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Monday, 16 Nov 2009
Gold Continues to Rise, Reaches $1,129 an Ounce!
The strongest trend in the market appears to be the bullishness of gold. Gold continues to break new records on a daily basis, and with a week packed with publications from the U.S economy entering, the main question is, can gold reach higher?
USD - Dollar Continues to Weaken Following Disappointing Data
The Dollar continued to weaken during last week's trading session. The Dollar extends its slow yet steady slide against the Euro, and the EUR/USD pair is reaching towards the 1.50 level again. The Dollar also depreciated against the Yen and the Pound.
The main reason for the Dollar's drop appears to be the disappointing data published from the U.S economy. The U.S Trade Balance, which measured the difference in value between imported and exported goods and services during September, dropped to -36.5B, much lower than the -31.8B expected. This has both positive and negative sides. From one hand, the American citizens are consuming more, stating that the economy is recovering. However, on the other hand, it also states that the export industry fails to reach its levels prior the recession. It seems that investors have focused on the negative view of this publication. Also last week, the Preliminary Consumer Sentiment failed to reach expectations for a 71.1 figure, and reached merely 66.0, its lowest result in 4 months. This shows that the U.S consumers still prefer to hold on to their funds, and are not hurry to spend them. In other words, American people still don't have enough confidence in their financial security.
As for the week ahead, many interesting publications are expected from the U.S economy. Traders should focus on the Retail Sales reports, the Producer Price Index, the Consumer Price Index, the Building Permits and the weekly Unemployment Claims. As for today, traders are also advised to follow the speech by Federal Reserve Chairman Ben Bernanke, which is expected at 17:15 GMT. Lately his speeches had an instant impact on the market, and traders should take advantage of the opportunities that may arise as a result.
EUR - Euro Sees Mixed Results against the Majors
The Euro saw a volatile session against the major currencies during last week's trading. The Euro managed to strengthen against the Dollar, yet saw mixed results against the Yen and the Pound.
Despite the weak Dollar, the Euro didn't manage to strengthen against the major currencies. Usually, when the Dollar is so weak, the Euro gets stronger, yet last week this axiom failed to exist. The main reason that the Euro didn't strengthen appears to be the negative data released from the German economy. German Economic Sentiment dropped in November to its lowest result in 4 months, reaching merely 51.1, far less than the expected 55.2 figure. This states that the German economy's pace of recovery might be a little slower than expected. In addition, the German Preliminary Gross Domestic Product failed to reach expectations for a 0.9% growth, and rose by only 0.7%. These two leading indicators have created hesitations among investors regarding the Euro-Zone's recovery, and by so have weakened the Euro.
As for this week, a batch of data is expected from the Euro-Zone. The most impacting publications look to be the European Consumer Price Indices, the European Current Account, and especially the German Producer Price Index. Following the recent disappointing data from the German economy, further negative data could have an extremely negative impact on the Euro. Considering that this is the most significant data from the German economy this week, traders are advised to follow its result.
JPY - Japan's Interest Rate Announcement Expected this Week
The Yen continued to see volatile trading against the major currencies during last week's session. The Yen rose a little against the Dollar, but mainly ups and downs against the Euro and the Pound.
The Yen's volatility came as a result of the mixed results from the leading publications of the Japanese economy last week. Both positive and negative data was released, and this has created range-trading for the Yen's leading pairs and crosses. The most significant negative data came from the Current Account report, which showed the difference in value between imported goods and services failed to reach expectations for 1.53T, and reached 1.34T. Japan's economy relies greatly on its exports, and thus the lower-than-expected figure has weakened the Yen. On the other hand, a surprising surge in the Core Machinery Orders has created optimism that the Japanese economy might be on its way to recover. As a result of the uneven results, the Yen didn't see a clear direction during last week's session.
Looking ahead to this week, the most intriguing publication from Japan is clearly the Overnight Call Rate on Friday, which is in fact the Japanese interest rate announcement for the upcoming month. Analysts forecast the Bank of Japan (BoJ) will leave rates at 0.10%. However, if the BoJ will surprise traders with a rate hike, the rate change may have the potential to boost the Yen. Traders are advised to follow the result of the announcement.
OIL - Crude Oil Drops on Weak U.S. Energy Demand
Crude oil saw a bearish trend during last week's trading session. Crude oil dropped to $75.60 a barrel, its lowest value in a month. Furthermore, ever since crude oil was trading at $82.0 a barrel, it saw a slow, yet coherent downtrend.
The main reason for the drop in oil's value seems to be speculations that the U.S demand for energy has declined. The slide began on Thursday as Crude Oil Inventories surprisingly rose to 1.8M barrels, well above expectations for a 0.8M result. In addition, the negative data from the U.S. economy on Friday has increased concerns for a reduced energy demand. The combination of high supply and low demand could have only one result - crude oil reached a month low.
As for this week, traders should follow the main publications from the U.S. economy. Traders should bear in mind that currently investors interpret positive data as a good sign for energy demand and vice versa. In addition, traders should also focus on the Crude Oil Inventories report on Wednesday, as this publication usually has an immediate impact on crude oil trading.
The bullish trend has continued for the past two trading sessions with a strong uptrend intact. The charts are showing no sign of weakening this trend as the pair is once again flirting with the significant 1.5000 price level. This pair could continue its uptrend, climbing potentially to the 1.5070 level by the end of today's trading session.
The 4-hour chart is showing the potential for bearish trading today. The chart displays the Relative Strength Index is trading in the overbought zone, indicating the potential for a downward correction. Traders may prefer to be short on this pair today.
The pair could see some upward movement today as a bullish cross has formed on the 4-hour chart's Slow Stochastic Oscillator, indicating the potential for some upward movement. It appears the pair has been consistently trading within the lower boundary on the daily chart's Bollinger Bands, lending to a possible appreciation to the 20 day average.
Traders may notice the 4-hour chart's Bollinger Bands. The pair has bounced off the upper Bollinger Band and has crossed the 20 day average line, indicating the lower band could be the next price target. This may give traders the incentive to be short on this pair and continue to ride the long term downward trend.
The Wild Card
The commodity has reached an all time high yesterday at $1129.72 and has continued its. The uptrend is not showing definitive signs of slowing. The daily chart shows the pair has consistently traded in the upper half of the chart's Bollinger Bands. This may indicate a strong uptrend. Until we see the commodity cross the 20 day average line suggesting the trend is weakening, forex and gold traders may want to continue to be long on gold.