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Thursday, 17 Jun 2010
Crude Oil Trades Above $77 a Barrel
Despite a rise in U.S inventories last week, Crude prices rallied, boosted by strong equities and largely positive U.S economic data and demand figures.
USD - USD Gains on Poor Housing Data Release
The US dollar advanced slightly versus the EUR and JPY Wednesday after U.S economic data showed a bigger-than-forecasted drop in housing starts. A decline was expected due to the expiration of a federal tax break for home buyers.
The return of risk aversion was also supported by reports that Spain may also seek financial aid, resurfacing concerns regarding the euro zone debt crisis. The USD's appreciation versus the euro continued during today's early Asian trading as well.
However, the USD's rally was modest as better-than-expected U.S. manufacturing data returned some optimism to investors as it signaled that the global economy is recovering despite the crisis in the euro zone. Riskier currencies such as the Australian dollar benefited from the news.
Looking ahead to today, another exciting news day is expected with the release of the CPI data and unemployment claims at 12:30 GMT and the Philly Fed Manufacturing Index at 14:00 GMT.
EUR - EUR Declines on Spain Concerns
The EUR declined against the USD and JPY after the release of mixed US data and renewed concerns about the euro zone's financial stability. These concerns pushed the EUR down from the two-week high of $1.2354 hit earlier on Wednesday.
The EUR is currently at $1.2275, compared with $1.2305 late Wednesday. The EUR also weakened to 112.06 yen from 112.83 yen. The British pound dropped to $1.4710 from $1.4819.
Investors were focused on Spain's debt woes fearing the possibility it will need to seek foreign aid, as the country is struggling with high deficits at a time of soaring unemployment, despite denials by both the European Union and the Spanish government.
While most news releases are expected from the US today, traders should follow closely the EU summit held today as the Bank of Spain plans to publish the results of stress tests carried out, providing financial markets with full insight into the stability of the country's banking system.
JPY - Yen Rises amid Renewed Euro Zone Concerns
The Yen rose against the EUR amid renewed concerns regarding Europe's debt crisis, boosting demand for Japan's currency as a refuge. The JPY strengthened against all 16 major counterparts on speculation possible tightening of regulation on financial markets by EU leaders will hamper recovery in the region.
The EUR's decline was bolstered by the Bank of Spain's announcement that it plans to publish the results of stress tests carried out on the nation's lenders.
Japan's currency climbed to 112.06 per EUR in Asian trading today from 112.57 in New York yesterday, when it touched 113.32, the lowest level since June 4. It is currently at 91.29 per USD from 91.44 yesterday.
Crude Oil - Price of Crude Oil Rises Above $77 a Barrel
Crude Oil futures rose Wednesday after a government report showed US gasoline demand hit a 10-month high. Light sweet crude for July delivery settled 73 cents, or 1%, higher at $77.67 a barrel on the New York Mercantile Exchange, its highest close since May 10.
US gasoline demand rose by 144,000 barrels a day last week, to 9.338 million barrels a day, according to a US Energy Information Administration (EIA) report. The growth coincides with the beginning of the US driving season signaling that the seasonal increase in US gasoline consumption is taking hold as summer vacationing begins. Oil prices were also aided by a better-than-expected US industrial production report.
With the US driving season ahead, and if concerns regarding the stability of the euro zone's regional economy continue to ease, crude prices are likely heading to $80 a barrel as confidence in the consistency of the economic recovery grows.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.3390 level. The daily chart's Slow Stochastic is showing a fresh bearish cross suggesting that downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is an impending bullish cross forming on the 4- hour chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The cross has experienced much bearishness for the past several days, and currently stands at the 1.1305 level. There is much evidence in the chart's oscillators that supports a possible bullish correction today. This is supported by the daily chart's Slow Stochastic. Going long with tight stops may turn out to bring big profits today.
The Wild Card
Oil prices rose significantly in the last week and peaked at $77.20 a barrel. However, the 4-hour charts' RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|00:30||AUD||AIG Manufacturing Index||47.3||*||-|
|00:50||CAD||Tankan Manufacturing Index||12||11||-|
|00:50||JPY||Tankan Non-Manufacturing Index||19||17||-|
|01:00||EUR||German 10-y Bond Auction||1.05|1.4||*||-|
|01:00||GBP||10-y Bond Auction||-||-||-|
|USD||Total Vehicle Sales||17.5M||16.9M||-|
|02:35||JPY||Final Manufacturing PMI||51.7||51.7||-|
|08:15||EUR||Spanish Manufacturing PMI||52.8||52.3||-|
|08:45||EUR||Italian Manufacturing PMI||49.8||49.4||-|
|09:00||EUR||Final Manufacturing PMI||50.5||50.5||-|
|13:15||USD||ADP Non-Farm Employment Change||204K||206K||-|
|14:45||USD||Final Manufacturing PMI||57.9||58.0||-|
|15:00||USD||ISM Manufacturing PMI||58.0||56.8||-|
|15:00||USD||ISM Manufacturing Prices||58.0||58.6||-|