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Thursday, 11 Nov 2010
Dollar Down ahead of G20 Meeting
The dollar declined versus riskier counterparts in early trading today, on speculations that emerging economies will let their currencies float freely and appreciate versus the USD. The rise of the Chinese yuan to the strongest level since 1993 boosted these speculations. Meanwhile, crude prices rallied to a two year high on a drop in inventories and improved economic outlook.
USD - USD Rallies versus the Yen on Positive Economic Data
The USD rallied Wednesday, advancing strongly against the yen and euro, as the release of several economic indicators showed encouraging signs for the U.S. economy. After the data, the dollar hit an intraday high against the yen, reaching 82.67, the strongest since Oct. 7.
The greenback gained as weekly unemployment claims report showed a higher than expected decline in weekly jobless claims as well as a narrowing of the trade deficit. An unsuccessful 30 year Treasuries auction later in the day as well as the release of further details concerning the Fed's Bond buying program weighed on the greenback causing it to lose some of its gains against the yen. The EUR/USD pair closed the day virtually unchanged from the morning session.
With a bank holiday in the US today no news is expected from the region. Traders should, however, follow any news that might come from the G20 meeting throughout the day. The low liquidity combined with possible news regarding future monetary moves is likely to provide a rather volatile trading day.
EUR - Sovereign Debt Concerns Continue to Weigh on the Common Currency
The EUR/USD pair heavy price swings continued Wednesday, as sovereign debt concerns continue to plague the euro with the common currency falling to $1.3671 as an unsuccessful Irish debt auction highlighted the high cost of insuring weak members of the euro-zone against debt default. The euro has since recovered however, gaining back to above $1.38 in today's early Asian trading.
It seems that the markets are torn between quantitative easing measures by the Federal Reserve on the one hand and euro zone's sovereign-debt crisis on the other, signaling that the massive swings in the pair's prices will likely continue in the short term.
The pound remained strong versus the USD and the euro as the BOE, in its latest quarterly inflation report, indicated inflation will likely remain above 2% for the time being, indicating the Bank of England is not likely to follow the Federal Reserve by expanding monetary easing policies.
JPY - JPY Down as Global Economic Prospects Improve
Japan's currency fell to its weakest level in more than a month against the greenback yesterday as positive economic data reduced the appeal of the safe haven currency. The dollar hit an intraday high against the yen, reaching 82.67, the strongest since Oct. 7. The yen has since gained some strength, trading around the 82.15 level during today's Asian trading. The yen also remained mainly unchanged against the euro, currently trading at 113.40 per euro from 113.41 in New York yesterday.
No major news are expected today from the region as well as most other major markets; however, traders should follow the G20 meeting taking place today and tomorrow for clues about the future of currency relations.
Crude Oil - Crude Rallies on a Drop in Inventories
The price of light, sweet crude oil futures contract for December delivery rose $1.09, or 1.3%, to $87.81 a barrel on the New York Mercantile Exchange. The contract hit an intraday high of $88.10 Wednesday, continuing its rise in today's early Asian trading, and is currently trading around $88.30 a barrel.
Crude oil prices rallied to a two year high after a Department of Energy report showed a steeper than expected drop in fuel stockpiles, continuing a slide from 27-year highs. Oil inventories fell 3.4 million barrels in the week ended Nov. 5.
Following yesterday's sharp drop, an upward correction may be in store for the pair today. The RSI for the pair is floating in the oversold territory on the 8 hour chart with a bullish cross evident on 8 hour and daily charts' Slow Stochastic. Going long for the day is advised.
A bearish cross is seen on the 2 hour and 4 hour charts' Slow Stochastic with the RSI for the pair floating in the overbought territory on the 2 hour chart. Going short with tight stops may be the preferred strategy for the day.
A breach of the upper Bollinger Band is evident on the 8 hour and daily charts with the RSI for the pair floating in the overbought territory on the 8 hour chart. A bearish cross is seen on the 2 hour MACD as well as the 8 hour chart's Slow Stochastic. Going short for today may be a good option.
A downward trend may be seen for the pair today as a bearish cross is seen on the 8 hour chart's Slow Stochastic while the RSI for the pair is floating ion the overbought territory. Furthermore a doji candlestick can be seen on the daily chat, indicating a reversal in direction might take pace. Going short with tight stops is advised for today.
The Wild Card
The EUR may see a reversal today as the RSI for the pair is floating in the oversold territory on the daily, 8 and 4 hour charts while a bullish cross is seen on the 8 hour and daily charts' Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the daily chart, indicating and impending upward move. Forex traders may take this opportunity to go long for the day at a great entry price.