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Thursday, 30 Sep 2010
Dollar Falls to a 5-Month Low
The US dollar reached its lowest level against the euro in five months Wednesday, as investors anticipated a Federal Reserve move to boost the ailing economy by renewing spending policies.
USD - Dollar Continues to Slide
The US dollar fell for a fourth straight session on Wednesday, hitting a fresh five-month low against the EUR, as traders brace for more weakness amid growing prospects for further U.S. monetary easing. By yesterday's close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.3630. The dollar experienced similar behavior against the JPY and closed at 83.50 level.
Generally weak U.S. economic data has fueled speculation the Federal Reserve could embark on a second round of quantitative easing, which would be negative for the dollar. That drove the greenback to a two-year low against the Australian dollar and a 2-1/2-year low versus the Swiss franc.
Investors may expect unusual price volatility to continue for the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of price swings for large profitable gains.
Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Unemployment Claims at 12:30 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Federal Reserve Chairman Ben Bernanke's Speech at around 18:30 GMT. This speech is very important and is very likely to impact the dollar.
EUR - EUR Strongly Advances against Dollar
The EUR strengthened against most of the major currencies yesterday as gains in commodities prompted investors to wade into riskier currency trades. The 16 nation currency extended gains to hit a fresh five-month high against the dollar and closed at around 1.3630. The EUR experienced similar behavior against the JPY as the pair rose from 113.45 to 114.15 by days end.
At the same time, the UK pound was near its weakest in more than four months against the EUR, as a report showed U.K. mortgage lending fell for a fourth month in August, adding to signs the recovery is faltering. The British currency slipped for a second day versus the EUR and closed around 0.8620.
Lenders granted 47,372 loans to buy homes, compared with a revised 48,346 in July, the Bank of England said today in London. Economists forecast that approvals would decrease to 47,000 from an initially reported 48,700 in July. The British currency was close to its strongest versus the dollar in six weeks on speculation the Federal Reserve will loosen monetary policy to shore up growth.
Looking ahead to today, the Euro-Zone and Britain are set to publish a number of important data releases. These include the British Nationwide HPI at 6:00 GMT and the German Unemployment Change at 7:55 GMT. These figures are likely to determine the GBP and EUR's strength going into the end of this week's trading.
JPY - Yen Experiences Mixed Results against Major Currencies
The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the GBP yesterday and closed its trading session at around the 132.40 level. The JPY also saw bearishness against the EUR and closed at 114.15.
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. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this will also likely to lead to further JPY volatility.
Crude Oil - Oil Recovers, Rises Above $77.50 a Barrel
Crude oil rose to a seven-week high after a U.S. government report showed an unexpected decline in gasoline supplies as refiners cut operating rates to the lowest level since April. Oil also increased as the dollar fell to a five-month low against a basket of currencies.
Oil and other commodities denominated in dollars for global trading tend to rise when the U.S. currency falls as 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 are advised to watch carefully the leading stock markets and the major economic indicators which will be published from the U.S. and euro-zone in order to predict the next movements in oil prices.
The EUR/USD cross has been experiencing much bullish behavior in the past 3 weeks. However, there is technical data that supports a bearish move for today. The RSI on the daily and 4-hour charts indicates that the pair floats in overbought territory, leading to the conclusion that a downward correction is imminent. Going short with tight stops may turn out to pay off today.
The price of this pair appears to be floating in overbought territory and the daily chart's RSI indicates a downward correction may be imminent. The downward direction on the hourly chart's Momentum Oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The USD/JPY cross has experienced bearish movement for the past 2 weeks, however it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the over-sold territory, indicating that an upward correction will happen soon. Going long with tight stops might be a wise choice.
The cross has been dropping for the past month now, and it now stands at the 0.9770 level. However, the weekly chart's RSI is already floating in oversold territory indicating that a bullish correction may take place in the near future. Going long with tight stops may turn out to be the right choice today.
The Wild Card
This pair's sustained upward movement has finally pushed its price into overbought territory on the 8-hour chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic indicating an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|