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Thursday, 30 Apr 2009
Dollar Tumbles as Investors Turn to Riskier Assets
Rising equity markets continue to push investors towards riskier assets and away from safe haven currencies such as the USD and JPY. Traders today will be following the Unemployment Claims release for further signs the U.S economic recession is easing.
USD - Dollar Drops Against the Majors as Equities Rally
The Dollar recorded an extremely volatile day of trading as a variety of factors helped push up the demand for riskier assets, whilst reducing the demand for safe-haven positions. Equity markets in the U.S. rallied as many companies in the U.S. recorded far better-than-expected results. These led to major banking shares, such as Bank of America and Citigroup making remarkable gains yesterday. The market also continued to move on the better-than-expected U.S. consumer confidence figures from Tuesday. The equity market surge and Dollar decline was also owed to Tuesday's impressive U.S. Consumer Confidence figures.
The USD tumbled by more than 130 pips against the EUR in yesterday's trading to close at 1.3322. This is much owed to the fall in demand for safe-haven currencies, as it seems that the U.S. recession may be bottoming out. This is despite poor U.S. GDP figures that were released yesterday. The Dollar also made losses against the GBP to end the day down 125 pips at 1.4830. However, versus the JPY, the USD finished higher 0.6% or 60 pips as the demand for the safe-haven Yen plummeted in yesterday's trading. This was largely owed to news that the economic situation in Japan, China and the U.S. was starting to improve.
As of today, there are a number of important U.S. economic data releases that are set to be released. The most important of which are the Unemployment Claims, Personal Spending, and Personal Income figures that are set to be released at 12:30 GMT simultaneously. The market is likely to be very volatile on the release of these figures. Additionally, later on today, the market is likely to take into account the poor U.S. GDP figures that were released yesterday. Therefore, the USD may reverse some of the losses that it made yesterday against its major currency crosses as investors may return to the safe-haven Dollar. We could see the EUR/USD trading near the 1.3200 level by the end of the day.
EUR - EUR Soars Versus the USD
The EUR experienced a bullish day of trading yesterday, mainly due to the European Consumer Confidence figures, showing its first month on month rise in 11 months. This added to the news from across the developed economies from the U.S. to Japan that the worst of the global economic recession may be over. The bullish equity markets in the Euro-Zone and in Britain were partly due to that of the U.S., partly due to the upgrade of British banks by brokers, and the fall in demand of safe-haven currencies. The EUR made its most notable gains against the USD in Thursday's trading.
The EUR gained about 130 pips against the Dollar in Wednesday's trading as demand for safe-haven currencies plummeted as the global economy begins to pick up. The pair closed at the 1.3322 level. The EUR/JPY cross rose by an impressive 210 pips to 129.90 as demand for the most safe-haven currency of all as of late plummeted as indicators from Japan showed that her economy had improved in April. Against the Pound, the EUR did make marginal gains as fears of a prolonged European recession dissipated slightly. The pair closed up 15 pips at 0.8980.
Looking ahead to today, the Euro-Zone and Britain are set to publish a number of important data releases. These include the British Nationwide HPI at 6:00 GMT and the Euro-Zone Unemployment Rate at 21:00 GMT. These figures are likely to determine the GBP and EUR's strength going into end of week trading. Forex traders are also advised to closely follow statements coming from U.S. President Barack Obama and the U.S. Federal Reserve, as the forex market is likely to be very volatile to this.
JPY - Yen Plummets as Economy Improves
The Yen plummeted yesterday against its major currency pairs as the current economic recession in the world's second largest economy seems to be bottoming out. The JPY slid over 60 pips Yen to 97.54 Yen per Dollar as the Yen's demise was compounded by strong U.S. consumer confidence figures. Thus the most safe-haven currency as of late plummeted as a result of both improvements in Japan and America's economy. The JPY also slid against the EUR, dropping a massive 210 pips to finish the day's trading at 129.90. The Pound also made inroads into the JPY as the confidence of the U.S. equity markets swept Europe, and reduced demand for the safe-haven JPY.
As the Japanese equity markets reopened yesterday after a bank holiday, shares soared as the global economy showed signs of bottoming out. This is following good U.S. Consumer Confidence figures from Tuesday, European Consumer Confidence figures from yesterday, and positive Japanese data releases on Wednesday. The bearish JPY yesterday was compounded by impressive factory production figures, showing their first increase in 6 months. All these factors helped pour investors away from the Yen and into the riskier equity market. Today, the Household Spending and Unemployment Rate figures are likely to help determine the JPY's strength in late trading. The USD/JPY could break the 98.00 resistance level by the end of today's trading.
Crude Oil - Jumps 4%
The price of Crude Oil ascended by $2 or 4% yesterday to $51.44 a barrel. The increase comes despite the higher-than-forecasted Crude Oil Inventories data release. Much of the black gold's bullishness was owed to the weak Dollar and optimism about a quicker than anticipated global economic recovery. Data coming from the U.S., Japan, China, and the Euro-Zone in the last 2 days helped bring back investors confidence into the equity and commodity markets
As a result of the renewed optimism, investors decided to return to the Crude Oil market. Moreover, the weaker Dollar added to the effects of Crude's gains on Wednesday. What we will now have to see is can Oil maintain this bullish momentum? Maybe in the medium-term this may be possible. However, in the short-term high Oil prices are less likely, especially as the U.S. is expected to release poor Unemployment Claims data later on today. Traders may look for profit taking after yesterday's bullish trading session. Crude could drop back to the $50.50 mark.
Yesterday's bullish trading session may have strengthened this pair a bit too far. This could be inferred as the 4-hour chart shows the pair trading in the over-bought zone on the RSI. The chart also shows a bearish cross has formed on the Slow Stochastic. These two signals indicate an imminent downward correction. Traders may also notice the hourly chart's Bollinger Bands tightening, indicating the potential for a violent breech. Going short could be the right play today.
The 4-hour chart shows the Cable trading in an overbought state on the RSI with a bearish cross on the pair's Slow Stochastic Oscillator. This indicates the potential for a downward correction. The Bollinger Bands show the most recent price move has originated at the upper border, indicating the potential to go all the way to the lower border. Traders may want to be short on this pair.
Despite the pair failing to break the 98.00 mark, the recent upward correction that has occurred the past two days may have the potential to continue. The daily chart shows a bullish cross has formed on the Slow Stochastic Oscillator, indicating the upward momentum could continue. The price is also floating in the oversold region on the RSI. Going long might be a good strategy.
The recent volatile upward movement has pushed the price of this pair into the over-sold territory on the RSI of the 4-hour chart, indicating an upward correction may be in the works. The recent bullish cross on the hourly chart's Slow Stochastic supports this notion. Going long might be wise decision today.
The Wild Card
After yesterday's bullish trading session, the commodity is showing strong bearish signals. The 4-hour chart shows a bearish cross has formed, pointing to a future downward correction in price. The same chart also has the price floating in the over-bought zone. This could give forex traders the opportunity to go short today on crude oil.
|01:01||GBP||RICS House Price Balance||53%||54%||-|
|01:50||JPY||Core Machinery Orders||m/m||-3.6%||3.3%||-|
|05:45||JPY||30-y Bond Auction||1.41|3.1||-||-|
|07:00||JPY||BoJ Monthly Report||-||-||-|
|07:00||JPY||Economy Watchers Sentiment||49.3||48.6||-|
|08:00||EUR||German Trade Balance||22.8B||20.2B||-|
|13:00||GBP||MPC Official Bank Rate Votes||1-0-8||1-0-8||-|
|13:00||GBP||Monetary Policy Statement||-||-||-|
|13:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|13:00||GBP||Asset Purchase Facility||375B||375B||-|
|13:00||GBP||MPC Asset Purchase Facility Votes||0-0-9||0-0-9||-|
|13:30||EUR||ECB Monthly Bulletin||-||-||-|
|16:30||USD||Natural Gas Storage||98B||101B||-|
|19:01||USD||30-y Bond Auction||2.98|2.5||-||-|