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Tuesday, 9 Sep 2008
Freddie and Fannie Takeover Continues to Help USD
Today, we can expect several indicators from the US economy, most of which according to forecasts are set to disappoint current USD trends. The day will begin with a speech by Federal Reserve Chairman Bernanke who is due to speak about education at the White House Initiative on Historic Black Colleges and Universities.
USD - Pending Home Sales on Tap
The Dollar appreciated versus most of the major currencies yesterday. The USD gained over 200 points versus the Euro, dipping below 1.41 to as low as 1.4050, lows that haven't been seen since October 2007. This appreciation took place as the markets responded to the US government's seizure and takeover of Freddie Mac and Fannie Mae. The takeover brings an immediate boost to what has been an ailing credit and mortgage crisis that has at times crippled the US economy. US stock markets responded with a resounding tone as the greenback flourished in the currency market. In his speech yesterday, Federal Open Market Committee Member Fisher strongly endorsed this takeover by the Treasury Department. Yesterday's fundamental data included US Consumer Credit, which came in at 4.6B, much lower than the last publication at 11.0B, showing that consumer spending did lag for the month of August. Despite the fall of in Consumer Credit, the USD was nearly unstoppable, surrendering gains to only the JPY, as the Dollar index traded at its highest levels in over a year.
Today, we can expect several indicators from the US economy, most of which according to forecasts are set to disappoint current USD trends. The day will begin with a speech by Federal Reserve Chairman Bernanke who is due to speak at the White House Initiative on Historic Black Colleges and Universities on the subject of education. In addition we can expect figures for Wholesales Inventories and IBD/TIPP Economic Optimism, both of which should hold little significance in how the markets move for the day. The highlight of the US news day will be the Pending Home Sales indicator, which is forecasted to show a drop-off of 1.2% since its last measurement. Based solely on the forecasts of today's fundamental indicators, one may assume that the USD will depreciate. However, as is the case with the greenback more than any other currency, when bullishness picks up steam it is very hard to bet against. Expect volatility in the market today, as behavior should keep the USD in range with yesterday's highs for most of the day.
EUR - EUR Prices Continue their Steady Decline
The Euro depreciated versus all of the major currencies yesterday. With a cocktail of poor local news and the rising USD trend in recent weeks, the EUR has found itself in deeper and deeper water. With the difficulties currently affecting the Euro-Zone economy, such as price stability, inflation and the slowdown in growth, the EUR should have seen a dip, none as big as what has been seen recently. Yesterday, the Euro lost over 200 points versus the USD and the GBP and suffered another day of losses against the JPY following the 200 point drop at market opening for the EUR/JPY cross on Sunday.
Looking ahead to today, the EUR will be left in the hands of global market movement and US data. The lone Euro-Zone indicator was released early this morning and showed a slight bullishness for the EUR despite the disappointing result. The German Trade Balance was forecasted at 17.5B and instead released at 11.8B. Shortly following the release the EUR/USD pair jumped back above 1.4120.
EUR traders should pay close attention to the global equity markets as well as the movement in USD and JPY pricing as today's trading session could prove to be just as active as yesterday.
JPY - JPY Posts Strong Gains Vs. Euro and Pound
The Yen appreciated versus all of the major currencies yesterday. With the revival of risk appetite to the market after the seizure of Freddie Mac and Fannie Mae, the JPY was able to make gains. With substantial gains of over 200 points versus the EUR and GBP since Sunday's market opening, the JPY has been able to take advantage of volatile market conditions to erase several months of bearish results against the majors. Against the USD the Japanese currency saw bullishness for the first time in 3 days. Yesterday, in local economic news for Japan, the Economy Watchers Current Index was released with a small monthly drop of 1 point as it reported a mark of 28.3, which did little to effect JPY trading.
Today a number of indicators are projected to come out from the Japanese economy. Early this morning we saw the release of the Machine Tool Orders index that was expected to drop by 8.9% last month and instead extended losses to 14.2%. The market was not affected much by the release and continued in its current trend. Later on tonight Japan will release annual CGPI, which measures the change of prices of goods sold by corporations and acts as an accurate indicator for consumer inflation. Also on tap is Japan's Current Account indicator, which is expected to rise to 1.34T Yen for this month. With a close eye on US stock markets and the movement of the USD and GBP, traders could see continued gains for the JPY today.
Oil - Oils Falls in Response to Rising Dollar
Yesterday's trading session saw a drop in Crude Oil prices, largely due to the bullish movement of the USD. Seeing its highest levels since late 2007, the greenback, along with news of sufficient oil supplies, pushed prices for Light Sweet Crude to as low as $104.80 per barrel yesterday.
Supply numbers received a steady boost yesterday as hurricane news from the Gulf of Mexico showed that Ike, the latest weather system to threaten US oil supply, had been downgraded to Category 1. Crude Oil also fell following words from Saudi Arabian Oil Minister Ali Al-Naimi on his arrival to the latest round of OPEC meetings in Vienna. He stated that supply was ‘healthy' and that prices in the market were ‘well-balanced'. News from the OPEC meetings will likely drive more volatile sessions for Crude Oil in the coming day.
The pair is continuing its downtrend with full steam, and is now traded around the 1.4080 level. As the current price on the daily chart has dropped beneath the Bollinger Bands' lower boarder, another bearish session could take place. Going short might be a good strategy today.
The cable has resumed its bearish trend and is attempting to breach the 1.7500 level. Should the breach will take place, the pair might extend its bearish run, with a potential price target of 1.7430.
The pair is continuing to provide mixed results, without making a significant breach. As all oscillators on the 4 hour chart are pointing down, it seems that the pair could face another bearish session. Going short with tight stops might be the right choice today.
The pair is extending its bullish momentum, and is now traded around the 1.1320 level. The Bollinger Bands on the daily chart are tightening, suggesting that another sharp bullish move might take place. Going long seems to be preferable.
The Wild Card
Oil prices are once again dropping, and a barrel of oil is currently traded around $105. And now, all oscillators on the daily chart are giving bearish signals, indicating that oil prices might further drop. This might give forex traders a great opportunity to enter a very popular trend.
|00:00||AUD||HIA New Home Sales||0.0%||-||-|
|00:00||EUR||German Prelim CPI||m/m||-0.3%||0.0%||-|
|00:00||EUR||Italian 10-y Bond Auction||2.44|1.5||-||-|
|01:30||AUD||Private Capital Expenditure||q/q||1.1%||-1.7%||-|
|09:00||EUR||Spanish Flash CPI||y/y||-0.1%||-0.3%||-|
|09:55||EUR||German Unemployment Change||-22K||-1K||-|
|10:00||EUR||M3 Money Supply||y/y||2.5%||2.6%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.5%||12.4%||-|
|13:00||EUR||GfK German Consumer Climate||8.5||8.6||-|