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Wednesday, 9 Apr 2008
Ears Poised For Bernanke's Speech
Yesterday, the Greenback spent most of the trading day with bullish momentum against a majority of its currency pairs and crosses. This despite a day of disappointment from US economic news. As the financial world awaited the results of the Federal Open Market Committee (FOMC) Meeting Minutes, the assumption amongst investors was that the summary of the news would be so bad for the US economic outlook, that the dollar would suffer big losses. Though the meeting minutes were released and gave no real positive outlook for future economic progress, a sense of urgency still exists amongst investors regarding a slowdown in growth. Still though it is unknown what the real catalyst behind the bullishness has been.
One of the key points of the FOMC Meetings was the discussion of the value of the Dollar and the need or lack there of for another rate cut. Two of the more hard-line Fed bosses, have not shied away form their suggested 75bp rate cut, but instead have embraced what seems to be the foundation of a successful direction for the dollar. It would still be irresponsible for any analysts to use such contrasting results as reasoning for greenback movement. Also released yesterday was the index for Pending Home Sales, as the figure returned to its lowest point since as the creation of the index in 2001. Sinking just under 2% in one month, this figure could once again stir up some uncertainty about the ailing housing market.
The current credit crisis and housing issues have become indefinite realities as the US braces itself for more economy changing news throughout the week. As we look ahead to Friday and the beginning of the G-7 Meetings, it is important to note that amidst all the poor economic data of the past week and a half, including a record drop in Non-Farm Payrolls, the greenback is still being traded with confidence.
Today, we await several events on the US economic calendar. Crude Oil and Wholesale Inventories are both expected today and should have little change in market conditions, barring any drastic movement in the inventory figures. The more relevant events of the day will come from two of the FOMC's more influential title holders, as we expect speeches from Dallas Fed President Fisher and Fed President Ben Bernanke. These two should contribute directly Dollar movement, as history has shown us in the past. Expect dollar movement to be some what unknown until midday, where the release of events to come will likely shape the outlook of the day for the dollar.
The EUR spent most of Monday range trading due to the absence of any Euro-Zone related events on the economic calendar. It has become evident that the EUR is notching a dominant line in the battle for the world's most appealing currency. As we are less than one day away from EUR and GBP Interest Rate announcements it is clear to see the difference between the two currencies, and coupled in with the USD, the issue is only magnified. The British currently find themselves in a position similar to that of America, as a slow-down in growth is currently pushing investors further and further away from GBP and USD and closer to the EUR.
As we await the commencement of the G-7 conferences, Expect the EUR, amidst reoccurring hawkish monetary policy from the E-Z to make slow strides against its most oft traded pairs.
On tap from the Euro-Zone today, we await the release of two mildly relevant events. Euro-Zone quarterly GDP and German Trade Balance figures will likely contribute little to EUR movement in the currency market. It is likely that the EUR will respond to outside news events in a positive manner throughout the day, and will see small rises if any in its value.
Risk behavior returned to the market yesterday as a wide range of economic data provided mixed results regarding the credit crisis being felt around the world. There looks to be a concerted effort by world financial organizations to stamp out the credit crisis once and for all. To do so would be a naturally risky move, one that would bring great liquidity to the Japanese market and the JPY.
The intervention of the IMF into global matters concerning the sub-prime crisis, suggests that the severity of the problem is far deeper than most would think. The near 1 Trillion dollars in losses that financial institutions could be forced to suffer is something that needs to be avoided, but not at the expense of any other economic aspect. The JPY now becomes a centerpiece, as carry trading is one of the more lucrative moves in the currency market and almost always includes the JPY.
In other JPY related news, the Japanese Government approved the permanent appointment of Massaki Shirakawa. The appointment comes after weeks of tug-o-war within the Japanese Government. What can be said is that any stability from the office of the BoJ should contribute to possible JPY bullishness.
Today, we can expect a host of Japanese events. The BOJ Monthly Report, Machine Tool Orders, Core Machinery Orders, Current Account and M2+CD Money Supply are all expected to be released to mixed results. The JPY is poised for a breakout, the question simply becomes when. Today we also expect Interest Rate Announcements for the JPY, as expectations have the benchmark 0.50% rate staying put, as the current state of the BoJ is still unsure.
The pair is consolidating at 1.5710 and appears to be accumulating momentum ahead of the next break. The 4 hour chart is showing moderate bullish momentum, and the daily chart is showing that there is still more room to run, probably towards the 1.5800 zone.
The cable is in the middle of a very sharp bearish trend after the breach through the 1.9800 level. The slow stochastic is showing a negative slope on the daily chart, and it appears that the bearish trend will continue. Going short might be a very wise choice today.
The pair is still traded within the bullish channel as the direction is currently unclear. No significant breach has been made in either direction, yet there is a bearish hint in the form of a cross on the 4 hour Slow Stochastic. The Bollinger Bands are tightening which indicates that the break is near. Going short with tight stops might be smart today.
There is a very distinct flag forming on the daily chart as the pair now floats at the tip of the flag. The slow stochastic is showing a bearish cross which might result in a breach through the bottom section of the flag. Traders are advised to wait for the bearish breach before swinging into the trend.
The Wild Card
The very accurate bullish channel has been breached, and gold is now in the middle of its bearish corrective journey. All oscillators are bearish, and forex traders have a great opportunity of taking advantage of this sharp technical event. Going short appears to be the right direction today.
|07:45||CHF||SECO Consumer Climate||-6||-11||-|
|08:00||EUR||German Factory Orders||m/m||-0.9%||1.6%||-|
|08:45||EUR||French Industrial Production||m/m||0.0%||0.1%||-|
|08:45||EUR||French Trade Balance||-3.4B||-3.5B||-|
|09:00||CHF||Foreign Currency Reserves||522.3B||-||-|
|10:15||EUR||Spanish 10-y Bond Auction||-||-||-|
|13:30||USD||Challenger Job Cuts||y/y||6.4%||-||-|
|16:30||USD||Natural Gas Storage||81B||-||-|
|EUR||French Bank Holiday||-||-||-|
|01:50||JPY||Monetary Policy Meeting Minutes||-||-||-|