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Wednesday, 6 Jan 2010
Dollar, JPY Gain, as Disappointing U.S Data Pushes Investors back to Safety
Tuesday's much worse than expected Pending Homes Sales release boosted the U.S. Dollar and the Yen as investors returned to the safety of the greenback and the Japanese currency. Both the Yen and Dollar reverted back to gaining in times of negative economic data. A full news day today will likely prove quite volatile for the major pairs, particularly in light of yesterday's disappointing surprise.
USD - USD Regains Safe Heaven Status
The USD advanced against most of its counterparts except the Yen Tuesday, as a slew of negative data reduced appetite for riskier assets, and investors turned to the safety of the greenback and the JPY.
The Pending Home Sales report plunged a seasonally adjusted 16% in November from October, pressuring equities and reducing the appeal of riskier assets. The Dollar Index rose to 77.684, up from 77.503 late Monday and 77.34 earlier in the session.
Today, investors' attention will be focused on the release of the FOMC meeting minutes at 19:00 GMT as they will look for any clues regarding rate increases and a timeline for the removal of stimulus and a tightening of monetary policy. Today will also see the release of the ADP Non Farm Payroll Report at 13:15 GMT. This will be a prelude to Friday's highly anticipated Non Farm Employment release. The ISM Non Manufacturing PMI is expected at 15:00 GMT. This eventful day will likely prove very volatile for the greenback and its counterparts.
EUR - EUR Pressured by Renewed Credit Concerns
Credit concerns returned to the Euro-Zone Tuesday, putting negative pressure on the common currency, with Iceland facing a downgrade of its credit rating. The EUR was little affected by data showing unemployment in Germany unexpectedly fell in December, the sixth consecutive monthly decline. Late Tuesday in New York, the EUR was at $1.4368 from $1.4411 late Monday and at 131.73 yen from 133.42 yen. The U.K. Pound was at $1.5996 from $1.6101. A decline in equities following the release of the disappointing U.S Pending Homes Sales data put further pressure on the EUR as investors shied away from riskier assets and turned to the safety of the USD and JPY.
With U.S economic data dominating the news releases today, the EUR and Pound's movements will likely be affected by the movements of the U.S currency. However, several important news releases are expected from Europe today, including the release of the British Services PMI at 9:00 GMT and the Euro-Zone Industrial New Orders at 10:00 GMT. After several months of expansion, the figure is expected to show a decline for the previous month; this will likely put further pressure on the EUR/USD pair.
JPY - JPY Benefits form Negative Economic Data
The Yen traded near a two-week high against the Dollar as disappointing U.S Pending Home Sales data signaled an uneven U.S economic recovery. This reduced expectations that the Federal Reserve will raise interest rates earlier than expected.
The Yen traded early this morning at 91.64 per USD from 91.71 yesterday when it declined to 91.26, the lowest level since Dec. 25. The JPY was at 131.79 per EUR from 131.75 yesterday. Adding further pressure to the USD versus the JPY was a decline in U.S Treasury Yields, making it less attractive for Japanese investors to buy foreign currency. Today's economic data releases will likely provide a direction for the Yen.
Crude Oil - Crude Gains for Ninth Consecutive Day
Light, sweet crude for February delivery settled 26 cents, or 0.3%, higher at $81.77 a barrel on the New York Mercantile Exchange. While oil prices continued to grow Tuesday, the rally flattened out as equities declined and USD gained versus most of its major counterparts. Light volume trading ahead of the release of today's U.S. crude and fuel inventory data added to the decline in momentum. The report from the Energy Information Administration (EIA) is due at 15:30 GMT.
Total stockpiles declined to their lowest levels since March last week as demand improved, driven up by an increase in heating oil consumption due to exceptionally cold weather in most of the U.S, the world's largest oil consumer. This week's data is expected to show a drop in stockpiles, and might lead to a reversal for the current rally in oil prices.
After going through a mild technical correction, it appears that the pair has resumed its general downtrend, as it is now trading at the 1.4350 level. Currently, as all oscillators on the 4-hour chart are pointing down, it seems that going short might be the preferable decision today.
The pair is still trading within the bearish channel as the direction still points downward. However there is a bullish hint in the form of a cross on the 2 hour Slow Stochastic. The hourly chart's Bollinger Bands are tightening which indicates that the break is near. Going long with tight stops might be smart today.
This pair is still in the midst of a steady uptrend which is not yet showing any sign of leveling out. There is also a very accurate bearish channel forming on the hourly chart indicating that there is still plenty of steam left in this bullish move. Once this pair breaches the 92.20 level it's likely to make another sharp break upwards.
The pair is in the midst of a bullish correction, and is currently trading around the 1.0340 level. As all oscillators on the 4 hour chart are pointing up, another bullish session might take place. Going long seems to be preferable.
The Wild Card
After a period of volatile sessions, all oscillators on the hourly and 4 H charts are providing bullish signals, suggesting that this commodity is building a strong bullish momentum. Currently trading at $1536, Platinum might aim for the $1610 mark in the near future, giving forex traders an opportunity to enter the commodity at a convenient price.