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Thursday, 2 Apr 2009
EUR Interest Rate Decision Due Today
Market participants are eagerly awaiting key data pieces due be released today. The European Central Bank is expected to cut Interest Rates by 50 basis points and weekly U.S. unemployment numbers are predicted to be high. These two events will be the main drivers of currencies in the forex market today.
USD - U.S. Unemployment Claims on Tap
The U.S. Dollar weakened during yesterday's trading session, correcting the sharp gains against the EUR and GBP seen last week as steep job losses in the private sector rekindled fears of a prolonged U.S. recession. After yesterday, the USD fell slightly against the EUR, pushing the oft-traded currency pair to 1.3270. The Dollar experienced similar behavior against the Pound and closed at 1.4490.
The ADP Non-Farm Employment Change released yesterday showed an additional 742K individuals lost their jobs in the U.S during the month of March. The number was far higher than economists had previously forecasted. This is indeed another sign that any economic recovery in the U.S. will be slow to commence.
Another leading indicator released yesterday was U.S. Pending Home Sales. This number handedly beat market expectations but 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.
As for today, the leading U.S. data will be the Unemployment Claims. The survey is expected to show 649K individuals have filed for unemployment insurance for the first time during the past week. Such a result will be a direct continuation of the recent troublesome figures delivered lately from the U.S. economy and is threatening to hurt the USD. Traders should follow it closely, as any crucial information might ignite a new trend in the market.
EUR - EUR Fluctuates as ECB Interest Rate Decision due Today
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15-nation currency saw moderate gains versus the USD. Versus the JPY, the Euro-Zone currency range-traded throughout most of the day, as much of the market data from yesterday was focused on the greenback.
Retail Sales in Germany unexpectedly fell in February and the rate of unemployment rose, fueling fears about job security. As a result, European companies have stepped up efforts to reduce production and cut jobs as the worst global slump since World War II. German business confidence fell to the lowest level in more than 26 years in March and unemployment increased for a fifth straight month.
As a result, the ECB is expected to cut its Interest Rates today while other governments embark on state-sponsored investment programs. The market may view the ECB action of a rate cut as a step to restore investor confidence, and to mitigate the economic fallout from the financial crisis.
In the last year, the ECB has been less aggressive than the Federal Reserve in monetary policy and as the financial crisis has worsened in Europe, the EUR has steadily fallen against the USD. However, the ECB plans for cutting Interest Rates might have an effect on the Euro-Zone economy and could reassure the European banking sector that they could rely on the ECB to keep liquidity circulating and also bring more confidence to the markets.
JPY - Yen Experiences Mixed Results against Major Currencies
Japan's business confidence hit a record low after slumping global demand has halved the nation's exports, pushing the country into one of its worst recessions. Rising unemployment and falling spending data a day earlier already showed the worrisome trend that the drop in external demand was affecting Japan's domestic economy. Analysts expect the Japanese economy to continue to contract in the first half of this year, lending a record five straight quarters of negative economic growth.
Today, the JPY will be absent from the economic calendar, however, traders should follow overseas events in order to determine the JPY's direction for today. Special attention should be given to the ECB Press Conference and U.S. Unemployment Claims figure that will be published at 11:45 and 12:30 GMT respectively, and will be today's leading publications that could affect the Yen's crosses.
OIL - Crude Oil Sinks below $49 a Barrel
Oil prices fell slightly during yesterday's trading session and closed below $49 a barrel as more signs of a sick economy fueled worries about energy consumption. The International Energy Agency (IEA) said that Crude Oil inventories rose to 359.4 million barrels, which is 15.5% above levels from one year ago, the highest level since 1993. Some analysts have said Crude Oil is waiting to break out from it's price slump but the negative inventories data may have held that rally in check..
Oil prices rose sharply last month from $35 to above $54 taking their cue from a rally in equity markets. But a new sign of a prolonged recession which has crushed energy demand around the world is again pushing prices lower below the psychological price level of $50.
After testing and breaking the resistance line of 1.3300, the hourly chart is showing a bearish cross on the Slow Stochastic with the pair's RSI floating in the oversold region. This may indicate an imminent downward correction for the pair. Going short could be the right play today.
The bullish momentum seen this morning may have left the pair in an oversold position after failing to breach the 1.4600 price level. The 4-hour chart's RSI is currently floating in the oversold region while a bearish cross has formed on the Slow Stochastic, indicating a downward move. This could be a good opportunity to go short.
The daily chart is showing bearish trends as the pair trades near the 98.75 level. The daily chart displays the Relative Strength Indicator trading in the upper range and an imminent bearish cross is forming on the Slow Stochastic Oscillator. This may indicate the potential for the pair to head lower today. Going short may be the right move.
There appears to be a leveling-off in the price of this pair as the Bollinger Bands on the 4-hour chart appears to be tightening, signaling an impending volatile price movement. Most oscillators show a lack of distinct direction. On the other hand, range-trading allows traders to cut profits from buying on dips and selling on highs.
The Wild Card
The pair's downward thrust early this morning continues the bearish trend. However, the 4-hour chart is providing extensive bullish signals. A bullish cross has formed on the Slow Stochastic and the pair is floating in the oversold range on the RSI. The Bollinger Bands on the daily chart continues to tighten, indicating a volatile correction may soon occur. Forex traders can take advantage of this imminent volatile movement by setting long positions with tight stops
|23:30||JPY||Tokyo Core CPI||y/y||2.2%||2.1%||-|
|23:30||JPY||National Core CPI||y/y||2.2%||2.1%||-|
|07:00||EUR||German Import Prices||m/m||-0.8%||0.5%||-|
|10:00||EUR||Italian Retail Sales||m/m||-0.2%||0.1%||-|
|12:30||USD||Final GDP Price Index||q/q||0.1%||0.1%||-|
|14:00||USD||Revised UoM Consumer Sentiment||91.2||93.9||-|
|14:00||USD||Revised UoM Inflation Expectations||3.0%||-||-|