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Thursday, 27 Aug 2009
Dollar Benefits on U.S. Economic Data; Today Traders Focus on the U.S Unemployment Claims
The U.S dollar gained ground Wednesday against the EUR and the British pound, after strong data on orders for new U.S.-made durable goods and new home sales comforted expectations of an improvement in the economy. The greenback traded higher after the durable-goods orders report said orders for July rose by 4.9%, the largest increase in 2 years. Investors will be watching for the new U.S. jobs report today before making significant moves.
USD - Dollar Rises on Signs of Economic Recovery
The Dollar rallied yesterday against most of its major counterparts after data suggesting the slowdown in the U.S. housing market has bottomed out. A better-then-expected result gave further support to the U.S. currency. The Dollar has been sold off recently partly due to growing optimism regarding the state of the U.S. economy. The USD finished yesterday's trading session about 50 pips higher against the EUR at the1.4249 level.
Yesterday's main U.S economic event was the New Home Sales data. New U.S. home sales hit its highest level in 10 months in July. Orders for Long-Lasting Manufactured Goods also surged yesterday and are interpreted by traders as fresh evidence of a modest economic recovery. Sales of "New Single-family Homes" rose by 9.6% from June, the highest rate since September. It is in fact the biggest percentage gain since a matching increase in February 2005, another indication that housing activity had stabilized after a three-year slump.
Looking ahead to today, there are few important news releases coming out of the U.S. These include the Prelim GDP and Unemployment Claims at 12.30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the USD in the short-term. 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.
EUR - EUR Records Mixed Results against the Majors
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Sterling on Wednesday, to trade above $0.8775 amid a broad sell-off in the GBP. The EUR experienced similar behavior against the CHF as the pair rose from 1.5185 to 1.5220 by days end. The EUR did see bearishness as well against the USD as it lost over 50 pips and closed at 1.4249.
A leading indicator released yesterday from Europe was the German Ifo Business Climate report. Germany holds the largest and strongest economy in the Euro-Zone, and thus the relevant publications from this economy usually have a hefty impact over the EUR. This indicator jumped to 90.5 in August from 87.4 in July, above economists' expectations. Analysts said that this is a plus for the European economy, and it's a sign confirming that the real economy is starting to get out of the period of freefall.
Sentiment in the Euro-Zone economy has brightened in the past month following better-than-expected news. The EUR is showing signs of resilience even though there was volatility throughout non-Euro crosses. It will be crucial for traders to identify how the preceding economic indicators from the U.S., Japanese, and other key economies will affect their positions.
JPY - The Japanese Yen Extends its Bullish Run
The Japanese yen rose for a second day against the EUR amid concerns financial losses will delay a recovery in the global economy, boosting demand for Japan's currency as a safe haven. The Yen also rose to a 5-week high against the British pound as a smaller-than-expected July trade balance data from Japan prompted investors flee from riskier-assets.
The outlook for economy in Japan is still doubtful as Japan's export slump deepened in July, indicating the boost in demand that helped pull the country out of its recession last quarter may be short-lived. Shipments abroad fell 36.5 % from a year earlier, steeper than June's 35.7% drop
Crude Oil - Crude Oil Falls 1.4% on U.S Inventory Data
The price of Crude Oil fell 1.4% or $1.00 to $71.20 yesterday, as the latest inventory numbers from the U.S. Energy Information Administration (EIA) showed an increase in crude oil stockpiles. The EIA reports that U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 200,000 barrels in the week ending August 21, from the previous week.
Crude Oil also declined on concern China may cut back on industrial investment, slowing demand for fuels in the world's second-largest energy user. Crude traded low after China said it was studying curbs on overcapacity in industries including steel and cement. Some analysts said the failure to break through the key level of $75 may signal that prices have topped out, with demand for oil still depressed by the global economic slowdown and murky signs of a broad recovery.
After failing to breach the 1.4400 level, the pair has lost its bullish momentum and is currently traded around the 1.4230 level. The daily chart's RSI has dropped below the 70 line, signing that the bearish move might be extended. Going short could be the right choice today
There is a very accurate bearish channel formed on the 4 hour chart, as the pair is now floating in its lower section. In addition, a bearish cross on the 4-hour chart's MACD suggests that the bearish momentum has more steam in it, with the potential of reaching the 1.6160 level.
After the volatile downward movement in the last 3 days, this pair seems poised for a modest correction today. The price currently floats in the over-sold territory on the RSI of the hourly, 4-hour and daily charts, and there is a fresh bullish cross on the 1-hour chart's Slow Stochastic. All of this information leads to the idea that going long might be a wise strategy throughout the day.
It appears that the pair has resumed its bullish activity, as it's testing the 1.0710 level. Currently, a bullish cross on the daily chart's Slow Stochastic is suggesting that the uptrend could go farther. Going long might be the preferable choice today.
The Wild Card
There is still a bearish configuration on the daily chart, indicating that the momentum is still down. However, hourly chart's Slow Stochastic is about to enter an oversold territory, indicating that there might be a minor bullish correction before a broader bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a general bearish trend.
|15:45||USD||Final Manufacturing PMI||52.9||52.9||51.1|
|16:00||USD||IBD/TIPP Economic Optimism||46.9||- 47.3||42.0|
|16:00||USD||ISM Manufacturing Prices||44.0||52.6||39.0|
|03:00||NZD||ANZ Commodity Prices||m/m||-11.2%||-||-|
|09:00||EUR||Spanish Unemployment Change||-74.0K||-||-|
|14:15||USD||ADP Non-Farm Employment Change||185K||204K||-|