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Wednesday, 3 Sep 2008
Dollar Looks to Make a 9 Month Record against the EUR.
The Dollar rose 0.6% and closed under 1.4520 versus the EUR in yesterday's trading session, even seeing prices dip under 1.45. This Dollar rally is continuing as this analysis is being posted as the EUR/USD now stretches below the 1.4400!
The greenback saw significant bullishness yesterday as a sharp drop in Oil prices and persistent concerns about the health of other major global economies drove investors to positions supporting the greenback.
USD - EUR/USD Drops below 1.45 for the First Time since February
The USD underwent a bullish trading session yesterday, as it appreciated against all of its major currency rivals. The Dollar rose 0.6% and closed under 1.4520 versus the EUR in yesterday's trading session, even seeing prices dip under 1.45. This Dollar rally is continuing as this analysis is being posted as the EUR/USD now stretches below the 1.4400!
Also, the USD saw gains against the GBP, as the GBP/USD pair hit a 2-1/2-year low of $1.7784 before pulling back to $1.7832.
The greenback saw significant bullishness yesterday as a sharp drop in Oil prices and persistent concerns about the health of other major global economies drove investors to positions supporting the greenback. The theme driving global financial markets yesterday was crude oil's tumble to as low as $105.46 per barrel in early trading, as Hurricane Gustav had limited impact on energy infrastructure. U.S. Manufacturing PMI shrank slightly to 49.9 in August from July's mark of 50.0, the level separating contraction from expansion, while inflation pressures also eased. The indicator result returned according to expectations and did not affect the dollar as much as expected due to the poor economic data from the Euro-Zone.
There are few economic data releases expected to be released today from the US at 14:00 GMT with Factory Orders being the main release. The Factory Orders index measures the value of new purchase orders placed with domestic manufacturers for durable and non-durable goods. Factory Orders tend to have a low impact because it reports much of the same information contained in the Durable Goods Orders report released over a week earlier. The other economic indicator expected today, Total Vehicle Sales, is expected to slightly rise compared to previous readings but should contribute little to volatility.
EUR - Euro-Zone Retail Sales May Take EUR to New Lows
The EUR completed yesterday's trading session with mixed results versus the major currencies. The 15-Nation currency fell 0.6% against the USD after falling below $1.45 in the early trading yesterday for the first time since February, and more than $0.15 off the record high scaled in mid-July. The EUR experienced similar behavior against the JPY as the pair dropped from 158.43 to 157.65 by day's end. The 15- Nation currency did see bullishness as well against The GPB and closed at 0.8142.
The only economic data released yesterday from the EZ was the Producer Price Index. Euro zone producer prices jumped less than expected in July as oil prices hit a record high. This increase, as small as it may be, may cause the ECB, European Central Bank, to keep rates changes on hold, thus placing downward pressure on the EUR. The Euro PPI rose 1.1% in July which was expected to be 1.3%.
Looking ahead to today, the most important financial indicator scheduled from the EZ economy is Retail Sales. Analysts forecast that European Retail Sales will be higher than in previous months. Traders are strongly advised to pay attention to today's Retail Sales announcement, as a stronger than expected result may launch a bullish correction in the EUR.
JPY - JPY Positive despite Leadership Issues.
Despite the bearishness against the USD, the JPY saw bullish trends against all of its other major currency counterparts. The JPY fell 0.7% against the USD and closed at 108.85. The EUR/JPY fell from 157.91, down to 157.08.
The export based Japanese economy took advantage of the drop in Crude Oil prices, which should help lower the transportation costs of Japanese exported goods across the world. The only scheduled news event that was announced yesterday was a speech by BOJ Governor Shirakawa, where he indicated that Japan's economy will return to a moderate growth path and is unlikely to face a sharp fall, which will help strengthen the Japanese Yen. The data also offset concerns regarding the sudden resignation of Japanese Prime Minister Fukuda, whose shock announcement sent waves throughout the financial world. Many feel that yet another change in power in Japan will cause problems with the new stimulus package that was intended to pull the Japanese out of imminent recession.
Today, the JPY will be absent from the economic calendar, and traders are advised to follow global developments, as the USD and EUR are likely to determine JPY's movements for today.
Oil - As Demand Falters - Oil Prices Continue To Slip.
Economic concerns and fears of recession in countries like the U.S. are hampering global demand for Crude and are holding back Oil prices from the records reached. The world economy is largely flat; the only real growth is in emerging markets. Event risks, such as Hurricanes and the Georgia crisis, no longer have the potency to spike oil prices like they used to. Fundamental demand has taken the wind out of oil prices since we saw the peak at $147 a barrel.
Yet the price of U.S. Crude Oil has fallen yesterday below $110 a barrel. Prices are now around $40 off record highs of almost $150 a barrel we saw in the spring.
Crude also felt pressure from the USD, which overnight rose to a seven-month high against the EUR, which traded as low as $US1.4466. A stronger dollar weakens the attraction of Oil, which is denominated in US dollars, as a hedge on currency.
The pair is continuing its bearish movement with full steam, as it breached through the 1.4420 level. The daily chart shows that the current price has dropped beneath the Bollinger Band's lower boarder, indicating that the bearish move has more steam in it. Going short seems to be a preferable choice today.
The pair continues to provide exclusive bearish signals, and the cable is now traded around the 1.7730 level. All oscillators on the daily chart are pointing down and further bearishness will probably take place, with potential target price of 1.7640.
The very strong resistant level of 108.80 has been breached, and the pair is extending its bullish journey. A bullish cross on the daily chart's Slow Stochastic suggests that the pair should retain its bullish momentum. Going long might be the right strategy today.
There is a very distinct bullish channel forming on the daily chart, as the pair is now floating in the middle of it. Currently, both the RSI and the Slow Stochastic on the daily chart are suggesting that the pair should continue its bullish movement. Going long might be the right choice today.
The Wild Card
Since Oil prices have breached through the $111.50 a barrel, it's been dropping consistently. As the Bollinger Bands on the daily chart are tightening, Oil prices could face another drop. This might give a great opportunity for forex traders to join a very popular trend.
|15:30||USD||Crude Oil Inventories||1.4M||-1.3M||-|
|19:00||USD||FOMC Meeting Minutes||*||*||*|
|01:00||AUD||CB Leading Index||0.2%||-||-|
|01:00||GBP||10-y Bond Auction||2.70|1.8||*||-|
|ALL||Jackson Hole Symposium||*||*||*|
|02:35||JPY||Flash Manufacturing PMI||50.5||51.7||-|
|04:00||NZD||Credit Card Spending||y/y||7.0%||*||-|
|08:00||EUR||French Flash Manufacturing PMI||47.8||47.9||-|
|08:00||EUR||French Flash Services PMI||50.4||50.3||-|
|08:30||EUR||German Flash Manufacturing PMI||52.4||51.8||-|
|08:30||EUR||German Flash Services PMI||56.7||55.5||-|
|09:00||EUR||Flash Manufacturing PMI||51.8||51.4||-|
|09:00||EUR||Flash Services PMI||54.2||53.6||-|
|09:30||GBP||Public Sector Net Borrowing||9.5B||10.1B||-|
|14:45||USD||Flash Manufacturing PMI||55.8||55.7||-|