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Tuesday, 22 Apr 2008
Existing Home Sales - On Tap
Yesterday, the greenback lost ground on what had been a bullish closing to last week's trading. The US was absent from the day's economic calendar, which pushed the Dollar to record lows against the Euro in particular. The greenback has struggled to make a steady recovery against its major currency rivals, as bullish trends have proven to be short lived lately. With so many contributing factors to the fate of the dollar and the overall importance it has on the global economy, many investors still believe the greenback has the ability to recover, even with the current state of affairs.
Last week's unemployment numbers were better than expected along with the Empire State Business Conditions Index, and events for the week to come could contribute to the greenback.
Yesterday, EUR/USD prices soared towards the 1.6000 level. A contributing factor in the rise of the major pair were stock market losses brought about by Bank of America reporting a sharp drop in their income. The bank, currently the second largest in the US reported quarterly losses that sent US stocks to their first losses in 5 days.
Today, we should expect a much more volatile market due to US news events on tap. At 14:00 GMT we expect the Richmond Fed Index, quarterly House Price Index and the Fed TAF auction summary, these will be headlined by the release of Existing Home Sales. The figure is forecasted to fall roughly 1.5% from last month's number and will show that Existing Home Sales slipped to $4.90M. Last month's number of $5.03M broke a six-month spell of declining sales, while annual figures from last year still trump this year's figure by just under 25%. Barring a positive surprise in these results expect to see even more dollar bearishness that could push the EUR/USD to record highs beyond 1.60.
The Euro recovered nicely yesterday, mainly against the dollar, even under some uncertainty regarding the future of the Euro-Zone economies. The Euro-Zone was relatively quiet yesterday as the only significant event was a speech by European Central Bank (ECB) President Jean-Claude Trichet. Trichet, while speaking at the “ECB/European Commission conference on post-trading arrangements in Europe”, noted in part, the necessity for full transparency by financial entities during this very tumultuous period in the global economy. These remarks were even more significant due to the recent questions regarding the true outlook of the Euro-Zone economy. There are many investors who believe that the slow-down in economic growth in the EU coupled with the rising price of the Euro puts the ECB in the precarious position of having to manipulate changes. Trichet, who has been hawkish regarding most monetary policies, could be forced to tweak interest rates in the near future to combat inflationary trends.
The recent rise in the London Inter-Bank Offered Rate (LIBOR) could prove to be detrimental for companies who borrowed heavily in the recent past, many of which were European. The slowdown in consumer spending in the Euro-Zone also lends to the assumption that economy does have some hurdles overcome.
Today there are no scheduled EZ economic events, as we look ahead to a full day of data on Wednesday. With the heavily traded EUR/USD pair approaching record highs, investors should keep there eyes peeled to Existing Home Sales from the US to determine the direction of the pair. Negative data could likely send the EUR/USD on a bullish run.
Yesterday, the JPY gained against a slew of major currency rivals as carry trading stalled off of Asian stock market losses. The unwinding in carry trades brought about the first rise in a week against the Euro, and did well against all of its dollar rivals.
The fall in US stock prices gave way to similar movement in the Asian Markets as losses were felt. An empty economic calendar put equal focus on risk appetite with carry trading slowing down.
Today, the JPY is expecting the 23:30 GMT Trade Balance report. Forecasts have the figure gaining 0.29 Trillion Yen, but should not have very much effect on JPY trading. Expect the JPY to react to US stock prices as well as the release of Existing Home Sales. It is likely will continue to see JPY bullishness.
After a failed attempt to test an additional all time high, the pair is showing its first signs of a correction. There is a bearish cross forming on the 4 hour Slow Stochastic, as the RSI confirms with a static float at the 50 level. It appears that going short might be preferable today.
After the bullish breach through the daily channel accumulated its momentum, the cable has returned to its bearish trend. The daily chart is showing a very strong bearish cross, and the 4 hour chart is slowly joining the bearish notion. Going short seems to be the right way today.
There is a very distinct channel forming on the daily chart, as the pair now slowly drops to the middle of it. The momentum is quite bearish at the hourly level, and is entering neutral territory at the daily level. Going short with tight stops might be a good choice today.
The pair continues to float without a distinct direction yet with extremely choppy sessions, and violent price movements. The daily chart is showing no bias to any direction, and the hourlies are moderately bearish. Traders could stay out of this one today, or go short with very tight stops
The Wild Card
The bullish bonanza continues with no close signs of a halt. Oil is constantly breaching record highs, and all oscillators are showing the continuation of the bullish trend. Sharp drops can be seen locally, so forex traders might look for a dip and attempt to rejoin the very strong bullish trend.
|09:30||GBP||MPC Meeting Minutes||0-0-9||0-0-9||-|
|09:30||GBP||Public Sector Net Borrowing||16.7B||7.6B||-|
|11:00||CHF||SNB Chairman Jordan Speaks||*||*||*|
|11:00||GBP||CBI Industrial Order Expectations||-25||-17||-|
|13:30||CAD||NZD Core Retail Sales||m/m||0.7%||0.2%||-|
|15:00||USD||Existing Home Sales||4.92M||4.99M||-|
|15:00||USD||Fed Chairman Bernanke Testifies||*||*||*|
|15:30||USD||Crude Oil Inventories||-0.6M||-||-|
|19:00||USD||FOMC Meeting Minutes||*||*||*|
|02:00||AUD||MI Inflation Expectations||2.2%||-||-|
|06:00||JPY||BoJ Monthly Report||*||*||*|
|08:00||EUR||French Flash Manufacturing PMI||44.4||44.8||-|
|08:00||EUR||French Flash Services PMI||44.3||44.7||-|
|08:30||EUR||German Flash Manufacturing PMI||48.1||48.9||-|
|08:30||EUR||German Flash Services PMI||49.6||50.2||-|