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Wednesday, 11 Feb 2009
Economies Writhe in Agony from Geithner Speech
U.S. Treasury Secretary Timothy Geithner gave a less-than-inspiring speech yesterday regarding the U.S. bank bailout program. Many analysts criticized the speech as failing to give enough specific details regarding the plan which led most to assume that this bailout may not be as well thought-out as originally assumed. Stock markets and world economies felt the pinch as investor confidence dropped following this event.
USD - Dollar Records Mixed Results as Bank Bailout Plans Disappoint Investors
The Dollar recorded some mixed results in yesterday's trading as traders were disappointed by Treasury Secretary Timothy Geithner. Geithner spoke yesterday about the Treasury's plan for a new $2 trillion Dollar banking bailout plan. This follows the approval by the U.S. Senate of Obama's $800 billion Dollar stimulus plan. Geithner received criticism that he wasn't specific enough in his speech, leading to a lack of confidence in the Dollar and U.S. Stock market.
Against the EUR, the USD fell 40 pips to 1.2871 by the close of Tuesday's trading. The Dollar also lost ground against the JPY by nearly 100 pips to 90.36 as investors cut their losses and returned to what they saw as a safe-haven currency. However, against the Pound, the USD rose by 350 pips to close at 1.4481. This was due to a knock-on effect as the British economy has been extremely volatile as of late, especially as a result of the failing banking sector. Therefore, bad news from the U.S. means even more bad news for Britain and the GBP.
Looking ahead, Obama and Geithner need to show more substance in order to rescue the U.S. economy. Only time will tell if both stimulus plans will lift the U.S. out of recession. Today, however, does have some important economic data releases from the U.S. Firstly; Geithner is scheduled to speak again at 15:00 GMT. At 13:30 and 19:00 GMT respectively, the U.S. Trade Balance and U.S. Budget Balance figures are set to be published. If the figures are indeed as forecast, or worse even, the USD may fall against its major currency pairs. On the other hand, better than expected figures could lead to a bullish Dollar in today's trading.
EUR - Pound Tumbles Due to Aftershock of U.S. Treasury Speech
The Pound slid against it major currency pairs as it felt the shockwaves of the Pessimism in the U.S. following the disappointing speech about a banking bailout by U.S. Treasury Secretary Timothy Geithner. The British economy and British currency are extremely volatile due to negative news from the U.S. and Europe, as their economy has been hit worse than many other countries in the developed world since the start of this recent recession. For example, Britain's GDP is expected to decline the most out of the G7 nations, by over 2.8%, according to the International Monetary Fund (IMF).
The GBP slid by a staggering 350 pips to 1.4481 vs. the USD. It slid by 220 pips vs. the EUR, against the JPY it slid by an enormous 430 pips to 131.19. These large losses show that investors returned to safe-haven currencies in yesterday's trading sessions. The thing that this shows forex traders is that the Pound acts very negatively to uncertainty in the financial world. Therefore, a lesson for the future may be for investors to follow U.S. news events more closely, and use the GBP as bait. This is useful because the Pound is very volatile to both positive and negative economic news coming from the U.S.
Today there are several important news events that may determine GBP and EUR currency crosses. These are the British Claimant Count Change at 9:30 GMT, the Bank of England's (BoE) inflation report at 10:30 GMT and a scheduled speech by BoE Governor King also at 10:30 GMT. Positive news may lead to a reversal of yesterday's losses in the GBP. Traders are advised to watch the Euro-Zone's reaction to this as King's speech may lead to the European Central Bank (ECB) revealing more details about possible rate cuts next month. This may result in high volatility for the EUR's pairs in today's trading.
JPY - Yen Climbs as U.S. Bank Bailout Produces Pessimism
The JPY rose against its major currency crosses in Tuesday's trading, as traders flocked back to the safe-haven Japanese currency. This came about as stocks in the U.S. and Japan fell heavily following statements by U.S. Treasury Secretary Timothy Geithner concerning the new $2 trillion U.S. banking bailout plan. Traders reacted with pessimism as they saw very few specific details about how Geithner, Obama, and the U.S. government will go about salvaging the U.S. banking sector, and thereby save the U.S. economy.
The JPY rose 80 pips against the EUR in yesterday's trading to close at 116.39. Against the USD, the JPY climbed 100 pips to finish yesterday's trading at 90.36. The JPY rose by a staggering 530 pips versus the GBP in yesterday's trading to close at 131.19. Forex traders are advised to follow Japanese, U.S., and British data releases throughout today's trading. The results of these may determine the JPY's strength against its major currency crosses into the middle of next week's trading.
Oil - Oil Plummets on U.S. Stimulus Doubts
The price of Crude Oil dropped by $1.80 a barrel, or 4.5%, to $38.04 in yesterday's trading as investors lost confidence due to the weak statements made by U.S. Treasury Secretary Timothy Geithner regarding the U.S. banking rescue package. Additionally, even though the U.S. Senate passed the economic stimulus plan, the House of Representatives and Senate need to close the gap on the further disagreements about the stimulus bill. Furthermore, it seems that OPEC threats of further decreasing Oil production has not dissuaded traders from selling-off Crude Oil.
Oil is expected to tumble by another $2 to $36 a barrel by the end of this week, as U.S. Crude Oil Inventories continue to build up. The Crude Oil Inventories figures are expected to be released later today at 15:00 GMT. U.S. stockpiles of Oil are likely to increase into March, adding additional downward pressure to the price of Oil. It is advisable to follow economic developments coming out of the U.S. as these developments may be the main factor determining the price of Crude Oil in the coming months.
This pair has apparently been building towards a volatile price movement recently as all oscillators show the price floating in neutral territory. The Bollinger Bands on all charts are also beginning to tighten in anticipation of a significant movement. Traders should wait for the breach and swing.
The price of this pair appears to be floating in the over-sold territory on the RSI of the hourly and 4-hour charts, indicating an upward correction may occur in the near future. A bullish cross also appears to be forming on the 4-hour chart's Slow Stochastic, adding support to this notion. Going long might be the right choice today.
The pair has finally ceased range-trading and has recently moved downward; however, the price currently floats in the over-sold territory on the hourly and 4-hour chart's RSI, signaling an upward correction may be imminent. Going long with tight stops might be the right choice today.
There appears to be a leveling-off in the price of this pair as the Bollinger Bands on the hourly chart appears to be tightening, signaling an impending volatile price movement. Most oscillators show a lack of direction, however. Waiting for a clearer signal might be the right choice today.
The Wild Card
The price of this commodity appears to be floating in the over-sold territory on the RSI of the hourly and daily charts, indicating an upward correction to the recent downward movement may occur later today. The imminent bullish cross on the daily chart supports this notion. As the price of this commodity has discovered a new range to trade in, forex traders can benefit greatly from selling on highs and buying on lows within this price zone.
|07:00||CHF||UBS Consumption Indicator||1.65||-||1.60|
|09:30||GBP||BBA Mortgage Approvals||44.5K||45.5K||-|
|10:00||EUR||Italian Retail Sales||m/m||0.3%||0.5%||-|
|10:01||EUR||German 10-y Bond Auction||0.44|1.2||-||-|
|10:20||AUD||RBA Assist Gov Debelle Speaks||-||-||-|
|12:30||GBP||Autumn Forecast Statement||-||-||-|
|13:30||USD||Core Durable Goods Orders||m/m||-0.3%||0.5%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Durable Goods Orders m/m||-1.2%||1.6%||-|
|14:45||USD||Flash Services PMI||54.8||55.2||-|
|15:00||USD||New Home Sales||468K||500K||-|
|15:00||USD||Revised UoM Consumer Sentiment||93.1||93.2||-|
|15:00||USD||Revised UoM Inflation Expectations||2.5%||-||-|
|15:30||USD||Crude Oil Inventories||0.3M||-||-|
|17:00||USD||Natural Gas Storage||-||-||-|