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Friday, 29 Oct 2010

Dollar Anticipates Release of US Advance GDP

The US Advance GDP is the primary publication today that is set to determine the level of the dollar when the report is released at 12:30 GMT. The other main releases that are set to dominate forex trading, especially for currencies such as the dollar and euro, is the publication of the European Unemployment Rate and Revised University of Michigan (UoM) Consumer Sentiment report at 9:00 and 13:55 GMT, respectively. Traders may find good opportunities to enter the market following these vital announcements.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownupupnodown
Weekly Trenddownupdownupdowndown
Resistance1.39801.603581.650.99600.98850.8825
1.39351.600081.300.99200.98400.8795
1.39001.596081.000.98900.98000.8750
Support1.38501.590080.250.98250.97250.8670
1.38151.587079.900.98000.97000.8625
1.37651.582079.550.97650.96650.8600

Economic News

USD - US Dollar Extends Losses

The US dollar extended losses against most of its major currency pairs on Thursday as speculation grew on a government stimulus plan to inject cash into the financial markets. By yesterday's close, the dollar had fallen around 1% against the EUR to 1.3930. The dollar experienced similar behavior against the GBP and closed at 1.5940.

The greenback has trended lower in recent weeks amid expectations the Federal Reserve will soon renew large-scale asset purchases to boost the economy, in what is known as quantitative easing. Speculation on easing steps grew after the New York Fed on Wednesday released a survey which asked market participants about their expectations for the size of any further debt purchases by the Fed. This survey is having some impact on market sentiment.

Another leading indicator released yesterday was US Unemployment Claims. This number handily beat last week's results, but failed to provide strength to the dollar as investors may be waiting for key data due to be released today to implement their trading strategies.

Today's Advance GDP and Revised UoM Consumer Sentiment data are expected to have a strong impact on the US currency. These figures could be a surprise, and the dollar could go either way as a result of highly positive or negative data. In any case, traders are unsure about how the market will react to today's news. A weak report could feed risk aversion, boost Treasuries and actually aid the US dollar. Then again, a better than expected result might be seen as a sign of relative US economic strength, and lift the dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the dollar's expense. Today will be exciting for intra-day, retail traders, that is certain.

EUR - EUR Gains on Stock Market Rallies and Bearish Dollar

The euro strengthened against most of its major counterparts yesterday, continuing to prove that, for the time being, this is one of the more solid currencies that traders can rely on to provide them with steady profits. The 16-nation single currency extended gains versus the USD on Thursday, to close around 1.3930 amid a broad sell-off in the US currency. The EUR experienced similar behavior against the CHF and closed at 1.3690.

The EUR was affected by the global stock market rally and the bearish dollar. The US stock market rally led investors to buy-back into the EUR, as they looked for returns on buying commodity-linked and higher-yielding currencies in Thursday's trading.

Looking ahead to today, the most important economic indicator scheduled to be released from the euro zone is the Unemployment Rate at 9:00 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a better than expected result may continue to boost the EUR in today's trading.

JPY - Expect Another Volatile Session as No Japanese News is Expected

The Japanese yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session around the 112.80 level. The JPY also saw bullishness against the USD as it jumped around 80 points and closed at 80.90.

Investors are showing concern over a recent rise in the JPY as it makes Japanese products less competitive abroad and hurts the value of overseas sales when translated back into the Japanese currency. With steady gains primarily against the dollar, much of the yen's bullish movement could be contributed to the repatriation of overseas earnings by Japanese companies into the local economy. This has had a positive effect on major JPY currency pairings, as the rising turmoil in the market is leading to more investment in the Japanese currency.

Crude Oil - Crude Oil Rises on Weaker Dollar

Oil prices rose yesterday in seesaw trading as traders eyed the weak dollar and a surprise drop in weekly job claims which bolstered confidence in the US economic recovery.

Oil and other commodities denominated in dollars for global trading tend to rise when the US currency falls since they become cheaper for holders of other currencies. A move away from dollar-based pricing of the world's leading commodity could further weaken the greenback.

As for today, traders should pay attention to the US Advance GDP report, as it has tended to have a large impact on Crude Oil's prices recently, especially in the short-term.

Technical News

EUR/USD

The EUR/USD experienced a bullish trend yesterday. However, it seems that this trend may be coming to an end. For example, the 4-hour chart's Stochastic (slow) signals that a bearish reversal is imminent. A downward trend today is also supported by the weekly chart's Stochastic (slow). Going short with tight stops may turn out to pay off today.

GBP/USD

The daily chart is showing mixed signals with its RSI fluctuating in the neutral territory. However, there is a fresh bearish cross forming on the 4-hour chart's Stochastic (slow) indicating a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be a preferable strategy.

USD/JPY

There is a fresh bullish cross forming on the 4-hour chart's Stochastic (slow) indicating a bullish correction might take place in the nearest future. The upward direction on the weekly chart's Momentum oscillator also supports this notion. Going long with tight stops might be the right strategy today.

USD/CHF

The bullish trend is losing steam and the pair seems to be consolidating around the 0.9850 level. The daily chart's RSI is already floating in the over-bought territory suggesting that the recent upward trend is losing strength and a bearish correction may be impending. Going short with tight stops might be the right strategy today.

The Wild Card

Gold

Gold prices rose significantly in the last week and peaked at $1345.50 an ounce. However, the 4-hour chart's Stochastic (slow) is now giving bearish signals, indicating that gold prices might go down today. This could give forex traders a great opportunity to enter a correction period, and at a nice entry point.

Current Time: 04/16 07:12 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/16
09:00EUR+ Italian Trade Balance0.37B1.27B-1
09:30GBP+ Claimant Count Change-34.6K-30.2K-5
09:30GBP+ Unemployment Rate7.2%7.2%-5
09:30GBP+ Average Earnings Indexq/q1.4%1.8%-3
10:00CHF+ ZEW Economic Expectations19.0--3
10:00EUR+ CPI y/y0.5%0.5%-3
10:00EUR+ Core CPI y/y1.0%0.8%-3
13:00USD+ FOMC Member Stein Speaks***3
13:30CAD+ Foreign Securities Purchases1.09B4.57B-3
13:30USD+ Building Permits1.01M1.00M-5
13:30USD+ Housing Starts0.91M0.97M-3
14:15USD+ Capacity Utilization Rate78.4%78.8%-3
14:15USD+ Industrial Production m/m0.6%0.5%-3
15:00CAD+ BoC Monetary Policy Report***5
15:00CAD+ BoC Rate Statement***5
15:00CAD+ Overnight Rate1.00%1.00%-5
15:30USD+ Crude Oil Inventories4.0M--3
16:15CAD+ BOC Press Conference***5
17:15USD+ Fed Chair Yellen Speaks***5
18:25USD+ FOMC Member Fisher Speaks***3
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