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Tuesday, 24 Nov 2009
Dollar Tumbles After Big Day on Wall Street
The Dollar decreased dramatically on Monday after a big day on Wall Street led to increased risk taking behavior among investors. An increase in equity and the price of commodities, as well as positive news on existing U.S. home sales had a dramatic effect on trading. Investors dumped their dollars in favor of high yielding currencies such as the EUR, which made impressive gains.
USD - USD Falls Amid Gains In The Stock Market
Following Monday's announcement that existing U.S. home sales in November were better then forecasted, Wall Street had an impressive trading day as confidence in the American economy began to return. This in turn led to a less then stellar day for the USD which traders abandoned in favor of riskier currencies such as the EUR. The Dollar Index went from 75.647 to 75.130, and the greenback was down against all major currencies. This further highlighted just how volatile the dollar is, as it was unable to maintain any of the gains made last week.
Looking to the days ahead, traders can expect the USD to make some dramatic moves ahead of the Thanksgiving holiday this Thursday. The Preliminary GDP report as well as the CB Consumer Confidence report, both set to be released on Tuesday at 13:30 GMT and 15:00 GMT respectively, could dictate which way the greenback moves in trading this week. If the data, as forecasted, shows a slower expansion of the U.S. economy, the dollar will likely improve slightly against its major counterparts, and its safe haven status could return.
EUR - EUR Makes Gains, But Can't Break $1.50
Buoyed by impressive gains in the global stock market on Monday, the Euro rose against all major currencies, but still failed to break the psychologically important $1.50 barrier. Leveling off at 1.4980 against the dollar, the EUR seemed perpetually stuck between the 1.4800 and 1.4990 marks. Against the Yen the EUR also made gains, advancing to Y133.22 from Y132.26 in trading on Monday as the rise in stocks also hurt the safe haven currency.
On Tuesday, traders should look at the German Ifo Business Climate report, set to be released at 09:00 GMT. The report is seen as not only a measure of German economic health, but also of the other euro zone countries. With a predicted increase from last month's figures, the EUR may get the incentive to push past the $1.50 mark.
JPY - JPY Bounces Back After Yesterdays Losses
The Japanese stock market took heavy losses in trading Tuesday, leading to impressive gains for the Yen a day after it sunk amid a global stock rally. Against the Euro, the yen moved from 133.22 to 132.77, signaling that the currency is rebounding from its previous losses. With the Nikkei 225 Stock Average falling for the fifth day straight due to concerns of deflation, investors seemed to be turning back to the yen as a safe haven currency.
At 23:50 GMT today, Japanese trade balance figures will be released. With most analysts predicting a positive number, traders can take these figures as an indication of where the yen is moving. If the predictions do indeed come true, traders can expect the JPY to further its gains, as there is a positive correlation between export demand and currency demand.
Crude Oil - Crude Prices Level Out
In light of the weak dollar, oil was able to make impressive gains in trading yesterday. Prices approached $80.00, but amid concerns about demand and inventories, oil retreated from its gains and prices stabilized at $77.55. With the dollar apparently set to rebound, and U.S. stock markets set to wind down in the coming days ahead of Thanksgiving, it is not very likely that the commodity will make any serious moves.
News coming from Iran, (the worlds fourth largest producer of crude oil), that it is testing a new missile defense system also played a role in the increase in prices. Uncertainties in the Middle East such as this one, may impact the direction oil prices are moving, but without a dramatic news event in the immediate future, the commodity should remain stable.
The typical range trading on the daily chart continues. Both the 4-hour RSI and Slow Stochastic are floating in neutral territory. However, the pair currently sits near the upper border of the weekly chart's RSI, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
There is a fresh bullish cross forming on the daily chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the hourly chart's Slow Stochastic also supports this notion. Going long with tight stops might be the right strategy today.
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the weekly chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
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. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The Wild Card
Gold prices rose significantly in the last week and peaked at $1165.45 for an ounce. However, the daily chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|