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Monday, 5 Jan 2009
Dollar Set to Go Bullish This Week
President-elect Barack Obama's recent announcement about more details of his economic stimulus plan and the Federal Reserve's decisions to undertake the process of printing money to boost market liquidity and return to growth, are likely to push the Dollar in a bullish direction over the next few days.
USD - USD Appreciates; Will This Week's Employment Data Help?
After a harsh couple of weeks, the U.S. Dollar now appears poised to regain some lost ground against its primary currency counterparts. The Dollar had risen to as high as 1.4660 versus the EUR just two weeks ago. Now it seems the greenback has begun its ascent away from these doldrums. As of last Friday, the USD had risen to as high as 1.3850 against the EUR and continued to float near that mark during today's early trading hours.
Against the Yen, the Dollar also began to march upward as it climbed from 90.00 to 92.00 these last few days, marking a long-overdue appreciation against the recently strengthened island currency.
No doubt the news that President-elect Barack Obama announced more details about his economic stimulus plan helped the USD rebound slightly. This news, as well as the Federal Reserve's decisions to undertake the process of quantitative easing - printing money - to boost market liquidity and return to growth, will likely push the Dollar to go bullish over the next few days.
This week it will be especially important to keep a close eye on U.S. employment data. With Non-Farm Payrolls and Unemployment Claims expected to show mixed results, the movement of the USD will probably become highly volatile later in the week. As for now, look to the Dollar and the British Pound to be the primary market movers as news from these two economic giants will continue to have profound effects across global markets.
EUR - Slovakia Set to Join EUR
With mixed results against its currency rivals this morning, the EUR may in fact be positioned to lose ground this week. With depreciation against the USD, JPY, and CHF, this European currency may indeed be heading for a reversal to its recent bullish trends.
Last week's low volume trading results and poor economic data now has many analysts predicting that the European Central Bank (ECB) is more likely to introduce another Interest Rate cut in its upcoming meeting. The mere speculation of this monetary policy decision alone has investors pricing in the rate cut ahead of its announcement. As such, forex traders will no doubt see a depreciation of the EUR leading up the ECB's decision, which won't be made public until the middle of next week.
Interestingly, the EUR will no longer be considered a 15-nation currency after this week's induction of Slovakia to the European Monetary Union (EMU). The addition of this rather small East European economy will carry little weight on the overall value of the currency, but its entrance to the EMU may carry the potential to help stabilize the region by kicking off what might become a popular trend for failing regional economies. The number of countries that join will depend on the success of the EUR in the coming weeks.
Glancing ahead, the Euro-Zone faces 2 important events this week. First is the introduction of Slovakia to the EMU, as already mentioned. The second is Great Britain's forecasted Interest Rate decision, set for this Thursday. The Bank of England (BoE) is expected to slash Britain's Official Bank Rate from 2.00% to 1.50% during its meeting later this week, an event which traders will see getting factored into the GBP pairs and crosses leading up to its announcement, and shortly thereafter.
JPY - Japanese Stocks and Risk Appetite Gain on Recently Weakened JPY
Throughout today's early trading hours the JPY appeared to be either floating or strengthening against its currency rivals. The forecast that the Bank of Japan (BoJ) will soon take stronger measures to curb the economic recession, coupled with the recent weakening of the JPY, has helped boost risk appetite. This increase in risk appetite has helped Japanese stocks rebound as a weakened JPY and low Crude Oil prices lifted the prospects of an increase to Japanese automotive sales.
This week will be an unusually quiet week for the JPY as there will be scarce economic news emanating from the island economy. However, there may be some unscheduled announcements this week from the BoJ about its decisions for, and implementation of, further economic stimulus packages. Forex traders should watch for any such announcements as they carry the potential to indicate future price movements and investor confidence levels.
Oil - Gaza Conflict May Carry Less Impact on Oil Prices than Previously Thought
Many analysts glimpse at the map of the Middle East and, rightfully, believe that the conflict in Gaza should carry little impact on the price of Crude Oil. This is because Israel is nowhere near the oil reserves or shipping lanes in the region. Yet one thing is for certain, since the start of hostilities the price of Crude Oil has begun a relatively sharp appreciation, climbing as high as $48.50 a barrel, up from $37.00 just 5 days prior.
It could be argued that this conflict stirs emotions within Middle Eastern countries and influences them to cut supplies. More likely, however, is that American and European speculators believed that this would impact Crude Oil prices and therefore factored such speculation into the market no matter how right or wrong it may have been. As such, traders may begin to see the price of Crude Oil come back down over the next few days. This may happen because these speculators may consider the weight of the strengthening U.S. Dollar, and the lack of a real impact on the Oil markets this conflict actually brings, and return to their previous sell-pattern trading of Crude Oil
The Slow Stochastic and the RSI on the daily chart are showing a continuation of the current bearish momentum. There is also a very accurate bearish channel forming on the 4-hour chart as well. In addition, all indicators on the hourly chart are pointing down. Going short might be the right choice today.
The pair has been range-trading for a while now with no specific direction. The daily chart's Slow Stochastic is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today.
A bearish formation on the daily chart is still intact; however the momentum is already quite low. The 4-hour chart is maintaining a slightly bearish indication yet with no distinct conclusion. Also, there is a bearish cross forming on the hourly chart, indicating that the bearish signal is in place. Traders are advised to hold for the breach and then swing into it.
The pair's trading continues without a distinct breaking direction. The hourly chart is giving mixed signals and is mostly floating in neutral territory. The dailies however, are showing a slight bullish momentum. The daily chart's Slow Stochastic and the RSI confirm that the direction is indeed up.
The Wild Card
This commodity has been trying to massively correct the intensive bearish move, and is now trading around the 874 level. The sharp bullish channel is in a high spot at the moment and together with a bullish cross of the hourly chart's Slow Stochastic it provides forex investors quite a good potential for long positions.
|02:00||NZD||ANZ Commodity Prices||m/m||-2.4%||*||-|
|02:30||JPY||Average Cash Earnings||y/y||1.0%||0.9%||-|
|04:45||JPY||10-y Bond Auction||0.52|4.3||*||-|
|05:30||AUD||RBA Rate Statement||*||*||*|
|08:00||EUR||Spanish Unemployment Change||-29.8K||25.5K||-|
|14:45||EUR||Final Manufacturing PMI||58.0||58.0||-|
|15:00||USD||ISM Manufacturing PMI||57.1||57.0||-|
|15:00||USD||IBD/TIPP Economic Optimism||44.5||46.2||-|
|15:00||USD||ISM Manufacturing Prices||59.5||57.0||-|
|00:01||GBP||BRC Shop Price Index||y/y||-1.9%||-||-|
|00:30||AUD||AIG Services Index||49.3||-||-|