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Tuesday, 14 Apr 2009
EUR Correction Continues
Liquidity was tight during yesterday's trading as holidays in Western Europe and the States reduced the number of market participants. This helped to exaggerate movements in the currency market. This type of trading yesterday helped the EUR continue to rise versus the Dollar.
USD - Gloomy Stock Market Puts Downward Pressure on the USD
In regards to the light news days traders have been experiencing recently, most active investors have tuned into the status of the stock market, which has seen a light downward slide lately. As a result, the USD also slid partially against its major currency counterparts. Ending the day down at 1.3316 against the EUR and 1.4831 against the British Pound, the Dollar sustained some moderate losses. However, throughout today's early trading hours the USD appeared to be recovering some of these losses. We could potentially see a rebound throughout the day.
With a relatively heavier news day expected, the USD could experience much more volatility throughout today's trading. With significant data on U.S. retail sales and inflationary figures for producers, the U.S. economy will likely be the primary driving force in trading later on. Towards the end of the day, Federal Reserve Board Chairman Ben Bernanke is also due to speak at Morehouse College in Atlanta regarding the recent financial crisis. His appearances tend to move the market as traders speculate about future monetary policy decisions based on the subtle clues in his speeches.
The stock market has been having a relatively stronger impact on the value of currencies lately. This is mainly because many eyes are watching economic indicators very closely in anticipation of signs that the economy is turning a corner and beginning to recover. This hopeful optimism may help the economy recover faster as speculation becomes a strong player in the growth of markets. If that is indeed the case, the USD may begin to strengthen in the short-run, but weaken overall as its safe-haven status is diminished.
EUR - EUR Not Driving its Own Market; Traders Look to the USD
The EUR appeared to be yesterday's losing currency pair, as it lost ground to every major counterpart except the USD. Trading up against the Dollar at 1.3316 at the end of yesterday's trading session, the EUR has now actually lost most of what it gained and is currently riding a downward slope against the greenback. Dropping back to 0.8970 against the Pound after making short-term gains, and sinking against the Yen to 132.70, the EUR's recent losses highlight the rising weakness in the Euro-Zone's regional economy.
With no news expected out of the Euro-Zone, the 16-nation currency is not expected to out-perform any of its currency rivals in the hours ahead. In fact, with almost zero news being released from the European Monetary Union this week, the driving force behind the EUR's pairs will most likely be the GBP and USD. With a relatively heavy news week for the USD, it has been forecast by many that the USD will be this week's market mover.
With an already low confidence level in the European economic system, traders have begun to look for weakness in other currency pairs when deciding when to enter a position on the EUR. Without a shock to the system in the form of quantitative easing, a reduced interest rate, or economic stimulus, the EUR will likely be a follower instead of a leader as other world currencies dictate its direction and momentum. Traders should look to the Dollar this week for the direction of the market.
JPY - JPY Posts Losses Throughout the Day; Recovers in Early Trading
The JPY has made a strong rebound over the past few hours. After steadily losing ground to most of its currency rivals, the Japanese Yen is now beginning to regain its losses from a correction in the market. Ending the day at 100.33 against the USD, the Yen is now trading at 99.67. Also, dropping as low as 134.21 against the EUR, the JPY is currently trading at 132.80 against this 16-nation currency in today's early trading hours, and there doesn't appear to be any signs of stopping this recent movement..
As many equities and various stocks feel the pinch from recent banking and economic data, traditional safe havens have gotten slightly more relevant. However, yesterday's lack of data highlighted the growing weakness in world stock markets and traditional safe havens apparently responded with downward trends as well. As a correction to this recent downward movement, the Yen has started its latest rebound and may continue to do so throughout the trading day
OIL - The Price of Crude Oil Flirts with the $50 Price Level
The price of Crude Oil has appeared to be flirting with the $50-a-barrel mark over the previous week. With the future strength of the USD coming under scrutiny by investors lately, the price of Crude could potentially rise back towards $55 in the days ahead. However, with the latest batch of banking data, the USD could be regaining safe-haven status as investors flee the stock market. This would then push the price of oil back towards $48 a barrel.
Without any signs of a clear direction, the flirtation with the $50 price level is likely to continue. In the absence of any significant news from the Organization of Petroleum Exporting Countries (OPEC), low confidence in the stock market, and a sinking feeling about the value of the Dollar, Crude Oil could be experiencing some unpredictable volatility over the coming week, but within a relatively clear price range. Traders have a great opportunity to jump into this market today and capture these impending price movements for a healthy profit.
The 4-hour chart is showing considerable bearish signals as the bullish trend is beginning to reverse. The Relative Strength Index currently has the price trading in the overbought zone and the Slow Stochastic Oscillator shows a bearish cross has formed. The pair has also begun to reverse from the Bollinger Band's upper border with the potential to reach the lower border. This could be a good opportunity for traders to go short today on this pair.
Early this morning the pair climbed to a daily high of 1.4913 and could be ready for a reversal. The daily and 4-hour chart show the pair trading in the over bought zone on the RSI. The 4-hour chart also displays a bearish cross on the Slow Stochastic Oscillator. This information could signal an imminent price decline. Going short with a tight stop may be the right move.
A correction on the hourly chart could be fore coming as a price move has originated at the bottom border of the Bollinger Bands. This may signal a move from the lower border all the way to the other border. Going long with a tight stop may be a wise choice today.
The recent downward correction may have pushed this pair into the over-sold territory on the RSI of the 4-hour chart, signaling an imminent upward correction. A bullish cross has also formed on the chart's Slow Stochastic, signaling a correction to the sharp downward movement from this morning. Traders may want to be long on this pair today.
The Wild Card
The pair's sustained upward movement has finally pushed its price into the over-bought territory on the 4-hour and daily chart's RSI. Not only that, but there is a bearish cross which has formed on the 4-hour Slow Stochastic Oscillator. This information points to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach and go short.
|00:00||EUR||French 10-y Bond Auction||-||-||-|
|00:00||EUR||Spanish 10-y Bond Auction||-||-||-|
|00:00||GBP||MPC Rate Statement||-||-||-|
|02:30||AUD||RBA Deputy Gov Lowe Speaks||-||-||-|
|04:45||JPY||30-y Bond Auction||1.46|2.7||-||-|
|08:00||EUR||German Factory Orders||m/m||4.2%||-0.8%||-|
|13:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|13:00||GBP||Asset Purchase Facility||375B||375B||-|
|13:30||USD||Challenger Job Cuts||y/y||17.6%||-||-|
|13:45||EUR||Minimum Bid Rate||0.05%||0.05%||-|
|14:30||EUR||ECB Press Conference||-||-||-|
|14:30||USD||Revised Nonfarm Productivity||q/q||-1.8%||-2.2%||-|
|14:30||USD||Revised Unit Labor Costs||2.7%||3.1%||-|
|16:00||USD||FOMC Member Williams Speaks||-||-||-|