3%||-|
|00:00||AUD||MI Inflation Expectations||2.3%||*||-|
|00:01||GBP||BoE Quarterly Bulletin||*||*||*|
|00:01||GBP||RICS House Price Balance||53%||52%||-|
|01:10||NZD||RBNZ Gov Wheeler Speaks||*||*||*|
|09:00||EUR||ECB Monthly Bulletin||*||*||*|
|12:30||CAD||Capacity Utilization Rate||81.7%||82.3%||-|
|12:30||USD||NZD Core Retail Sales||m/m||0.0%||0.2%||-|