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Friday, 22 May 2009
Dollar Volatility Set to Impact Forex Market Today
The USD's volatility is set to continue today as forex trader's eye Federal Reserve Chairman Ben Bernanke's speech as 6 GMT. In the meantime, however, it would be a wise move for investors to open some important positions as they can take advantage of the forex market prior to and after this main news event. Key economic data releases from the leading economies should also be a vital inspiration for traders today.
USD - Dollar Tumbles to a 5 Month Low
The U.S currency continued to slip against the EUR yesterday, dropping 1% to as low as 1.3950. It also dropped to its lowest this year against many of its other major currency pairs as worries about swelling U.S. deficits soured investor's appetites on U.S. assets.
The Dollar has fallen every day this week against the EUR and Pound Sterling, and it marked its third straight daily decline against the Japanese Yen yesterday. Analysts attributed the fall in the Dollar, which has been treated as a lower risk, safe-haven investment, to growing optimism that the worst of the financial crisis has passed. This has caused investors to unwind positions in favor of the U.S. currency built up when fear was widespread, credit was frozen and stock markets were in free fall.
A leading indicator released yesterday was U.S. Unemployment Claims. This number handedly beat last week's result. However, it failed to provide strength to the Dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead today, the news event that may have a very large impact on the Dollar and its main currency pairs in today's trading is Federal Reserve Chairman Ben Bernanke's speech at around 18:00 GMT. This speech is very important as it is very likely to Impact the Dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into next week's trading.
EUR - The EUR Continues to Strengthen against the USD
The EUR rallied yesterday against the Dollar as encouraging news about the European economy emerged. This sparked hope that the 16-country Euro-Zone may be emerging from the depths of recession. The EUR touched a 5- five month high versus the Dollar to above the 1.3950 level. The European currency finished around 80 pips higher against the JPY to finish yesterday's trading session at the 131.19 level.
The Euro-Zone's manufacturing and services sector recorded their best performance in 7 months, suggesting the Euro-Zone economy will shrink only slightly in the 2nd quarter after a record slump in the 1st quarter. The survey showed a significant improvement, thereby boosting hopes that the rate of decline in the Euro-Zone economy is now moderating after a particularly torrid 4th quarter of 2008 and 1st quarter of 2009. The reduced contraction in manufacturing activity in May suggests that the sector is starting to benefit from the massive de-stocking that has taken place.
Sentiment in the Euro-Zone economy has brightened in the past week following better-than-expected news. The EUR is showing signs of resilience even though there was volatility throughout non-Euro crosses. It will be crucial for traders to identify how the preceding economic indicators from the U.S., Japanese, and other key economies will affect their positions.
JPY - JPY Slides against EUR and Spikes versus the Dollar
The Japanese Yen completed yesterday's trading session with mixed results versus the major currencies. The JPY fell against the EUR yesterday, pushing the oft-traded currency pair to 131.19. The JPY slipped only marginally yesterday against the GBP to the 149.31 level. The JPY did see some bullishness as well as it gained 35 pips against the USD and closed at 94.17.
The Japanese market should have a heavy effect on the JPY versus its major currency counterparts, as the Overnight Call Rate will be announced today. The rate is expected to remain unchanged, but traders should pay close attention to the BoJ Press Conference that will follow to look for expectations of Japan's economic future. A bullish statement from the BoJ could lead some traders to believe the BoJ is forecasting a rosier financial climate in Japan.
Crude Oil - Crude Oil Rises Despite Economic Concerns
Crude Oil rose slightly by 21 pips to $61.63 a barrel yesterday, continuing its comeback. This was despite the U.S. Federal Reserve cutting its forecast for the economy of the U.S., the world's biggest energy-consuming country. Crude is trading for less than half year-ago levels, as demand has softened with the economic crisis. Expectations that consumers may once again want more Oil when the recession bottoms have partly fueled the rally, with traders watching the stock market for economic telltales.
Concerns about the reliability of supply also have begun to creep into the market, highlighted by an escalating conflict between rebels and security forces in Nigeria's Oil-rich southern region this week. There is a reasonable possibility that Oil prices will continue to be bullish going into next week, providing that the economic situation of the leading economies continues to rapidly improve.
The pair has been experiencing some very bullish behavior in the past week, as it currently stands between the 1.3900-1.3950 levels. The main oscillators of the daily chart indicate this trend may continue into the near future. However, the 4-hour Slow Stochastic reveals that a bearish cross is about to occur anytime soon, indicating that a bearish correction may be imminent. Now may be a ripe time to take advantage of the situation at an early stage.
The cross has received increasing support as of late, as this pair approaches new highs. The continuation of the bullish trend is supported by the 1-day and 1-week charts' MACD. On the other hand, the 4-hour and 1-day charts' Slow Stochastic seems to contradict this. It may be wise to open a long position with tight stops before the bullish trend comes to an end.
The pair has been going through much bearish behavior in the past several days. The MACD of the 1-hour chart fails to show a clear signal as to the future direction of this pair. However, the 1-day Stochastic Slow and RSI show that this pair is still likely to go lower before making a bullish correction. Traders should take advantage of this bullish trend now while it still carries steam.
The 1-day Stochastic Slow shows that the pair may continue its downward trend into the near future. This is also supported by the 4-hour charts' MACD. However, the 4-hour Stochastic slow seems to indicate that a bullish cross is imminent. It may be a wise move for traders to open a long position with tight stops when this bullish cross is breached.
The Wild Card
Gold prices have been increasing rapidly lately, as they stand at over $951 per ounce. The 1-day and 1-week chart shows that this bullish trend is set to continue. This is also supported by the 1-hour and 4-hour MACD oscillator. It may be a wise move for forex traders to enter this very popular trend.
|14:30||USD||Crude Oil Inventories||1.4M||2.1M||6.2M|
|17:01||USD||10-y Bond Auction||2.80|2.5||*||-|
|18:00||USD||Federal Budget Balance||-10.4B||-223.2B||-|
|20:00||NZD||Official Cash Rate||2.50%||2.75%||-|
|20:00||NZD||RBNZ Press Conference||*||*||*|
|20:00||NZD||RBNZ Rate Statement||*||*||*|
|20:00||AUD||RBNZ Monetary Policy Statement||*||*||*|
|23:50||JPY||Core Machinery Orders||m/m||-15.7%||7.3%||-|
|00:00||AUD||MI Inflation Expectations||2.3%||*||-|
|00:01||GBP||BoE Quarterly Bulletin||*||*||*|
|00:01||GBP||RICS House Price Balance||53%||52%||-|
|01:10||NZD||RBNZ Gov Wheeler Speaks||*||*||*|
|09:00||EUR||ECB Monthly Bulletin||*||*||*|
|12:30||CAD||Capacity Utilization Rate||81.7%||82.3%||-|
|12:30||USD||NZD Core Retail Sales||m/m||0.0%||0.2%||-|