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Friday, 20 Nov 2009
Dollar, Yen Gain on Bleaker Economic Recovery Outlook
The Dollar and Yen gained against the EUR and other higher yielding currencies Thursday on concerns about the sluggish pace of the world economic recovery. A Decline in equity and commodity prices pushed investors back into the USD and JPY as safe haven currencies.
USD - USD Gains on Weak U.S Economic Data
The Dollar gained versus the EUR and other higher yielding currencies on Thursday following the release of weak U.S. economic data and a steep drop in global equities. The Dollar index rose to 75.3108 from 75.108 late Wednesday. The Dollar was supported versus other currencies as U.S. stocks fell, following weakness in European and Asian equities. The Dollar tends to have an inverse relationship to moves by equities and commodities throughout the global financial crisis.
The U.S. Labor Department said 505,000 Americans filed initial claims for unemployment benefits in the latest week, unchanged from the previous week and a level considered still too high to indicate payrolls numbers will turn positive in the near term. U.S. leading indicators rose 0.3% in October after a 1% gain in September; signaling the U.S economy might be recovering at a decelerating rate.
Currency movements have been largely confined to recent ranges as the market continues to debate the speed of economic recovery and the direction of U.S. monetary policy.
EUR - EUR Struggling to Rise above $1.50 Level
The EUR and other higher yielding currencies declined Thursday as weakening confidence about the global economic recovery prompted investors to turn to the Dollar and Yen for safety. Disappointing U.S economic data as well as steep drop in equities triggered a decline in demand for risk. Signals from world leaders regarding a more restrictive official stance toward capital flows and currency volatility also contributed to investors' risk aversion. The EUR was at $1.4910 from $1.4960 late Wednesday and at Y132.54 from Y133.73. The Pound was at $1.6651 from $1.6740.
The EUR is struggling to rise above $1.50 and is mainly caught between $1.48 and $1.50 trading levels. Further caution arises from ambivalent signals coming from Federal Reserve speakers about the possible timing of interest-rate hikes as well as the Fed's attitude toward the weakening Dollar.
JPY - JPY Trades Near a Two Week High versus Euro
The JPY traded near a two week high versus the EUR after the biggest drop in global equities this month prompted investors to turn to the safety of the Japanese and U.S. currencies. The Yen traded at 132.80 per EUR early this morning, after climbing yesterday to 131.76, the strongest level since Nov. 3. Japan's currency was at 88.98 against the USD, following a 0.4% gain.
Concerns about the global economy tend to favor the safe-haven Dollar and the Yen, and decrease demand for assets correlated with economic growth such as stocks and currencies from commodity-rich countries. Today the Bank of Japan will conclude its two-day policy meeting, and is widely expected to leave its overnight call rate target at 0.1%.
Crude Oil - Crude Declines on Falling Equities
Crude Oil prices fell Thursday after 4 consecutive days of gains on poor U.S economic data and falling equities. Further pressure came on Oil prices as the Dollar advanced against the EUR, reducing the appeal of commodities as an alternative investment. It appears that U.S. energy demand remains weak while inventories are still high; furthermore, this week's U.S. economic data seems to be pointing to a slower pace of recovery as was previously expected.
Crude Oil for December delivery fell $2.12, or 2.7%, to settle at $77.46 a barrel on the New York Mercantile Exchange; the biggest daily drop since Oct. 30. Equity markets along with Dollar levels have been the dominant and most powerful influence on the oil market in recent months.
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 typical range trading on the hourly chart continues. The daily chart RSI is floating in neutral territory. However, the 4-hour Chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long might be a wise choice today.
The price of this pair appears to be floating in the over-sold territory on the weekly chart's RSI indicating an upward correction may be imminent. The upward direction on the daily chart's Momentum oscillator also supports this notion. Going long with tight stops may turn out to be a good strategy today.
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the weekly Chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The Wild Card
The Oil prices dropped significantly yesterday, and it is currently traded around $78.45 per barrel. However, the 4-hour chart's RSI is floating in an oversold territory suggesting that a recent downwards trend is loosing steam and a bullish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|13:30||USD||Core Durable Goods Orders||m/m||-0.7%||0.6%||-0.8%|
|13:30||USD||Durable Goods Orders m/m||m/m||-0.9%||0.6%||-3.4%|
|14:00||USD||S&P/CS Composite-20 HPI||y/y||4.5%||4.7%||-|
|14:45||USD||Flash Services PMI||53.3||53.9||-|
|15:00||USD||CB Consumer Confidence||92.6||95.7||-|
|15:00||USD||New Home Sales||438K||452K||-|
|15:00||USD||Richmond Manufacturing Index||7||6||-|
|23:30||AUD||MI Leading Index||m/m||-0.1%||-||-|
|00:00||EUR||German 30-y Bond Auction||1.77|1.2||-||-|
|00:30||AUD||Trimmed Mean CPI||q/q||0.4%||0.5%||-|
|07:00||CHF||UBS Consumption Indicator||1.29||-||-|
|07:00||EUR||GfK German Consumer Climate||9.0||9.2||-|
|07:00||EUR||German Import Prices||m/m||-0.8%||-1.4%||-|