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Wednesday, 12 Nov 2008
Crude Oil Prices below $60; Verifies ForexYard's Forecast
Crude Oil prices experienced another day of depreciation as the oft-traded commodity dropped below $60 a barrel during yesterday's trading session. Oil prices traded down for the second straight day to reach the price level previously forecasted by ForexYard analysts. Much of this bearish movement in Crude Oil can be attributed to fears of a drop in fuel consumption due to poor economic outlook in the major world economies, as well as relatively unchanged production levels.
USD - USD Breaks through Significant Price Barrier against the EUR
The USD saw a bullish trading session versus most of its major currency crosses yesterday. The USD took advantage of the falling Crude Oil Prices, which reached a 20-month low, and some bearishness by its counterpart currencies. Against the EUR, the USD reached its highest value in more than a week as the pair traded under the significant price barrier of 1.2500 towards the end of yesterday's trading session. The greenback experienced similar behavior against the British Pound and Swiss Franc.
Concerns that the deepening global economic crisis will slow demand for Oil dragged prices for the commodity 5% lower, which has strengthened the American Dollar. Worries about the state of the global economy generally prompted a move into the greenback, which is widely considered a more secure currency to hold during times of uncertainty.
The question now becomes if the current Dollar "strength" will continue, despite the worrying outlook of the US economy. An optimistic Dollar trader will look at the uneasy situation with the EUR and GBP as an indicator for positive USD movement. Though there is still plenty of important US data to be released in November, the greenback has already proven it can take bad data and still make gains, as long as its major rivals are stuck in a similar predicament.
Looking ahead, the US is set for a relatively quiet news day considering the only news will be a speech delivered by Federal Open Market Committee member Donald Kohn at 16:00 and 18:00 GMT. However, with energy prices and the US stock market driving much of the financial speculation worldwide, it is safe to say that the Dollar will contribute to at least some of today's market volatility.
EUR - Euro-Zone Continues to Suffer Despite Positive Economic Data
The Euro-Zone's economic woes don't seem to be running out of steam as the EUR continued its fall during yesterday trading session against most of its currency counterparts. Overall there seemed to be a lack of impactful data releases coming out of the Euro-Zone compared to the average week. Despite the fact that most economic indicators came out slightly better than forecasted, the EUR continued to fall from fears of economic weakness and recession.
The EUR was also hurt by the USD's recent success, which caused the pair to trade in the mid 1.2500 range throughout the last hours of yesterday's trading session. The pair now sits, for the moment, at 1.2550, and is still giving off bearish signals. The German ZEW Economic Sentiment indicator rose to -53.5 in November from -63.0 in October yesterday, beating market forecasts. The EUR briefly jumped against the Dollar after the release of this indicator, which reflects the difference between the share of analysts and investors who are optimistic and those who are pessimistic. Unfortunately, the rise didn't last long.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains.
JPY - JPY Value Relatively Flat Recently
Yesterday the JPY saw rather flat results against most of its major currency rivals. The JPY was predominantly influenced by the other major currencies' behavior, however, as only one indicator was published from Japan. It appears lately as if the JPY is being motivated by outside factors more than by the Japanese economy.
Investors have been bailing out of more leveraged carry trades, and have begun borrowing Yen at low rates in order to buy higher yielding currencies and commodities. Moreover, not only did the JPY appreciate against the major currencies such as the EUR and the GBP, it was also the only currency to appreciate against the USD. Analysts also estimate that the Euro-Zone's economic uncertainty has lead investors to seek out for other prospects aside from the EUR. The first choice was of course the USD, which initiated its current bullish trend. Since the US economy is far from being a stable economy to rely on recently, the JPY has become a very attractive replacement.
Today, there is no major economic news expected to be released from Japan, however, we should see active JPY trading in response to key Euro-Zone data releases. The near term outlook for the JPY remains relatively bullish. Therefore, traders are advised to follow US news and Euro-Zone data with extra precaution this week as they will mark future JPY behavior.
Oil - Crude Oil Sinks below $60 a Barrel
Crude Oil prices experienced another day of depreciation as the oft-traded commodity dropped below $60 during yesterday's trading session. Oil prices traded down for the second straight day to reach the price level previously forecasted by ForexYard analysts. Much of this bearish movement in Crude Oil can be attributed to fears of a drop in fuel consumption due to poor economic outlook in the major world economies, as well as relatively unchanged production levels.
With economic growth slowing in the US and Europe, and another month of falling service industry numbers, Crude Oil may continue to see a depreciating value. For now it seems that Crude Oil prices will continue to drop for as long as the USD continues to appreciate. Traders are strongly advised to follow the USD against its major pairs and crosses in order to try to predict today's developments.
(To see ForexYard's prediction visit our Forex Blog and see the article "ForexYard predicts that Crude Oil prices will hit $60 again before the end of November," - date: October 30.)
The key Fibonacci level of 1.2500 was breached and the bearish move is now validated with a full bar on the 4 hour chart. The momentum is very bearish and it appears that the next target price might be 1.2200. Going short appears to be favorable today.
The bearish momentum continues with full steam, as the Cable now floats around 1.5450 level, which is the bottom barrier of the downwards channel. Daily chart's Slow Stochastic is showing that a breach through the bottom level will probably unleash a very strong additional bearish move with a target price of 1.5200. Going short appears to be the right choice today.
The typical range trading on the 4 hour chart continues. Both the hourly RSI and Slow Stochastic are floating in neutral territory. The daily chart is showing moderate bullish momentum with diminishing strength. Forex traders are advised to wait for a clearer signal before entering the market n this pair.
The daily chart is showing that there is still some strength in the bullish channel. The hourly's are indicating that the local bearish corrective move is losing power, and the cross on the 4 hour chart's Slow Stochastic also supporting the continuation of the daily bullish trend. Going long with tight stops might be a preferable strategy today.
The Wild Card
The momentum that was created yesterday by the bearish breach through the bottom of the channel in the hourly chart is growing stronger. The 4 hour chart is supporting a strong bearish notion as well, creating a great opportunity for forex traders to join.
|15:55||USD||Revised UoM Consumer Sentiment||89.4||90.2||88.8|
|15:55||USD||Revised UoM Inflation Expectations||2.6%||2.8%|
|16:00||USD||New Home Sales||467K||471K||458K|
|16:00||USD||Pending Home Sales||m/m||0.3%||0.9%||-1.1%|
|16:30||USD||Crude Oil Inventories||2.6M||0.4M||1.9M|
|18:00||USD||Natural Gas Storage||-17B||-|
|00:00||AUD||HIA New Home Sales||0.0%||-||-|
|00:00||EUR||German Prelim CPI||m/m||-0.3%||0.0%||-|
|00:00||EUR||Italian 10-y Bond Auction||2.44|1.5||-||-|
|01:30||AUD||Private Capital Expenditure||q/q||1.1%||-1.7%||-|
|09:00||EUR||Spanish Flash CPI||y/y||-0.1%||-0.3%||-|
|09:55||EUR||German Unemployment Change||-22K||-1K||-|
|10:00||EUR||M3 Money Supply||y/y||2.5%||2.6%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.5%||12.4%||-|
|13:00||EUR||GfK German Consumer Climate||8.5||8.6||-|