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Wednesday, 5 Oct 2011
Dollar Anticipates Release of U.S. ADP Non-Farm Employment Change
The U.S. ADP Non-Farm Employment Change is the primary publication today that is set to determine the level of the USD when it is released at 12:15 GMT. The other main releases that are set to dominate forex trading, especially for currencies such as the Dollar and EUR is the publication of the Retail Sales from the Euro-Zone at 9:00GMT and Crude Oil inventories at 14:30 GMT. Traders may find good opportunities to enter the market following these vital announcements.
USD - Dollar Falls Broadly against the EUR on Fed's Comments
The US dollar fell against the EUR on Tuesday after Federal Reserve Chairman Ben Bernanke said the central bank is prepared to take further steps to help the economy. By yesterday's close, the dollar fell 1% against the EUR to 1.3276.
Federal Reserve Chairman Ben S. Bernanke said the central bank stands ready to take additional steps to boost U.S. growth and cautioned lawmakers against budget moves that would harm a “sluggish” recovery. The remarks signal Bernanke may not be finished after attempts in August and September to strengthen record monetary stimulus with unconventional tools. The central bank's near-zero benchmark interest rate and $2.3 trillion of housing and government-debt purchases since 2008 have failed to produce self-sustaining growth in the economy and employment.
Looking ahead to today, there are few news releases coming out of the U.S. These include the ADP Non- Farm Employment Change and Crude Oil Inventories at 12:15 GMT and 14:30 GMT respectively. Better-than-expected results may help the Dollar recover some of yesterday's losses against the EUR. On the other hand, if the results turn out to be lower than forecast, then the Dollar may record a fairly bearish session in today's trading. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow these releases.
EUR - Euro rallies Against Dollar and GBP
The euro bounced from a near nine-month low and rallied sharply against the dollar on Tuesday after Federal Reserve Chairman Ben Bernanke said the central bank is prepared to act further to help the economy. As the result, the EUR rose sharply against the USD, pushing the oft-traded currency pair to 1.3276. The 16 nation currency experienced similar behavior against the GBP and closed at 0.8640.
The move higher in the euro then fed on itself as investors who had bet against the single currency were forced to buy and cover short positions to prevent more losses.
The single currency fell to $1.3145, its weakest since January as a slide in stocks and a collapse in the shares of Franco-Belgian banking group Dexia which has hefty exposure to Greek debt prompted flight to the safety of the world's most liquid currency.
Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the Retail Sales. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term.
JPY - JPY Free Fall Continues
The Japanese Yen saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell against the EUR and closed at 101.90, while the GBP/JPY cross also rose to around 118.30.
The JPY's trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially the ADP Non- Farm Employment Change at 12:15 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
Crude oil - Crude Oil Falls Below $75 a Barrel
Crude oil prices dropped below $75 per barrel to its lowest level in more than a year, as fears of another recession grew.
An ongoing worry for investors in recent months has been Greece's debt problems and their impact on the rest of Europe. Without more financial aid, Greece will start running out of money in two weeks. A Greek default could spread to neighboring countries and possibly trigger widespread banking problems. That would hamper world energy demand as lending slows and businesses cut spending.
The EUR/USD has gone increasingly bullish today, and currently stands at the 1.3240 level. The 8-hour chart's Slow Stochastic supports this currency cross to rise further today. However, the hourly chart's Stochastic Slow signals that a bearish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
The price of this pair appears to be floating in the over-sold territory on the 8-hour chart's RSI indicating an upward correction may be imminent. The upward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
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. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the 8-hour chart's Stochastic Slow signals that a bearish reversal is imminent. . Going short with tight stops might be a wise choice.
The Wild Card
Crude oil prices are once again dropping, and it is currently traded around $75.50 per barrel. And now, the 8-hour chart's Slow Stochastic is giving bullish signals, indicating that oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.
|09:00||EUR||German Ifo Business Climate||103.2||103.0||-|
|14:00||EUR||Belgian NBB Business Climate||-6.8||-5.3||-|
|14:45||USD||Flash Services PMI||57.1||57.3|
|23:50||JPY||Monetary Policy Meeting Minutes||3.5%||3.6%||-|