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Thursday, 25 Mar 2010
EUR/USD Falls on European Fiscal Concerns
The Dollar rallied broadly, while the EUR fell to 10-month lows on Wednesday, as a ratings firm downgraded Portugal, adding to worries over debt sustainability and growth in some of euro zone's smaller countries. That supported some safe-haven flows into the U.S. dollar.
USD - Dollar's Rally Continues
The Dollar extended gains against most of its major counterparts after a report showed new orders for long-lasting U.S. manufactured goods rose for the third straight month in February. As a result, the USD finished yesterday's trading session 100 pips higher against the GBP at the 1.4890 level. The greenback also saw bullishness against the EUR and closed at 1.3330.
Yesterday, government reports showed that the U.S orders for long-lasting goods rose in February for a third month, while inventories and backlogs climbed by the most in more than a year, indicating the manufacturing rebound will keep on propelling the U.S. recovery. Analysts said portions of the durable goods report were positive and helped support strong demand for the U.S. dollar, which started earlier in the session.
The other factor that led to the bullish Dollar yesterday was that U.S stocks fell on mounting concerns about spiraling debt in some developed economies, which boosted demand for the USD as a safe-haven currency.
Looking ahead to today, the most important American economic indicator scheduled to be released is the Unemployment Claims at 12:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Fed Chairman Ben Bernanke's testimony at around 14:00 GMT. The testimony is very important as it will very likely lead to Dollar volatility, and may set the pace for the greenback for the rest of the week.
EUR - EUR Falls to a 10-Month Low Versus the Dollar
The EUR extended its losses to a 10-month low against the Dollar on Wednesday as investors doubted that euro zone leaders would come up with a quick rescue package for debt-laden Greece at a summit this week. By yesterday's close, the EUR fell sharply against the USD, pushing the oft-traded currency pair to 1.3330. The 16 nation currency experienced similar behavior against the GBP and closed at 0.8950.
Fears that the Greek debt crisis will spread have been the main focus of attention in the markets. Fitch Ratings downgraded its view on Portugal's debt amid growing concerns about the government's ability to service its borrowings. There are also concerns that the Washington D.C. based IMF will play a substantial role in helping Greece get a grip on its public finances, underlining the difficulty of European governments to deal with the Greek debt crisis on their own.
For weeks, it seemed that the countries that use the Euro were adamant that they would not look for outside help in addressing Greece's debt crisis. But the German government's increasing reluctance to bail out Greece amid domestic opposition has increased the likelihood that the IMF would be called in.
JPY - Yen Drops on All Fronts
The JPY saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell sharply against the USD, pushing the oft-traded currency pair to 91.95. The Yen experienced similar behavior against the EUR and closed at 122.50.
The JPY's future trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should pay attention to the news coming from the U.S. and Europe as these economies will be the deciding factors for the JPY's movement today. This is especially true for the U.S Unemployment Claims at 12:30 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this will also likely to lead to further JPY volatility.
Crude Oil - Oil Drops as Inventories Rise
The price of crude oil fell 1.5% to $80.20 during yesterday's trading session. This drop came after a U.S. government report showed Crude Oil inventories rose more than expected in the world's top energy consumer. The Energy Department reported that crude inventories rose by 7.3 million barrels to 351.3 million barrels last week. Analyst's expected an increase of 1.67 million barrels.
Oil prices also tracked lower stock prices, which fell after Fitch Ratings said Portugal's recovery will be slower than other countries in the euro-zone, hurting its ability to repay debt.
Looking ahead, traders are advised to watch the global stock markets and the major economic indicators which will be published from the U.S. and Euro-Zone. They will likely serve as solid indicators for the next movement in oil prices.
The Stochastic Slow on the 4-hour chart indicates that a bullish correction is long overdue for the pair. This sentiment is supported by the Relative Strength Index (RSI), which shows that the pair is deep in oversold territory. Going long may be a good strategy today.
The Relative Strength Index (RSI) on the 2-hour chart indicates that the pair is currently in oversold territory, indicating an upward correction may be imminent. This view is supported by the Stochastic Slow on the daily chart. Traders may want to go long with this pair today.
The Stochastic Slow on the 8-hour chart shows that a bearish correction may be forming for this pair. The Relative Strength Index (RSI) also indicates that the pair is deep in overbought territory. Going short may be a wise strategy today.
Yesterday the pair made a significant breach of the 1.0640 resistance line, rising 100 pips above this level. The pair could continue its recent bullish streak as the daily chart shows the 7-day Relative Strength Indicator trending higher. The 10-day Momentum Indicator also shows the pair moving higher along a sharp up sloping trend line. Traders are advised to stay long on the pair until the trend line is broken.
The Wild Card
A head and shoulders pattern may have formed on the 4-hour crude oil chart with the downward sloping neck line drawn underneath the price levels of $79.93 and $78.83. The future price move could be estimated by measuring the distance from the head of the pattern down to the neckline, for a price move of roughly 430 pips. Forex and commodity traders may want to place an entry stop sell order below the neckline for the possible breakout.
|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%||-||-|
|09:00||CHF||KOF Economic Barometer||90.1||-||-|
|09:00||EUR||Spanish Flash CPI||y/y||-1.1%||-||-|
|10:30||GBP||Net Lending to Individuals m/m||m/m||2.4B||-||-|
|10:30||GBP||M4 Money Supply||-0.8%||-||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||-||-|
|16:00||USD||Pending Home Sales||m/m||1.7%||-||-|