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Friday, 20 May 2011
Did President Obama's Mideast Policy Speech Chill USD Values?
A speech delivered by President Barack Obama yesterday regarding US policy in the Middle East caused a stir in late-session trading. Though his position appeared moderate, even standoffish in its approach to the ‘Arab Spring,' many have criticized Obama for his missed opportunity in addressing other major concerns. It is difficult to state whether this had a chilling effect on the US dollar in today's trading or not, but spectator sentiment appears to have viewed the speech with doubt and consternation.
USD - US Dollar Mixed as Traders Eye Manufacturing and Housing Data
Poor economic data out of the United States continued to weigh on the US dollar yesterday as investors continued to eye the interest rate differentials between the US and Europe. The soft data has convinced traders that the Federal Reserve will not likely elect to lift interest rates in the near future and the result has been consecutive bearish sessions for the greenback.
Yesterday's manufacturing data out of Philadelphia highlighted a stark downturn in the manufacturing sector of the American northeast over the past month. The data comes on the coattails of similar downturns across Europe seen earlier this month. A lift in British industrial order expectations yesterday may translate over to its American counterpart next month, but for now the data remains weak and this weighed on the value of the dollar in recent trading.
A speech delivered by President Barack Obama yesterday regarding US policy in the Middle East also caused a stir in late-session trading. Though his position was moderate in its approach to the Arab Spring, many have criticized Obama for his missed opportunity in addressing other major concerns. It is difficult to state whether this had a chilling effect on the US dollar in today's trading or not, but spectator sentiment appears to have viewed the speech with doubt and consternation.
With today's US absence from the economic calendar, USD values could continue to bear the weight of this week's gloom. Many traders have begun to seek higher yielding assets under the impression that the Fed will fail to lift interest rates in 2011.
EUR - EUR Makes Mid-Day Gains as US Data Falters
The euro rose in yesterday's late-trading sessions as economic news, mixed with some political drama and policy speech-giving, has had investors balancing between debt concerns and interest rate differentials. Soft data out of the American economy, however, has held many traders leery of seeking safety in the greenback. After yesterday's severe downturn in the Philly Fed Manufacturing Index, investors appear to have shifted their gaze on interest rate differentials which have favored the EUR's recent jump.
Many forex traders had assumed this week's ECOFIN meetings would provide perspective into the region's debt woes, but the distraction of the Strauss-Kahn affair and the punditry over Obama's Mid-East policy speech has begun to assist in the attention focus being switched over to interest rate differentials. This sentiment has so far helped the 17-nation common currency begin to make gains against the greenback.
As for today, the euro zone turns its economic data engine back on with the publication of two significant reports. At 7:00 GMT, Germany will publish its producer price index (PPI). The figure is expected to reveal solid, stable growth in German inflation. A report in line with these expectations should help add fuel to the interest rate speculation.
Following Germany's data release will be a 9:00 GMT publication of the region's Current Account. This report is the region's trade balance (albeit by a different name) which measures the change in value for imported and exported goods. Expectations are for a shrinking deficit which should also help lift the EUR ahead of the week's close.
JPY - JPY Sees Minor Headway after Interest Rate Decision Published
The Japanese yen (JPY) began trading in a bearish direction against most of its currency rivals this week after the Bank of Japan (BOJ) released data which showed the Japanese economy contracting by 0.9% so far this quarter. After a week of ups and downs, the Japanese yen now appears to be in a stronger position and is making gains after this morning's interest rate decision. The dominant stance of risk aversion overarching this week and last had many traders moving in and out of the yen until yesterday evening.
Yesterday, the yen moved down over 100 pips against the US dollar by mid-day as traders fled the shrinking Japanese economy. As of this morning, however, the sentiment appears to have shifted in favor of the JPY. Soft American economic data supported this move and today's rate statement by the BOJ assisted in another rise for the island currency ahead of the week's closing. Should sentiment continue to favor the yen over its counterparts, traders could see further bullishness, particularly against the USD if investors remain bearish on the American economy.
Crude Oil - Solid Natural Gas Stock Sends Oil Lower as Commodities See Sell-Off
Oil prices jumped above $100 a barrel yesterday morning following a report out of the United States on Wednesday which revealed zero growth in their weekly oil stockpile data. These US oil stockpile reports had shown growth of over 3 million barrels a week for the past two consecutive weeks. The sudden halt of this inventory growth had a sharp effect on the value of Crude Oil as its price jumped above $100 a barrel shortly after the report was published.
Thursday's publication of natural gas storage in the United States, however, was enough to send commodity prices back down. After peaking near $101 a barrel, the price of oil fell back to $98 on moves by commodity investors to sell commodities amid an expectation for decreased demand following soft manufacturing data in the US. President Barack Obama's endorsement of the democratic uprisings, known as the ‘Arab Spring,' in the Middle East has also caused enough of a stir to expect some shifts in oil prices as reforms are anticipated. Whether this buzz will persist through the end of the trading day is yet to be seen.
The EUR/USD pair gained about 300 pips over the past week, and seems to be in the midst of a bullish move. The pair is currently testing the 1.4350 resistance level. If it will cross the resistance level it has potential to reach as high as the 1.4500 level.
There is a very distinct bearish channel formed on the 4-hour chart, and the cable is floating in the middle of it. However, as a bullish cross takes place on the 4-hour chart's MACD, it seems that a bullish correction might be impending. Going long with tight stops might be the right strategy today.
Ever since the USD/JPY pair bottomed at the 79.50 level, it is steadily correcting upwards and is currently trading near the 81.70 level. In addition, both the Slow Stochastic and the MACD on the daily chart are providing bullish signals, suggesting that another bullish move could take place today. Going long might be the right choice today.
The USD/CHF pair has been range-trading between the 0.8760 and the 0.8950 levels for the past week. Currently, the pair seems on its way towards the lower border of the range. If the pair will manage to cross the 0.8760 level, it might trigger a bearish move, with a key-target level of 0.8600.
The Wild Card
After several days of mixed trading, it seems that gold has stabilized near the $1,500 an ounce range. Nevertheless, as the daily chart's RSI has crossed the 30-line and continues to point upwards, it seems that a bullish session might be expected today. This could be a good opportunity for forex traders to catch the trend at its beginning.
|13:30||CAD||NZD Core Retail Sales||m/m||1.0%||0.6%||0.6%|
|14:45||USD||Flash Manufacturing PMI||55.5||56.2||-|
|15:00||USD||New Home Sales||440K||455K||-|
|15:30||USD||Crude Oil Inventories||10.0M||2.6M||-|
|22:00||NZD||Official Cash Rate||2.75%||3.00%||-|
|22:00||NZD||RBNZ Rate Statement||*||*||*|
|01:00||EUR||Spanish 10-y Bond Auction||3.29|2.1||*||-|
|09:00||EUR||German Ifo Business Climate||110.7||110.5||-|
|10:00||EUR||ECB President Draghi Speaks||*||*||*|
|11:00||GBP||CBI Realized Sales||13||18||-|