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Monday, 8 Nov 2010
Dollar Starting Week Off With Gains on its Major Rivals
Following last Friday's better than expected US Non-Farm Payroll's figure, the greenback continues to make gains against its main currency rivals. The EUR/USD pair has fallen below the 1.4000 level and is continuing its decline. The USD/JPY pair is holding onto the gains made on Friday, and is currently trading around the 81.25 level. Today, a lack of significant US news events means that the dollar may see some unexpected movement, as a low volatility situation may lead to erratic market behavior.
USD - Greenback Extends Friday's Gains
The most recent US Non-Farm Payrolls figure gave the dollar a much needed boost to close out last week's trading session. As a result of the employment figure, the greenback was able to correct some of the losses it took following the Fed's quantitative easing announcement last Wednesday. Investor confidence in the US economy has increased, if only slightly, and the dollar has been able to capitalize on the news.
The EUR/USD pair, which tumbled well over 100 pips following the release of the payrolls figure, continues to drop. Currently trading around the 1.3945 level, the pair has broken the psychologically significant 1.4000 support line and does not appear to be in store for an upward correction in the immediate future. In addition, the GBP/USD pair has dropped over 90 pips in overnight trading. Currently trading around the 1.6115 level, the pair may continue to fall in trading today.
A lack of US news today means that dollar values will largely be determined by other countries economic indicators. Traders will want to pay particular attention to the Canadian Housing Starts figure at 13:15 GMT. A drop in the number of new homes compared to last month is forecasted. If true, the USD/CAD pair may see some bullish movement in afternoon trading.
EUR - EUR Tumbles amid Renewed Debt Concerns
The combination of last Friday's positive US employment figure and renewed concerns about Irish debt have weighed down on the euro going into this week's trading session. The EUR has already fallen over 100 pips against the dollar since markets opened last night. In addition, the 16-nation single currency has tumbled against the safe-haven yen. Since markets opened for the week, the EUR/JPY pair has fallen close to 100 pips and is currently trading around the 113.30 level.
Today, traders will want to pay close attention to the German Industrial Production figure, set to be released at 11:00 GMT. Germany possesses the largest economy in the euro-zone, and economic indicators from the country tend to play a disproportionately large role in euro values. Analysts are predicting today's figure to come in at around 0.6%, which if true, would signal a marked decrease in industrial production from last month. Should the forecasts turn out to be accurate, the euro may extend its bearish movement today.
JPY - Yen Sees Mixed Results in Overnight Trading
Starting off the week, the yen saw gains against a number of currencies in overnight trading. The Japanese currency was boosted by renewed debt concerns in the euro-zone, as well as a much worse than expected German Factory Orders figure released on Friday. As such, the EUR/JPY pair fell around 100 pips since last night and is currently trading around the 113.30 level. Against the UK pound, the yen gained approximately 65 pips in overnight trading. The GBP/JPY pair currently stands at the 130.90 level.
While the safe-haven yen has seen gains against virtually all of the riskier currencies in overnight trading, it has not been able to recoup the losses it took against the greenback following Friday's US Non-Farm Report. The USD/JPY pair is virtually unchanged since markets opened for the week, and is currently trading steady at the 81.15 level.
Today, traders will want to pay attention to the German Industrial Production figure. Should it come in at its forecasted level, investors may continue to abandon their riskier assets in favor of safe-havens. In such a case, the yen may be able to extend its recent bullish trend.
Crude Oil - Crude Jumps Following Non-Farm Data
Friday's US Non-Farm data gave crude oil a significant boost to close out the week. Crude saw a 125 pip spike on Friday afternoon, and closed out the week trading close to $87.50 a barrel. Analysts attributed the gains to the better than expected employment data, but cautioned that as long as the dollar maintains its current bullish trend, crude gains will likely be muted. Since markets opened last week, the price of oil has already dropped around 50 pips.
Today, crude prices will largely be determined by where the dollar moves. Analysts remain cautious about the US economic recovery. Any negative US news will likely cause the greenback to slip, in which case, oil will likely move up as a result.
The Stochastic Slow on the 4-hour chart indicates a bullish cross has formed, meaning that upward movement is likely to occur. This theory is supported by the Williams Percent Range on the 8-hour chart, which is currently below the -80 level. Traders are advised to go long with tight stops today.
Technical indicators are showing mixed readings for this pair. The 8-hour chart's Relative Strength Index is currently floating in neutral territory, which means that major movement is not predicted. At the same time, a bearish cross has formed on the MACD in the same chart. Traders may want to take a wait and see approach for the pair today, as a clearer direction will likely present itself later on.
Most technical indicators show the pair trading in neutral territory, meaning that no clear direction is known at this time. This includes the Relative Strength Index on the 4-hour chart and the Stochastic Slow on the 8-hour chart. Traders will want to wait for a clear direction to present itself before making any major moves today.
The Relative Strength Index on the 8-hour chart is currently floating in oversold territory, indicating a bullish correction is likely to occur today. In addition, a bullish cross on the MACD in the 4-hour chart has formed. Traders will want to go long in their positions today.
The Wild Card
After experiencing a prolonged bullish run, silver now appears to be in overbought territory, and poised for a downward correction. A bearish cross has formed on the 8-hour chart's Stochastic Slow. In addition, the Williams Percent Range on the 4-hour chart is floating well into the overbought region. Forex traders may want to go short with tight stops today.
|01:00||EUR||French 10-y Bond Auction||-||-||-|
|01:30||AUD||MI Inflation Gauge||0.0%||-||-|
|02:00||NZD||ANZ Commodity Prices||m/m||1.8%||-||-|
|05:45||JPY||10-y Bond Auction||0.40|2.8||-||-|
|13:30||USD||Challenger Job Cuts||y/y||20.9%||-||-|
|16:30||USD||Natural Gas Storage||-||-||-|