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Tuesday, 8 Sep 2009
Forex Market to Move on News Coming from Europe and Canada
In forex trading, the USD is set to have relatively quiet news today. This lack of major news indicates that the other major currencies, such as the GBP, EUR and CAD, may be the market movers today and traders should pay close attention to each of their respective economic news releases.
USD - Dollar Falls as Labor Day Holiday Takes Its Toll
The U.S. Dollar fell against a number of its major crosses due to U.S. markets being closed. Looking at Monday's trading as a whole, the Labor Day holiday in the U.S. took its toll on the American currency. In early trading yesterday, the USD fell to a near 2 week low vs. the British Pound. This was after Kraft Foods stated that it made an offer to buy British chocolate maker Cadbury. Despite the low trading volume on Monday, it seems that risk appetite was high, and high-yielding currencies became more attractive. The Dollar Index dropping by 0.2% to 78.00 yesterday is evidence of this.
The USD/JPY cross fell by 25 pips yesterday to the 92.85 level, as many traders ditched the U.S. currency for the Yen due to the improving global economy and the thin trading of Labor Day. The Australian Dollar hit a 1 year high vs. the U.S. Dollar on Monday. The AUD was helped due to rising Gold and Crude Oil prices as of late, which Australia's currency is highly dependent. In addition, Australia's currency is in much greater shape than that of America. The Canadian Dollar made some inroads into the greenback. By the end of yesterday's trading, the EUR/USD pair closed unchanged at 1.4332.
Looking ahead to today's trading, there is the U.S. Consumer Credit figures at 19:00 GMT. The other releases that are expected to affect the main USD crosses are the British Manufacturing Production at 08:30 GMT, the German Industrial Production result at 10:00 GMT and Canadian Building Permits figures from at 12:30 GMT. The volume today is likely to be high following yesterday's bank holidays in both the U.S. and Canada. We might see the EUR/USD and GBP/USD close over 100 pips away from the opening. If you want to make big profits today, buy into the USD's crosses now.
EUR - EUR Trading Dominated By Optimistic Data
On Monday, EUR trading was driven by German Factory Orders rising for the 5th consecutive month in July by a higher than forecast 3.5%. This was much needed confidence for Europe's largest economy. Major benchmark indexes rose in all the western European markets. The German DAX climbed by 1.5%, and the British FTSE 100 added 1.7%. Despite the positive figures from Germany, Europe's biggest economy is still a long way away from returning to desirable levels. It can be said that the recent G20 Meetings helped return confidence to the European currency.
The EUR snatched a 3rd consecutive day of gains against the British currency, as the pair rose by 30 pips to close at the 0.8777 level. This was largely due to German industrial data helping the EUR, which was much needed boost for the European currency. The EUR/USD cross finished trading unchanged at the 1.4232 level. This was owed to the U.S. Labor Day bank holiday. The GBP/USD pair rose in earlier trading yesterday, but ended up 60 pips lower at the 1.6343 level. The GBP declined yesterday, due to an equity market rally, which led to traders dropping the cable.
Today, there is much economic news that is expected to determine the value of the both the EUR and GBP. There is the British Manufacturing Production at 08:30 GMT, the German Industrial Production at 10:00 GMT, and the British Nationwide Consumer Confidence at 23:01 GMT. There is likely to be a continuation of much of Monday's trends. However, the volatility may increase a lot, as regular trading returns to the forefront. It is advisable to buy into the main EUR, GBP, and CHF crosses, as today's trading kicks in.
JPY - JPY Expected to Slide
The Yen fell to its lowest level in a week vs. the EUR. However, the EUR/JPY eventually finished yesterday's trading 30 pips lower at the 133.18 level. In the coming days, it seems that the Japanese currency may slide as global equities are expected to rise. Analysts expect this to reduce demand for the JPY as a safe-haven. This behavior was already seen on Monday, as the JPY dropped vs. the AUD and the NZD.
The recent election victory of the Democrat Party has led to much speculation amongst investors that the JPY may slide in the coming weeks and months. Many people believe that this inexperienced party will increase taxes too high, and will be unable to handle Japan's finances well. Therefore, these analysts conclude that there may be a downward spiral of the Japanese currency in the near future.
Crude Oil - Crude Oil Eyes OPEC Meeting
Crude Oil finished trading virtually unchanged at $68.12. This behavior was largely owed to the U.S. markets being closed on Monday. Therefore, there was lower than usual volatility in both the forex market and the commodity market. Furthermore, in mid-trading many investors ditched Crude Oil for equities, which was initiated by the announcement of the attempted takeover bid by Kraft Foods of Cadbury.
OPEC is set to meet on Wednesday 9th September, and is expected to maintain the production target of 24.845 million barrels a day in Vienna, according to Kuwaiti Oil Minister Sheikh Ahmed Al-Sabah. As trading volume returns back to normal today, there is likely to be very high fluctuations in the price of Crude Oil. Traders will be keeping one eye on tomorrow's OPEC meeting, and another eye on USD strength.
The pair has been range trading between the 1.4200 and the 1.4360 levels in the past several days. The daily chart seems to be showing misleading data. However, the 4-hour chart offers a more accurate picture. The RSI of the 4-hour chart shows the pair sitting in the overbought territory, signaling that a downward correction in the coming hours is imminent. Entering the pair at an early stage seems to be a wise choice today.
The hourly chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, there is a bearish cross forming on the daily chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
There is a fresh bullish cross forming on the 4- hour chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the hourly chart's Slow Stochastic also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy.
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. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The Wild Card
Silver prices rose significantly in the last month and peaked at $16.41 per ounce. However, there is a bearish cross on the daily chart's Slow Stochastic 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.