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Thursday, 4 Mar 2010
Dollar Falls vs. EUR on Positive ISM Data
The U.S. dollar traded lower Wednesday as investors moved to higher-yielding currencies and riskier assets after U.S. data was better than expected. ISM service data showed the U.S. services sector grew in February at its fastest pace in more than 2 years, reducing the appeal of the greenback as a relatively safe investment.
USD - Dollar Pulls Back on Greek Cuts
The U.S. dollar dropped versus the EUR and other major currencies Wednesday as Greece outlined tax changes and budget cuts to help reduce its deficit, easing concerns about a debt-fueled crisis and reducing the relative appeal of the U.S. currency.
The Dollar also turned lower versus the Japanese currency, slipping 0.4% to buy 88.47 yen. The U.S dollar may fall for a 3rd day against the JPY on speculation job losses in the U.S. will encourage the Fed to keep borrowing costs unchanged.
The USD fell for a 2nd day against the EUR as traders increased bets the Federal Reserve will keep its target interest rate near zero to sustain a recovery in the world's biggest economy. The U.S. currency weakened after Fed Bank of Dallas President Richard Fisher said borrowing costs should remain low until the economy picks up, which won't happen for some time.
EUR - The EUR at 2 Week High as Greece Debt Concern Ease
The EUR was firmer on Thursday, as investors encouraged by Greece's fresh austerity measures to reduce its deficit cut some of the record short positions in the single currency. Greece announced plans for a further $6.5 billion in pay cuts and tax hikes to reduce its deficit, easing worries about the country's debt crisis.
The European currency traded near a 2 week high against the U.S dollar on easing concerns the European Union's biggest budget gap will derail a regional recovery after Greece announced tax increases and deeper spending cuts. The EUR traded at $1.3703 from $1.3697 yesterday when it reached $1.3736, the strongest since Feb. 17
However, gains in the EUR were tempered on speculation the European Central Bank will maintain credit easing measures at a policy meeting today. Economists expect the ECB to keep the benchmark rate at 1% as in previous months.
JPY - Yen Advances to 2 Month High vs. Dollar
The Japanese yen climbed against the U.S dollar amid speculation Japanese companies were buying the currency. The yen strengthened to 88.48 versus the U.S. currency, the highest level since Dec. 14, from 88.85 yesterday.
The Japanese currency rose to its highest in more than 2 months against the greenback on Wednesday as investors cut long positions versus other currencies. Investors fret about a stronger yen because it eats into exporter profits when repatriated.
OIL - Oil Trades above $80 on Economic Hopes
Crude oil prices gained more than 1% to close above $80 a barrel Wednesday, taking direction from a dropping U.S. dollar and data showing fewer U.S. job losses, which overshadowed a surprisingly high increase in crude-oil stockpiles. Wednesday marked the first day since Jan. 12 that the most active contract has hit $81 intraday, and the first day in a week that the contract has closed at or above the $80 level.
For the past several weeks, Crude prices have been unable to get much past $80 a barrel, hemmed in by concerns over supplies outstripping fragile demand. Weekly inventory data from the Energy Information Administration (EIA) did little to assuage those concerns. In keeping with a trend reported by industry group American Petroleum Institute late Tuesday, the EIA showed a bigger increase in crude-oil stockpiles than expected. Analysts said that with the fundamentals weak and consistent resistance above the $80 level, Oil may start to trade lower over the next few days.
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is an impending bearish cross forming on the 4-hour chart's MACD indicating a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The GBP/USD has gone increasingly bullish in the past 2 days, and currently stands at the 1.5070 level. The daily chart's RSI supports this currency cross to rise further today. However, the 4-hour chart's Stochastic Slow signals that a bearish reversal might 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 4-hour chart's RSI indicating a downward correction may be imminent. The downward direction on the daily chart RSI also supports this notion. Going long might be a wise choice.
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. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The Wild Card
Silver prices rose significantly in the last week and peaked at $17.10 an ounce. However, the 8- charts' RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|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%||-|