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Thursday, 15 Mar 2012
Fed Outlook Gives Dollar Additional Boost
A positive economic outlook from the US Federal Reserve earlier this week, helped boost the dollar against its main currency rivals throughout yesterday's trading session. The news helped boost the USD/JPY to a fresh 11-month high, while the EUR/USD dropped as low as 1.3029 during the morning session. Today, traders will want to pay attention to a batch of US data, which includes this week's Unemployment Claims figure. Any positive US news could help boost the dollar further.
USD - US News Set to Impact Markets Today
The USD was able to extend its bullish trend yesterday, as positive US news continues to boost investor confidence in the American economic recovery. The USD/JPY hit a fresh 11-month high during the afternoon session, and appeared close to breaching the 84.00 level. The EUR/USD dropped to a fresh 1-month low at 1.3029 before staging a mild upward recovery. The main reason behind yesterday's dollar surge was a positive outlook from the Fed on Tuesday. With a batch of US news set to be released today, the greenback may be able to maintain its bullish momentum.
The main piece of US news set to be released today is likely to be the weekly Unemployment Claims figure, scheduled for 12:30 GMT. Following last week's positive Non-Farm Payrolls report, investors will be carefully watching today's figure for clues as to the strength of the US employment sector. In addition, traders will want to note the results of the US PPI figure and TIC Long-Term Purchases, both set to be released at 12:30 GMT. Positive results may continue to help the dollar.
EUR - Weak Euro-Zone Indicators Keep Pressure on EUR
The euro continued its downward run against the US dollar yesterday, after several euro-zone economic indicators came in below forecasted levels. Following the release of the European Core CPI and Industrial Production figures, the EUR/USD dropped some 55 pips and came close to a 1-month low, reached only several hours before. The common-currency had more luck against other safe-haven currencies, in particular the Swiss Franc. The EUR/CHF shot up over 40 pips to reach as high as 1.2115 during the afternoon session.
Turning to today, in addition to any announcements out of the euro-zone that always have the potential to generate market volatility, traders will want to monitor the results of several US economic indicators. In the past, the euro largely benefitted from positive US news, as it tended to generate risk-taking among investors. That has not been the case in recent weeks however, as the euro-zone debt crisis has overshadowed any gains in the US economy. Should today's news signal additional growth in the US economy, the EUR/USD may slide as a result.
JPY - Poor Japanese Economy Weighs Down on Yen
A record Japanese trade deficit combined with recent monetary easing steps from the Bank of Japan continued to weigh down on the yen throughout yesterday's trading session. In addition to the USD/JPY, which hit a fresh 11-month high, the GBP/JPY shot up over 130 pips yesterday. The pair reached as high as 131.44 before staging a slight downward correction during the evening session.
Today, US news is forecasted to once again generate volatility for the yen. With the Unemployment Claims, TIC Long-Term Purchases and Philly Fed Manufacturing Index all forecasted to show additional gains in the US economy, investor risk taking may continue as we begin to close out the week. If the forecasts for the news turn out to be correct, the yen may see additional losses today.
Crude Oil - Crude Oil Tumbles Following Strong US Data
The price of crude oil tumbled during yesterday's trading session, as the combination of a strong US dollar and decreased demand for oil out of China weighed down on the commodity. A strong US dollar typically leads to a drop in oil prices, as the commodity becomes less attractive to international buyers. Oil dropped over $1 a barrel yesterday, reaching as low as $105.61 during the afternoon session.
Today, oil may continue to fall providing US indicators show additional growth in the American economy. That being said, tensions in the Middle East still threaten to cause the price of oil to spike. Traders will want to watch out for any escalation in the conflict between Iran and Western nations. Should anything occur, oil may bounce back to close out the week.
The Slow Stochastic on the 8-hour chart has formed a bullish cross, indicating that upward movement could occur in the near future. This theory is supported by the Relative Strength Index on the daily chart, which has crossed into oversold territory. Going long may be the wise choice for this pair.
Most long-term technical indicators show the GBP/USD trading in neutral territory at this time. The daily chart's Williams Percent Range and Relative Strength Index are both range trading. As there is no defined trend, traders may want to take a wait and see approach for this pair ahead of any major movements.
Technical indicators on the daily chart continue to show that this pair is overbought and could see downward movement in the near future. These include the Slow Stochastic, which has formed a bearish cross, and the Relative Strength Index which is currently at 80. Going short may be the wise choice for this pair.
The daily chart's Williams Percent Range is currently well into the overbought zone, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently around 75. Going short may be the wise choice for this pair.
The Wild Card
A bearish cross on the daily chart indicates that downward movement for this pair may occur in the near future. The Williams Percent Range on the same chart, which is currently at -20, gives further evidence to this theory. This may be a good time for forex traders to go short in their positions, ahead of a possible downward correction.
|18:05||USD||FOMC Member Bullard Speaks||*||*||*|
|23:50||JPY||BSI Manufacturing Index||15.2||17.2||-|
|23:50||JPY||Tertiary Industry Activity||m/m||-0.2%||0.3%||-|
|23:50||JPY||M2 Money Stock||y/y||4.1%||4.3%||-|
|00:01||GBP||RICS House Price Balance||57%||59%||-|
|00:30||AUD||NAB Business Confidence||5||*||-|
|03:45||JPY||30-y Bond Auction||1.62|4.4||*||-|
|06:00||JPY||Prelim Machine Tool Orders||y/y||8.4%||-||-|
|07:45||EUR||French Industrial Production||m/m||-0.5%||0.2%||-|
|09:00||EUR||Italian Industrial Production||m/m||0.2%||0.3%||-|
|15:00||GBP||NIESR GDP Estimate||0.7%||*||-|