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Wednesday, 15 Apr 2009

Financial Firm's Profits Help to Sway the Dollar

Many traders are looking towards Wall Street's reported earnings before placing their forex trades. The Street has been influencing currency moves and with the announcement of some of the world's largest financial firm's first quarter results this week, currencies may find direction based on their profits and losses.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddownupdownupdowndown
Weekly Trenddownupdowndowndowndown
Resistance1.33151.491099.201.15100.72350.8980
1.32851.489099.001.14900.72150.8960
1.32551.486098.701.14600.71850.8930
Support1.31951.480098.101.14000.71250.8870
1.31651.477097.801.13700.70950.8840
1.31451.475097.601.13500.70750.8820

Economic News

USD - Nerves on Wall Street Continue to Move Currencies

The U.S. currency continues to strengthen given the recent demand for riskier currencies. Falls in equity markets have driven traders to reduce their positions in riskier, higher yielding currencies. Many of the uncertainties in the currency markets are due to earnings season on Wall Street.

This week brings quarterly results from a number of financial companies, including U.S banks Citigroup and JP Morgan Chase. And the markets are waiting for the U.S. corporate earnings season to get into full swing. Some market players think this week's reports could show signs that the worst of the financial crisis is over, which means that the USD may still surpass its major counterparts before the end of this trading week.

Last week, the USD rose against the Yen, buoyed by a rally in U.S. shares after positive earnings guidance from U.S. bank Wells Fargo. Analysts' expecting that if U.S. earnings results show signs that the U.S. is pulling away from the worst of the economic downturn, risk appetite is expected to grow, putting more pressure on the Yen and also providing a lift to the Dollar.

EUR - The European Currency Rebounds against the Dollar

In yesterday's trading the European currency extended its gains vs. the greenback, rising 1.4% to $1.3363. The British pound also took more ground, rising 1.3% to $1.4842. Against the Japanese yen however, the EUR declined the most in a week before Germany's Federal Statistics Office releases its report on wholesale prices Wednesday, supporting the case for the region's central bank to cut Interest Rates. The price figure is expected to slump 7.1% in March from a year earlier.

However, Europe's single currency may weaken during the next few days on concern European Central Bank (ECB) officials this week will signal they may keep lowering rates to support growth. ECB President Jean-Claude Trichet already said last week the central bank is studying unorthodox ways of boosting the European economy. Some in the market continue to hold the view that the EUR remains laden by expectations of another Rate cut and the prospect of unconventional monetary easing, and the EUR is likely to halt its gains versus the Dollar, in the nearest future.

JPY - Carry Trade has is Again a Trader's Favorite

The Yen has begun to strengthen from a 5-month low versus the Dollar last week as fears of a prolonged recession are driving traders to the Yen. The currency is often seen as safe haven plays in the forex market. Traders may have been a bit premature in driving up higher yielding currencies as global equity markets went on a tear the past month and a half. There has been very little concrete evidence of a sustained economic turnaround. This in turn has once again provided a boost to the Yen as a safe haven currency.

The return of the carry trade is again becoming widely popular. Japanese Interest rates once again are in the basement and there are other nations providing significantly higher rates of returns. Due to the weak Yen, many traders have jumped back into this type of strategy and it has provided healthy returns the past two months. This could be a signal of the global economy returning to the previous economic cycle.

Oil - Crude Oil Inventories to be Released Today

The commodity is still recovering from its 5% plunge in price after the International Energy Agency slashed its forecast for Crude demand in 2009. The Agency predicts a drop of 2.8% in global demand for Oil. Crude Oil has not been able to steadily trade above the $51 price level, though Oil has risen over 10% this year. It appears traders are waiting for signs of a significant economic recovery. Many analysts have claimed a bottom has been reached in Crude Oil trading, though that remains to be seen. A fair value for Crude Oil may be $45.

Today the market is anticipating the release of the weekly U.S. Crude Oil inventories report from the Energy Information Agency. Traders are expecting Crude stocks to rise by 2 million barrels this past week. A reading above this mark may help to send the price of Crude lower, perhaps below the $50 mark once again.

Technical News

EUR/USD

The typical range trading on the 4-hour chart continues. Both the daily RSI and Slow Stochastic are floating in neutral territory. However, the pair currently sits near the bottom border of the hourly chart's RSI, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

The price of this pair appears to be floating in the over-bought territory on the daily chart's RSI indicating a downward correction may be imminent. The downward direction on the 4-hour chart's Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

USD/JPY

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour 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.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.

The Wild Card

Crude Oil

Oil prices are once again dropping, and a barrel of oil is currently traded around $49.26. And now, all oscillators on the 4-hour chart are giving bullish signals, indicating that oil prices might go up. This might give
forex traders a great opportunity to enter a very popular trend.

Current Time: 11/25 22:10 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/26
00:00EUR+ German 10-y Bond Auction-0.87/1.2-3
01:30AUD+ Construction Work Doneq/q-1.2%-1.7%-3
08:00CHF+ UBS Consumption Indicator1.41--1
08:00EUR+ German Import Prices0.3%-0.3%-1
10:30GBP+ Second Estimate GDPq/q0.7%0.7%-5
10:30GBP+ Prelim Business Investment 3.3%2.3%-2
10:30GBP+ Index of Services 3m/3m0.8%0.7%-1
12:00GBP+ CBI Realized Sales2831-3
14:30USD+ Core Durable Goods Orders m/m-0.1%0.5%-5
14:30USD+ Unemployment Claims 291k287K-5
14:30USD+ Core PCE Price Index m/m0.1%0.1%-3
14:30USD+ Durable Goods Orders m/mm/m-1.1%-0.4%-3
14:30USD+ Personal Spending m/m-0.2%0.4%-3
14:30USD+ Personal Income m/m0.2%0.4%-1
15:45USD+ Chicago PMI66.263.1-3
15:55USD+ Revised UoM Consumer Sentiment89.490.2-3
15:55USD+ Revised UoM Inflation Expectations2.6%-1
16:00USD+ New Home Sales467K471K-5
16:00USD+ Pending Home Salesm/m0.3%0.9%-3
16:30USD+ Crude Oil Inventories2.6M-3
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