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Thursday, 11 Feb 2010
Euro Levels Out Against Major Rivals Ahead of EU Summit
The Euro made slight gains against its major counterparts in overnight trading today. Still, investors remain apprehensive about investing in the Euro, especially ahead of a key European Union meeting which could shed light on a possible bailout for Greece.
USD - Bernanke Speech Gives USD a Boost
The U.S. Dollar received a fairly significant boost on Wednesday following reports that the U.S. Federal Reserve (FED) would soon raise discount lending rates. FED Chairman Ben Bernanke made the announcement, leading investors to believe that U.S. economic policy would tighten at a quicker rate then its major counterparts. The Dollar index rose to 80.80 as a direct result of the announcement. Currently the greenback is up against both the Euro and British Pound with the pairs trading at 1.3779 and 1.5631 respectively.
The Dollar is forecasted to continue its uptrend today, especially against the Euro. Investors are largely keeping their distance from the ailing European currency, especially ahead of a key European Union policy meeting. With the single currency plagued by record high deficits in several of its countries, risk aversion seems to be the prevailing trend among investors. USD has been benefiting greatly from this, and it appears that it will continue to do so.
In the only significant Dollar news event today, the weekly American unemployment claims are set to be released at 13:30 GMT. With the number of Americans who filed for first time unemployment insurance forecasted to drop, traders can expect the greenback to receive a boost in afternoon trading. Of course, should the figure come in above the predicted 460K, the Dollar may take some losses later today.
EUR - Risk Aversion Causing Euro to Slide
The Euro remains down overall ahead of a key EU economic summit today which will likely determine if and how a Greek bailout will be initiated. Greece, plagued by record high debts, is only one of the EU's problematic countries. Both Spain and Portugal are dealing with above average deficits, a fact that will likely continue to weigh down on the Euro. Furthermore, analysts are now saying that any EU bailout for Greece will likely only help the Euro in the short term.
Currently, the Euro is slightly up from the lows reached yesterday. EUR/USD is trading around the 1.3780 level and EUR/GBP is at 0.8812. Despite these modest gains, analysts do not forecast the Euro to remain up for long. With American unemployment figures forecasted to show an improved American economy, as well as the recent FED announcement regarding bank lending rates, USD will likely increase its gains against the Euro in trading today.
JPY - JPY Makes Gains Due to Risk Aversion
While there were no major Japanese news events on Wednesday, the Yen still managed to make gains as investors turned to risk aversion in their trading strategies. Uncertainties regarding the fate of the Euro caused safe haven currencies like the Yen to move up. Currently GBP/JPY is trading at around the 140.65 level, down from around 141.00 yesterday morning.
With no Japanese economic news events scheduled today, Yen levels will likely be determined by the results of the EU summit. If the summit manages to boost investor confidence in the Euro, the Yen will likely go down as a result. On the other hand, if investors are still uncomfortable with the Euro-zone economies, the Yen's safe-haven status could bring it some profits in trading today.
Crude Oil - Oil Prices Rise Based on Increased Demand
Crude oil prices continued to rise for the 4th day straight, following a report from the U.S. Energy Department saying that global demand will likely increase in 2010. Several other factors, including a possible EU bailout for Greece and fresh U.S. sanctions on Iran, helped drive prices up. Currently crude is trading around the 74.80 level.
Today, traders can expect the rise in oil prices to continue, especially following the results of the EU summit. Any positive American economic indicator, such as the upcoming unemployment data, could also cause prices to rise. Finally, the recent batch of heavy winter weather in the United States has driven up demand for oil, leading to an increase in crude prices.
In the short-term, this pair has pushed a few indicators, such as the hourly RSI, into the over-bought territory, indicating some immediate downward pressure. However, longer-term indicators, such as the 4-hour and daily RSI and Stochastic (slow), still indicate room to grow. Traders could see some early morning corrections, but it appears as if the overall trend today is bullish.
After reaching its lowest level since May of last year, this pair has leveled off into a flat range-trading pattern between 1.56 and 1.57. After this morning's upturn, there appears to be a bearish cross on the hourly Stochastic (slow), indicating an impending downward correction. The 4-hour Stochastic (slow) shows a bullish cross, however, suggesting that the range-trading behavior will likely continue today. Buying on lows and selling on highs may be a wise tactic today.
This pair has been trading within a narrow bullish channel with only minor distances between highs and lows. Mid-term indicators, such as the 4-hour Stochastic (slow), are showing signals of a bearish correction today. The fresh bearish cross on this indicator suggests that this turn may come following the opening of European markets. Going short with tight stops appears to be today's preferable strategy.
The hourly and 4-hour RSI show this pair floating in the over-sold territory, highlighting a possible bullish correction later today. A bullish cross on the hourly Stochastic (slow) supports this notion. Going long might not be a bad idea today.
The Wild Card
Short- and mid-term indicators on Crude Oil seem to be giving off bearish signals this morning. Both the hourly and 4-hour Stochastic (slow) appear to be showing a bearish cross. The RSI on both charts also appears to be floating in the over-bought territory. These indications may give forex traders a chance to capture a healthy dose of profits in today's early trading hours by going short on this commodity.