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Monday, 3 Aug 2009
Full Week of Fundamental Data Looks to Provide Volatility
The economic calendar is filled with high impact data this week that threatens to sow large volatility into the market. From the wide range of news reports, ForexYard advises its traders to pay special attention to the U.S Manufacturing PMI, Pending Home Sales, Non-Farm Employment Change and EUR Minimum Bid Rate reports.
USD - Non-Farm Payrolls Week Kicks Off
Last week the Dollar saw mixed results against the major currencies. The USD underwent extremely volatile sessions against the EUR and the Yen, yet the pairs rapidly returned to former rates by Friday's close after the US and Canada released their GDP figures.
It appears that the mixed results which were received from the U.S leading economic indicators were the main reason for the Dollar's harsh volatility, experienced last week. On Monday, the New Home Sales report, which measures the annualized number of new single-family homes that were sold during the previous month, delivered the highest figure in 7 months. In addition, the Core Durable Goods Orders index, a leading indicator of production, delivered the third consecutive positive figure.
However, aside from these positive reports, the Conference Board's Consumer Report, which was released on Tuesday, showed that the U.S consumers are still cautious regarding their expenses. Usually, the more secure the consumers feel, the better the economy is doing. The weekly Unemployment Claims also delivered negative figures, as 584,000 individuals lost their jobs during the past week.
As for this week, an extremely busy trading week is impending. The leading economic publications for the week will be the Manufacturing Purchasing Managers' Index, the Pending Home Sales, the ADP Non-Farm Employment Change, the weekly Unemployment Claims, and of course, the Non-Farm Payrolls on Friday. This week promises to create large volatility for USD pairs, which will provide traders many opportunities to create high profits.
EUR - Euro-Zone Interest Rate Announcement Scheduled This Week
The EUR experienced a rather volatile session during last week's trading. The EUR saw mixed results vs. the Dollar, starting the week with a sharp drop, and correcting it by the weekend. The EUR also saw mixed results against the Yen and slid partially against the Pound.
The indecisive figures from the Euro-Zone's strongest economy, Germany, was the main reason for the EUR's volatility. On one hand, the German Unemployment Change showed that merely 6,000 people lost their jobs during June. This continued the relatively positive employment condition in Germany from the past few months. However, on the other hand, the German Preliminary Consumer Price Index delivered a negative result, showing that the inflation level in Germany is currently the most fragile aspect of its economy, and that concerns for deflation shouldn't be revoked at the moment.
As for the week ahead, traders should once again focus their concentration on the German economy publication. A bundle of data is expected from the German economy, and its results will have a large impact on the EUR. The leading publications are the German Retails Sales, the Factory Orders, and the Industrial Production. Yet on top of that, the European Central Bank (ECB) is scheduled to announce its Interest Rate and monetary policy decisions on Thursday. In case the ECB surprises and manipulates interest rates, the EUR will be strongly impacted, and is likely to influence the major currencies as well.
JPY - Yen's Volatility Continues
The Yen continued with its volatile activity from the past week. The JPY saw frequent ups and downs against the Dollar, closing the week around the 94.50 level. The Yan also underwent a volatile session against the EUR, and dropped against the GBP.
The significant news publications from the Japanese economy delivered mixed results as well. The Japanese Retails Sales dropped for the 10th consecutive month. This demonstrates the poor consuming condition in Japan, which shows that the Japanese still lack the confidence that the recession is a part of the past and not the future. The Preliminary Industrial Production reports, however, showed that the total inflation-adjusted value of output produced by manufacturers in June rose by 2.4%. This shows that although the Japanese are cutting on expenses, the Japanese economy still manages to create large export, and thus the industrial production figures continue to rise despite the recession.
Looking ahead to this week, two indicators seem to be more relevant then the others. Tomorrow night, the Japanese Monetary Base is scheduled. This indicator's result seems to have influence on the Japanese interest rates, and thus investors tend to react to this publication. Also this week, the Leading Indicators index will be published on Thursday. This index is designed to predict the direction of the economy and has the potential to impact the Yen's value.
Crude Oil - Crude Oil Reaches $70 a Barrel!
Crude Oil's prices continue to rise, and a barrel of Crude Oil is currently trading near $70 a barrel, a 1-month high.
Crude Oil began last week's trading with a sharp drop in value, mostly as a result of the strengthening Dollar. Later on, the Dollar dropped and the positive global data created a sentiment that the leading economies are pulling out of recession. It is widely thought that a financial improvement will raise energy demand, and thus the prices of oil rose. The positive figures from the global equity markets also contributed to Crude Oil's bullish trend. It still looks that oil's value is strongly correlated with the equity markets, especially in the U.S, and traders are advised to consider this in their Crude Oil positions.
As for the week head, Crude Oil looks to continue with its bullish trend. However, traders should follow the Dollar's value, global equity markets and energy reports this week, as Crude Oil has proven to be a very volatile investment.
The bullish trend is losing its steam and the pair seems to be consolidating around the 1.4250 level. There is a bearish cross forming on the 4-hour Slow Stochastic, indicating a bearish correction might take place in the nearest future. When the downward breach occurs, going short with tight stops appears to be the preferable strategy.
The daily chart is showing mixed signals with its RSI fluctuating in neutral territory. However, the 4-hour chart's RSI is already floating in the over-bought territory suggesting that the recent upward trend is losing steam and a bearish correction is impending. Going short with tight stops might be the right strategy today.
The typical range-trading on the hourly chart continues. Both the daily RSI and Slow Stochastic are floating in neutral territory. However, there is a bullish cross forming on the 4-hour chart, suggesting an upward correction may be imminent. Going long might be a wise choice.
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 RSI also supports this notion. When the upward breach occurs, going long with tight stops appears to be a preferable strategy.
The Wild Card
Gold prices rose significantly last Friday and peaked at $955 an ounce. However, the 4-hour chart's RSI is floating in an overbought territory suggesting that the recent upward trend is losing momentum and a bearish correction may be impending. This might be a good opportunity for forex traders to enter the trend at a very early stage and a great entry price.
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|
|09:00||CHF||KOF Economic Barometer||90.1||-||-|
|09:00||EUR||Spanish Flash CPI||y/y||-1.1%||-||-|
|10:30||GBP||Net Lending to Individuals m/m||m/m||2.4B||-||-|
|10:30||GBP||M4 Money Supply||-0.8%||-||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||-||-|
|16:00||USD||Pending Home Sales||m/m||1.7%||-||-|