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Monday, 7 Mar 2011
Crude Oil Trades Near 29-Month High as Middle East Unrest Continues
As violence in Libya continues, crude oil reached its highest level since September 2008 today, at $106.30 a barrel. Crude prices are also being supported by the positive U.S. employment data which was released on Friday.
USD - Dollar Falls vs. Majors after Positive Employment Data
The U.S. dollar dropped against most of its major currency rivals during last week's trading session. The greenback fell about 250 pips vs. the euro and the EUR/USD pair reached as high as the 1.4000 level, marking a 4-month high. The dollar fell about 250 pips against the British pound we well.
Last week's employment data from the U.S. provided several positive indications which have increased demand for higher-yielding assets. The U.S Unemployment Rate fell to 8.9 percent last month, the lowest since April 2009. In addition, the U.S. Non-Farm Employment Change showed that the economy added a net 192,000 jobs last month. The weekly Unemployment Claims report provided positive data as well. Applications for unemployment benefits decreased by 20,000 to 368,000 - the lowest level since May 2008.
The dollar's depreciation against the euro also took place due to expectations that the European Central Bank will hike interest rates in April. The Fed, on the other hand, isn't likely to hike rates in the near-future.
Looking ahead to this week, many significant economic releases are expected from the U.S. economy. The most noteworthy reports look to be the Trade Balance, the weekly Unemployment Claims, the Retails Sales and the Consumer Sentiment. Traders are advised to follow these reports as they are likely to have a large impact on the dollar.
EUR - Euro Soars on Expectations ECB Will Hike Rates
The euro rallied against most of its major currency counterparts during last week's trading session. The euro climbed about 250 vs. the U.S. dollar and the EUR/USD pair reached a 4-month high. The 17-nation currency also saw a 300 pips rise against the Japanese yen.
The euro strengthened last week after the European Central Bank President (ECB) said the ECB may raise interest rates next month to counter accelerating inflation. Rising food and commodity prices have the ECB concerned that if it does not get ahead of inflation concerns, then rising prices could have a negative impact on the euro zone economy.
Investors also understand that unlike the ECB, the Federal Reserve isn't expected to hike rates anytime soon, and this naturally makes the euro a much more appealing asset.
As for the week ahead, traders are advised to follow any hint regarding a potential rates change from the euro-zone, as this issue looks to dominate this week's economic news as well. Special attention should also be given to German economic releases, as they usually have a large impact on the euro.
JPY - Increased Risk-Appetite Weakens the Yen
The Japanese yen fell against most of its major currency rivals last week. The yen dropped about 300 pips vs. the euro, and the EUR/JPY pair reached as high as the 115.95 level. The yen also saw a 250 pip fall against the British pound.
The yen fell after U.S. employment data provided positive results, signaling that labor market conditions in the U.S. are recovering. U.S. employers added 192,000 workers in February and the unemployment rate unexpectedly declined to 8.9 percent, the lowest since April 2009. In addition, applications for unemployment benefits decreased by 20,000 to 368,000 - the lowest level since May 2008.
The yen's downfall against the euro was also the result of expectations that the European Central Bank will hike interest rates in April.
As for this week, traders are advised to follow the Japanese equity market, as the yen is highly affected by its movements. Special attention should also be given to the Final Gross Domestic Product, which is scheduled for Wednesday, as its release is likely to have a significant impact on yen trading.
Crude Oil - Crude Oil Climbs To $106.30 a Barrel for the First Time since September 2008
Crude oil's rally continued last week, and by Friday peaked at $104.90 a barrel. Moreover, due to weekend developments in the Middle East, oil opened this week with rising prices as well. At the moment, crude is trading close to the 106.10 level, marking a 29-month high.
Crude prices continue to rise as fighting between Libyan rebels and troops loyal to Muammar Qaddafi intensifies. Violence in Libya has cut output in the North African country by as much as 1 million barrels a day, according to the International Energy Agency.
In addition, positive U.S. employment data which was released on Friday has also pushed crude oil prices upwards on speculation that demand for crude oil in the U.S. will increase.
Looking ahead to the following week, traders are advised to closely follow the developments in the Middle East. In case the unrest spreads to other oil-producing nations, oil prices could soar further. Traders should also pay attention to the U.S. Crude Oil Inventories report scheduled for Wednesday, as its release usually has an instant impact on the market.
After several failed attempts to breach through the 1.4000 level, the pair has consolidated near the 1.3980 level. Currently, as a bearish cross is taking place on the 4-hour chart's Slow Stochastic, it seems that a downward correction might take place today. Going short with tight stops might be the right strategy today.
There is a very distinct bullish channel formed on the daily chart, and the cable is now floating in the middle of it. However, as both the RSI and Slow Stochastic are providing bearish signals, it seems that a downward move could be imminent, with potential to reach the 1.6150 level.
The USD/JPY continues with range-trading between the 81.00 and the 84.50 levels, and is currently trading near the 82.15 level. At the moment, both the 4-hour and the 1-day charts are providing mixed signals. Traders are advised to take a wait and see approach today.
The pair has seen several failed attempts to fall below the 0.9200 level for the past couple of weeks. That being said, as the 4-hour chart's Slow Stochastic and MACD have recently completed a bearish cross, it seems that the pair has potential to drop below the 0.9200 level today.
The Wild Card
There is a very strong bullish channel forming on the daily chart, and gold is currently floating in the middle of it. In addition, both the MACD and the RSI on the chart are providing bullish indications, suggesting that the upward movement may have more steam in it. This might be a great opportunity for forex traders to join a very popular trend.
|01:30||AUD||ANZ Job Advertisements||m/m||0.9%|
|03:45||USD||Final Manufacturing PMI||56.2||56.1||-|
|04:00||USD||ISM Manufacturing PMI||56.6||56.5||-|
|04:00||USD||ISM Manufacturing Prices||59.5||58.3||-|
|04:00||USD||Total Vehicle Sales||16.4M||16.6M||-|
|09:15||USD||Spanish Manufacturing PMI||-52.6||-52.4||-|
|09:45||EUR||Italian Manufacturing PMI||50.7||50.6||-|
|10:00||EUR||Final Manufacturing PMI||50.7||50.7||-|