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Friday, 15 Jan 2010
Dollar Remains Low Amid Poor U.S. Economic News
The Dollar fell broadly on Thursday amid negative news reports that all but dashed hopes of an interest rate hike in the near future. Today, investors will be looking at two reports that could impact USD. The Core CPI report as well as a consumer sentiment report could give the Dollar a much needed boost in afternoon trading.
USD - Dollar Still Low after Retail Sales Report
After falling broadly against most of its major counterparts in trading yesterday, the Dollar is still low as we start off the day. A disappointing retail sales report yesterday caused the greenback to fall to a two month low against the Australian Dollar and a three month low against the Canadian Dollar. The poor economic news all but dashed hopes that the Fed would raise U.S. interest rates in the near future.
Today, traders will want to pay attention to the Core CPI Report as well as the Prelim UoM Consumer Sentiment Report. Set to be released at 13:00 and 14:55 GMT respectively, the reports are likely to create volatility in the marketplace, as they are a key indicator of both consumer spending and sentiment. Both reports directly weigh in on any decision to raise interest rates.
Analysts are not predicting any drastic figures from either report, but traders will want to watch out for surprises later today. If the Core CPI comes in above 0.1%, or the Consumer Sentiment is above 73, the Dollar could see some gains against both the Euro and Sterling. That being said, the U.S. economy has not been kind to the Dollar lately. If figures for both of these reports come in below the predicted results, the Dollar's recent downturn could become prolonged.
EUR - ECB Chief Trichet's Comments Weigh Down on Euro
The Euro fell against the U.S. Dollar in recent trading, following comments by the European Central Bank Chief highlighting the importance of the U.S. currency. Currently the pair is trading around the 1.4428 level, a decline from 1.4500 several hours ago. Still, most analysts are quick to say that any Dollar gains are likely to be minimal following yesterday's U.S. retail sales news.
The ECB's decision to keep European interest rates at their current levels also caused the Euro to go down. Low inflation and uneven economic growth throughout the E.U. have prevented interest rates from moving away from their record lows.
Today, traders will likely want to pay attention to the American Core CPI Report. A worse then expected figure will likely give a boost to the Euro in afternoon trading. Additionally, the European Core CPI figures are set to be released at 10:00 GMT today. A positive number may cause the Euro to move up against its other counterparts.
JPY - Yen Maintains Gains Following Chinese News
Investors, who appear to be turning away from riskier currencies, have been giving JPY a big boost against its major counterparts in recent trading. The Chinese decision to tighten its monetary policy has led to big gains for the safe-haven Yen. After rising to 131.11 against the Euro yesterday, the EUR/JPY pair is currently trading around the 131.45 level.
If the major economic news out of the U.S. comes in as expected today, the Yen is likely to see more gains. Analysts are not forecasting that the American economy is any closer to raising its interest rates in the near future. Providing this is true, investors are likely to continue to turn to the Yen as a source of stability in the Forex market
Crude Oil - Crude Prices Fall Based on U.S. Data
Weak American Retail Sales figures have caused Crude Oil to fall below $80.00 a barrel in recent trading. Additionally, the most recent U.S. Unemployment figures have contributed to a drop in American oil demand, further contributing to the fall in prices
At the moment, it appears that high American Oil stockpiles combined with low demand, should keep prices down for the time being. Looking ahead, most analysts are seeing at least marginal gains in the U.S. economy. This could mean that Oil prices could make gains providing American economic indicators begin to improve.
Yesterday's correction of the pair to the 1.4405 price level may have left it oversold. The daily chart shows the pair is currently trading just under its 10-day moving average. A crossing above this line may indicate further appreciation is in store for the pair. Traders may want to watch for the break and enter into a long position with the 1.4550 price as the next resistance line.
The daily chart's MACD histogram confirms the strong bullish correction the pair has displayed since the previous week. The short term correction may have a bit more room to rise as the price approaches both the downward sloping long term trend line and a major resistance level of 1.6410. Traders may want take profit at this price. An entry limit sell order at the price level may also be a strategy as the pair could reverse back down at trend line.
The strong downtrend trend continues for the pair. This may be confirmed by Relative Strength Index for both the weekly chart and the daily chart. Both show the RSI slope trending lower with the pair failing to break the trend line. There is also a strong downward trending MACD histogram on the daily chart, potentially signaling the downtrend has room to run. We may see the pair approach the resistance line of 90.75 today.
The pair halted a slight bullish correction yesterday near the 4-hour chart's resistance line of 1.0245. The chart also shows the momentum almost reached the maximum of its upper limit and is now trending down. Now may be a good time to go short as
we could see this pair fall back in line with its long term downward sloping trend line.
The Wild Card
The price of crude oil has broken its most recent bullish trend line on the daily chart and has dropped below the 10-day moving average. This could signal an end to the bullish run. The price has also crossed the middle line of the Bollinger Band, signaling the potential for the price to fall to its lower limit. Forex and commodity traders may also notice the bearish cross and the downward sloping histogram on the MACD. This may give traders the reason to short crude oil.
|01:00||EUR||German Prelim CPI||m/m||0.2%||-0.1%||-|
|01:00||EUR||Italian 10-y Bond Auction||-||-||-|
|01:00||ALL||Jackson Hole Symposium||-||-||-|
|01:05||GBP||GfK Consumer Confidence||4||4||-|
|01:30||JPY||Tokyo Core CPI||y/y||-0.1%||-0.1%||-|
|01:30||JPY||National Core CPI||y/y||0.1%||-0.2%||-|
|09:00||EUR||Spanish Flash CPI||y/y||0.0%||-0.1%||-|
|10:30||GBP||Second Estimate GDP||q/q||0.7%||0.7%||-|
|10:30||GBP||Prelim Business Investment||q/q||2.0%||1.6%||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|16:00||USD||Revised UoM Consumer Sentiment||92.9||93.2||-|
|16:00||USD||Revised UoM Inflation Expectations||2.8%||-||-|