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Friday, 13 Feb 2009
G-7 Takes the Task of Rebuilding the World Economy
The G-7's finance ministers and central bankers meet tonight and tomorrow before releasing a statement and talking to reporters at about 2:30 p.m. local time. On the agenda: How to thwart protectionism, overhaul financial oversight and end what the International Monetary Fund calls a depression in advanced economies.
USD - First Good Sign from the U.S Economy
The Dollar continues to safely strengthen against the major currencies, and yesterday the greenback reached a 10-day high against the EUR. For now, it seems that the ongoing reports claiming the U.S government is combating recession, and the wide acceptance of the steps it's taking by financial experts around the world are enough to set free the bullish trend we're witnessing for the past couple of weeks.
As for yesterday, a batch of relatively positive data was delivered, supporting the Dollar's upward trend. The monthly U.S Core Retail Sales rose 0.9% in January, beating forecasts for a 0.5% decline. That piece of information is extremely significant, as this is the first time in 6 months that the monthly value of sales at the retail level (excluding automobiles) was greater than the one in the previous month. In a few months, we all might look back and say that this was the first sign of the rehabilitated U.S economy.
Another important indicator that was released yesterday was the Unemployment Claims. The published figure showed that 623K individuals filed for unemployment insurance for the first time during the past week, and if we said that the Core Retail Sales might be a good sign, this is a very disturbing sign, for sure. It is now the second week in a row that over 600K people are losing there jobs in the U.S, pointing out the well-known fact that the U.S economy is continuously contracting.
As for today, the Preliminary University of Michigan Sentiment survey will be released at 14:55 GMT. This survey is considered to be a primary indicator of consumers' financial confidence, and thus tends to have a large impact on the market. Currently, a 60.6 mark is expected, which is considered to be a positive result, however traders should keep their eyes focus, and look for a possibly change of trend during this time.
EUR - Low Oil Price to Help Euro-Zone Economy - Says Trichet
Yesterday the EUR saw a volatile trading session against the major currency pairs. The EUR climbed against the JPY; however it continued its downtrend against the USD.
The main news from the Euro-Zone yesterday came from Jean-Claude Trichet's speech, in which the European Central Bank President said that that the expansionary impact of relatively low oil prices, and technological progress should come to aid of the Euro-Zone economy. In his speech Trichet expressed his optimism despite of the challenges the economies will face in 2009.
Trichet's speech was probably the leading factor to halt the slide of the EUR/USD at midday, as it was his first hawkish speech in quite a while now. It is safe to say that investors have an endless thirst for such words from the economic leaders, especially in times like now.
Also yesterday, the European Monthly Industrial Production indicator was released. The indicator showed that the total inflation-adjusted value of output has dropped by 2.6% in December as opposed to the previous month. This publication reflected 4 straight months in which this economic indicator is deteriorating, demonstrating how unhealthy the Euro-zone industrial production is currently.
Looking ahead to today, the European Flash Gross Domestic Product (GDP) is expected at 10:00 GMT. This indicator measures the change in the value of all goods and services. Forecasts for this indicator are suggesting that the Euro-zone's GDP has dropped by 1.3% in December, painting quite a gloomy picture of the current financial status. Traders should also stay informed of news released from the G7 Meeting that will be held during the next to days, as any information from that meeting could change the course of the local currencies before the trading week reaches its end.
JPY - Japanese Yen Seems to Be the Best Financial Investment
The JPY underwent an extremely volatile session against all the major currencies. During early trading the JPY dropped against the USD and the EUR, however, later on the trend reversed, and the JPY returned to its previous rates.
It appears that investors are considering the Japanese economy to be the safest one, or at least the most stabile economy to trust their funds in at the moment, as the JPY is gaining strength in a consistent way, in spite of the fact the all the experts are predicting on a daily basis that the JPY is overvalued and that a downtrend is just a matter of time. It should be said that the best currency to go long on, for a few months now is the JPY, and weather you traded it against the USD, the EUR or the GBP, either way you gained profits, and a lot of profits. As long as no clearer signs are proving that the JPY has limited its bullish trend, it will retain its status as one of the best investments in the current economic turbulence.
As for today, no significant data is expected from the Japanese economy, however, the G7 Meeting that will be held during the weekend, is likely to affect the Yen as well. Traders are advised watch closely after any development from the meeting, especially for announcements regarding the Japanese economy.
OIL - Crude Oil Prices Following Equity Markets
Crude Oil prices continue to slide on a permanent basis, and a barrel of Crude Oil was traded for $33.50 yesterday.
Forecasts are assuming that world oil consumption will drop 1.7% to 84.3 million barrels a day this year, and particularly there is a serious concern that oil demand will drop sharply in the U.S. it seems that as long as the U.S economy continues to deteriorate, oil prices will continue to respond in lowering prices. if oil prices were considered to be attached to the USD in the past, it appears that today oil prices are more attached to the Dow Jones than to anything else, and as long as equity markets in the U.S will deliver bearish signs, a barrel of Crude Oil might be values under $30.
As for today, traders are advised to continue following equity markets in the U.S as they seem to be the best tool in order to predict future developments.
This pair is in the midst of a narrowing upward channel and is now floating in the middle of it. The hourlies are showing mixed signals with its RSI floating in neutral territory. However, the Slow Stochastic of the daily chart is showing quite a strong bullish momentum, and the RSI confirms that the direction is indeed up. All indications are that there is more room for further upward movement and the preferable strategy today will be to go long on dips.
Despite yesterday's sharp drop, the bullish channel on the daily chart is still intact. According to a 4 hour chart, the pair is oversold; therefore a fresh bullish momentum may be quite imminent on the 4 hour chart as well. Going long with tight limits might be a preferable strategy today.
The pair is still in a bullish configuration and is now floating around 91.00. The momentum on the 4 hour chart is very strong and it appears that there might be a testing the level of 91.60. The Bollinger Bands are tightened on the daily chart implying that volatility will increase during the day; meaning that traders may have a good opportunity to make profits during today's trading session.
The hourlies are showing that the pair still does not have a distinct direction, as the chart appears to be quite horizontal for the past 2 days. Indicators on the 4 hour and the daily charts are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.
The Wild Card
There is a very accurate bullish channel forming on the daily chart, as the break through the bottom level of it was just validated. Silver now has enough bullish momentum to be carried into the 14.50 zone. This is a great opportunity for forex traders to use this technical break and swing into a high potential upwards move.
|23:00||NZD||Westpac Consumer Sentiment||121.2||-||-|
|01:00||EUR||German Buba Monthly Report||*||*||*|
|14:00||EUR||ECB President Draghi Speaks||*||*||*|
|15:00||USD||Existing Home Sales||5.15M||-||-|
|15:05||USD||FOMC Member Dudley Speaks||*||*||*|