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Wednesday, 23 Jul 2008

Dollar Advances on Speculation of Euro-Zone Turmoil.

The dollar appreciated against all of the major currencies yesterday. The reason for this appreciation is a direct reaction to speeches by the US Treasury Secretary Henry Paulson and the Federal Reserve Bank of Philadelphia President Charles Plosser. In their speeches, they have stressed policies that could strengthen the dollar.

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Economic News

USD - USD Reacts to Paulson & Plossers' Speech.

The dollar appreciated against all of the major currencies yesterday. Traders should note that the USD hit a 10 day high versus the Euro at 1.5757. The dollar ultimately gained almost 150 points and closed at 1.5780. The greenback against the CHF appreciated over 130 points and closed at 1.0307. The USD vs. the JPY rose by about 90 points were obtained and closed at 107.31. The reason for this appreciation is a direct reaction to speeches by the US Treasury Secretary Henry Paulson and the Federal Reserve Bank of Philadelphia President Charles Plosser. In their speeches, they have stressed policies that could strengthen the dollar. Secretary Paulson gave encouraging words regarding the mortgage crisis, while President Plosser hinted that interest rates will rise in the near future. In addition, two more indicators came to light, the Richmond Manufacturing Index and the House Price Index. Both of these indicators declined -16 and -0.3% respectively, however the House Price Index fell by less than forecasted.

Today only two indicators are expected for the red white and blue. However, the Crude Oil Inventories could add to yesterday's appreciation of the dollar, just like last time, if the indicator will surprise the analysts and ascend. As well, the Beige Book will come out, yet it is must likely be ignored by investors, because the book is considered a secondary source.

US banks are trying to sell off their lucrative money-management departments in an attempt to raise much needed cash. The banks are doing this in spite of the recent rally in their stocks. On condition the banks sell these departments to buyers abroad, the buyers will need to convert their money into dollars to complete these deals. Thus a greater demand for the USD will ensue and the most recent trend will carry on.

Investors should keep their eyes open on the Crude Oil Inventories indicator before deciding on today's trend.

EUR - Volatile Trading Leads to Major Sell-off for the EUR.

The Euro weakened against most of the major currencies except the CHF. The EUR lost a most notable 150 points against the USD and closed at a 10 day low of 1.5780. The reason for this movement was not dependent on news from the Euro-Zone as there weren't any news releases yesterday from the EZ.

In contrast, three economic indicators will be published from the Euro-Zone today. The French Consumer spending which is expected to have a declining trend should come in at -0.6%. The next two indicators should not have a great effect on the Euro. The Italian Retail Sales should come in at -0.1%. And the Industrial New Orders, that measures new purchasing orders of local manufacturers for durable and non-durable goods, is forecasted at -1.3%.

Thus a preferable strategy for today will be to go short; however investors are advised to pay close intention to news events from other effecting countries.

JPY - Will The Japanese Trade Balance Data Help JPY to Rise?

The Yen completed yesterday's trading session with mixed results. The Yen lost almost 90 points vs. the USD and eventually closed at 107.31, however the Yen gained 55 points versus the CHF and closed at 104.09. Yesterday's indicators were not published in Japan thus this trend was generated by news events from around the world.

Today only one indicator will come out from Japan. The Trade Balance is projected to come in at 0.28T. This indicator measures the difference between imported and exported goods during a reported month. Investors should note that on Thursday the Tokyo Core CPI that measures price changes from year to year will come out as well as other indicators. Today, traders should keep an eye on the Yen's counterparts before placing their orders.

Crude Oil - Crude Fall As Storm Risk Subsides.

Crude Oil futures fell yesterday as fears diminished over the threat from Hurricane Dolly to energy equipment in the U.S. Gulf of Mexico.

Forecasters said an Atlantic hurricane would steer clear of offshore oil platforms and the greenback gained against other currencies. None of the computer models used to predict storm tracks indicated it would steer toward the Gulf of Mexico, home to about a quarter of U.S. oil production. The gain in the U.S. dollar triggered some technical selling in the commodities markets. As a result, Crude oil in New York dropped $3.09 a barrel to $127.95 a barrel yesterday, the lowest price since June 5. Oil was recently at $127.97 in after-hours trading.

Crude Oil weakness and some strengthening in the U.S. dollar forced Gold prices down. August Gold fell $15.10 to settle at $948 a troy ounce.

Technical News


After a sharp drop yesterday, the range trading continues, as the pair floats aimlessly on the hourly and the 4 hour chart. The oscillators are still floating in neutral territory with no distinct direction signal. There seems to be moderate bullish momentum on the hourlies, yet forex traders are advised to wait for a clearer signal before entering the market on this one


Despite yesterday's sharp drop, the bullish channel on the daily chart is still intact. According to a 4 hour chart, the pair is oversold; therefore a fresh bullish momentum may be quite imminent on the 4 hour chart as well. Going long with tight limits might be a preferable strategy today.


The pair is still in a bullish configuration and is now floating around 107.30. The momentum on the 4 hour chart is very strong and it appears that there might be a testing of the Fibonacci level of 108.00. The Bollinger Bands are tightened on the 4 hour chart implying that volatility will increase during the day; meaning that traders may have a good opportunity to make profits during today's trading session.


There are very strong bullish signals on both the hourlies and the daily charts. The RSI and Momentum are positively sloped. This pair is trending upwards and there are no imminent indications of a reversal. Therefore traders can maximize profits by entering steady long positions

The Wild Card


There is a very accurate bearish channel forming on the daily chart, as the break through the bottom level of it was just validated. Silver now has enough bearish momentum to be carried into the 17.00 zone. This is a great opportunity for forex traders to use this technical break and swing into a high potential downwards move.

Current Time: 11/28 19:50 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
22:45NZD+ Building Consents m/m-5.7%--1
EUR+ German Prelim CPI m/m0.0%--3
00:30AUD+ MI Inflation Gauge m/m0.0%--1
00:50JPY+ Retail Sales y/y-0.2%--3
00:50JPY+ Prelim Industrial Production m/m1.1%--1
01:00AUD+ HIA New Home Salesm/m-4.0%--1
01:00NZD+ ANZ Business Confidence10.5--5
01:30AUD+ Company Operating Profits q/q-1.9%--3
01:30AUD+ Private Sector Credit m/m0.8%--1
06:00JPY+ Housing Startsy/y2.6%--1
09:00CHF+ KOF Economic Barometer99.8--3
10:30GBP+ Net Lending to Individualsm/m4.9B--3
10:30GBP+ M4 Money Supplym/m-1.0%--1
10:30GBP+ Mortgage Approvals69K--1
11:00EUR+ Italian Prelim CPI m/m0.2%--1
14:30CAD+ Current Account-17.4B--3
15:45USD+ Chicago PMI56.2--3
16:00USD+ Pending Home Salesm/m-2.3%--3
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