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Tuesday, 10 Nov 2009
Dollar to be the Driver of the Forex market Today
The Dollar is expected to be the driver of the forex market today. This is following yesterday's bearish session for the U.S. currency. Traders will be very much focused on Federal Reserve Bank of Atlanta President and key Federal Reserve FOMC (Federal Open Market Committee) member Dennis Lockart's speech at 14:15 GMT, and the IBD/TIPP Economic Optimism release at 15:00 GMT. It is encouraged that you traders open big positions in the USD now.
USD - Dollar Falls on Higher Risk Appetite
The Dollar fell dramatically on Monday against a basket of currencies on higher risk appetite. This included slipping to a 3-month low vs. the GBP. The greenback's weakness was due to forecasts that U.S. Interest Rates will be low for the foreseeable future. The other factor playing on optimism yesterday was the recent G20 Meeting in St. Andrews on the weekend in which it was discussed that the global stimulus will only be withdrawn when a solid economic recovery is maintained. This led to an equity market rally in the U.S, which therefore pushed traders to sell-off the USD as the trading day dragged on.
The Dollar finished trading against the GBP lower at the 1.6750 level. This was despite hitting a 3-month low of 1.6842. The USD also lost considerable ground against the European currency in yesterday's trading. The EUR/USD cross closed higher by 40 pips at the 1.4978 level. However, the pair did hit as high as 1.5018 on Monday. The USD/CAD lost considerable ground, as it sunk by 100 pips to the 1.0580 level. The greenback also went bearish against both the Yen and the Swiss Franc.
Looking ahead to today's trading, we have many exciting events. The most significant publication from the U.S. will be the IBD/TIPP Economic Optimism at 15:00 GMT. Also significant will be Federal Reserve Bank of Atlanta President and key Federal Reserve FOMC (Federal Open Market Committee) member Dennis Lockart's speech at 14:15 GMT. Traders will be very much focused on these 2 events, as they are set to be the primary determinants in the USD's strength on Tuesday. It is encouraged that you open big positions in the EUR/USD, AUD/USD, GBP/USD and USD/JPY crosses now.
EUR - Pound Climbs to 3-Month High vs. Dollar
The British Pound climbed to a 3-month high vs. the Dollar in Monday's trading. This came about as the British stock market rose for a 4th consecutive day. Both of these factors were driven by the weakness of the USD and the initial equity market rally on Wall Street. With regards to the EUR, it soared against the Dollar, due to Optimistic German industrial Production data on Monday. The strong EUR is a concern for the Euro-Zone, as it hurts the region's exports to trading partners, such as the U.S. and China.
The EUR/USD cross went bullish in yesterday's trading, as the pair rose by 40 pips to the 1.4978 level. The Pound rose to as high as the 1.6842 mark vs. the USD, as traders were very bullish on the Pound yesterday. However, the pair closed at around the 1.6750 level. Looking at the EUR/GBP cross, it rose only 7 pips, as both the British and Euro-Zone currencies were strong yesterday. It will be difficult for the Euro-Zone policy makers to weaken the EUR, due to choosing a tight monetary policy from the beginning of the financial crisis.
Tuesday's trading offers promising opportunities with regards to both the EUR and GBP's. The main releases that are set to be published from Britain are the Trade Balance at 09:30 GMT and the CB Leading Index at 10:00 GMT. From the Euro-Zone, the French Industrial Production will be published at 07:45 GMT and the German ZEW Economic Sentiment will be released at 10:00 GMT. These publications are set to be crucial in determining the strength of the GBP and EUR crosses, as mid-week trading approaches.
JPY - Yen Goes Volatile against the Majors
The Japanese Yen went extremely volatile against its major currency pairs yesterday. The Yen closed 15 pips higher vs. the USD at the 89.95 level. This was despite the pair trading significantly lower throughout much of Monday's trading. The GBP/JPY and EUR/JPY moved a lot in yesterday's trading. However, both of these pairs finished trading virtually unchanged from yesterday's opening.
Last night, the Japanese economy released some important data. This included both the Current Account and the M2 Money Stock. The former was worse than forecast, and the latter was better than forecast. Results such as these explain the mixed feelings of traders towards the JPY. The most important release that investors need to follow from Japan later today is the Core Machinery Orders at 23:50 GMT.
Crude Oil - Oil Jumps on Weak Dollar
Crude Oil climbed for a second consecutive day, as the Dollar continued to tumble. This behavior was initiated by the weekend's G20 meeting in which it was agreed that the financial stimulus will only be withdrawn once we see a solid recovery. Also, the U.S. signaled that Interest Rates will be kept low for the foreseeable future. All this led to a U.S. equity rally, and traders dropped the USD and bought-up Crude Oil.
Crude finally closed higher at $79.08, as investors attempted to use the black gold as a hedge against inflation. This comes as the Dollar continues to show much weakness. As today's trading commences, Oil will continue to be the most traded commodity. In addition, Crude prices will continue to be highly correlated with the USD. Therefore, open your positions in Crude whilst trading volume is still low.
There is a fresh bearish cross forming on the daily chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the 4-hour charts also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.6620 level. The daily chart's Slow Stochastic is showing a bearish cross suggesting that downwards correction might take place in the nearest time frame. Going short with tight stops 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 4-hour chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, a bullish cross forming on the daily chart's Slow Stochastic implies that upwards correction might take place in the nearest time frame. Going long with tight stops appears to be preferable strategy.
The Wild Card
Gold sustained upward movement has finally pushed its price into the over-bought territory on the daily chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
|01:30||AUD||ANZ Job Advertisements||m/m||0.9%|
|03:45||USD||Final Manufacturing PMI||56.2||56.1||-|
|04:00||USD||ISM Manufacturing PMI||56.6||56.5||-|
|04:00||USD||ISM Manufacturing Prices||59.5||58.3||-|
|04:00||USD||Total Vehicle Sales||16.4M||16.6M||-|
|09:15||USD||Spanish Manufacturing PMI||-52.6||-52.4||-|
|09:45||EUR||Italian Manufacturing PMI||50.7||50.6||-|
|10:00||EUR||Final Manufacturing PMI||50.7||50.7||-|