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Thursday, 8 Jul 2010
Euro Reaches 7-week High Against USD
EUR/USD has remained at or near its 7-week high throughout overnight trading, as investor confidence in the 16-nation currency continues to rise. Currently trading around the 1.2665 level, the pair's next major resistance line is around 1.2676. Should the pair break this level, it could see further gains throughout the day today.
USD - Dollar Continues to Fall Against Euro and British Pound
A series of dismal U.S. economic indicators has led to general erosion in confidence in the American economic recovery as well as the U.S. dollar as a whole. Both the EUR/USD and GBP/USD pairs have increased over 100 pips in the last 24-hours. This has led some investors to question the safe haven status of the dollar. That being said, the dollar made some substantial gains against the yen throughout trading yesterday. USD/JPY shot up from 87.05 during morning trading, to its current level of 88.20.
Today, a number of news events are set to shake up dollar pairs. Both the euro-zone and the U.K. will be releasing their respective interest rate reports. While neither is forecasted to raise rates, any statements of optimism from the ECP or MPC regarding the economic recovery are likely to cause the dollar to take more losses in afternoon trading.
Additionally, traders will want to watch out for this week's U.S. unemployment claims report. Unemployment has been a constant reminder of how fragile America's economic situation is at this point. While analysts are forecasting a decrease this week in the number of people who filed for first time unemployment insurance, that decrease is likely to be negligible at best. At the same time, should the figures come in well below the expected levels, the USD may see some gains in evening trading.
EUR - EUR Bullishness Expected to Continue Today
The euro is expected to continue gaining on its main currency rivals today, as investors continue to move to riskier positions in the marketplace following a rally in the U.S. stock market. While EUR/USD saw moderate downward corrections in trading yesterday, it still managed to make some significant gains, and is currently trading around a 7-week high. Meanwhile, the 16-nation currency continues to dominate the safe-haven yen. EUR/JPY has soared over 200 pips in the last 24-hours, largely due to the belief that the euro is moving toward solid ground.
Today, both the European Central Bank and British Monetary Policy Committee are scheduled to release statements about their respective interest rates. While neither is expected to raise interest rates, and positive statement will like lead to more gains for the currencies against the U.S. dollar and yen. Also, should the U.S. unemployment claims come in as expected, traders can assume the dollar will slide further against its European counterparts.
JPY - Yen Takes Losses Against Dollar and Euro
A rally in the Asian stock market has caused investors to abandon the safe-haven yen, in favor of riskier currencies like the euro and U.K. pound. EUR/JPY has reached a 2-week high, while GBP/JPY has moved up some 300 pips in the last 24-hours. If the U.S. and Asian stock markets see another bullish day today, traders can expect the Japanese currency to continue to drop.
Additionally, yen values will likely be determined by the European and U.S. economic indicators set to be released throughout the day. Positive news from either Europe or the U.S., will likely cause investors to continue buying up riskier assets. This will likely cause the yen to fall once again. That being said, should the news today voice any concerns about the pace of the global economic recovery, we may see investors return to safe haven assets like the JPY.
Crude Oil - Oil Prices Set to Rise for a 3rd Day
The price of crude oil has soared recently, largely due to an increase in U.S. demand during the busy summer months. In addition, a decrease in U.S. supplies has helped fuel the price increase. Crude oil shot up from 71.70 yesterday morning, to its current level of 74.65. Analysts are forecasting prices to continue to rise as more and more Americans take vacations and drive up demand. The U.S. is the world's largest oil consumer, and demand reaches its peak during the summer months.
Today, the U.S. Crude Oil Inventories report, set to be released at 15:00 GMT, is forecasted to come in around -1.8 M. Should the report come in at or around this level, traders can expect crude prices to continue to rise in afternoon and evening trading.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart's RSI. Going Short with tight stops may turn out to pay off today.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.5180 level. The pair currently sits near the upper border of the daily chart's RSI, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
There is a fresh bearish cross forming on the 4-hour chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the hourly chart's Momentum oscillator also supports this notion. Going short with tight stops might be a wise choice.
The USD/CHF has gone increasingly bearish in the past several days, and currently stands at the 1.05114 level. However, the daily Chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The Wild Card
Crude oil prices rose significantly yesterday and peaked at $74.65 for a barrel. However, the 4-hour chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|14:00||EUR||ECB President Draghi Speaks||*||*||*|
|15:00||USD||Existing Home Sales||5.15M||-||-|
|15:05||USD||FOMC Member Dudley Speaks||*||*||*|
|00:30||USD||FOMC Member Kocherlakota Speaks||*||*||*|
|08:00||EUR||French Flash Manufacturing PMI||46.9||-||-|
|08:00||EUR||French Flash Services PMI||50.3||-||-|
|08:30||EUR||German Flash Manufacturing PMI||51.4||-||-|
|08:30||EUR||German Flash Services PMI||54.9||-||-|
|09:00||EUR||Flash Manufacturing PMI||50.7||-||-|
|09:00||EUR||Flash Services PMI||53.1||-||-|
|09:30||GBP||BBA Mortgage Approvals||42.8K||-||-|
|09:30||GBP||Public Sector Net Borrowing||-1.1B||-||-|
|13:30||CAD||NZD Core Retail Sales||1.5%||-||-|