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Thursday, 13 May 2010
Gold Prices Hit Record Highs
Gold futures hit a record high yesterday as investors worry the Euro-Zone bailout will not be much of a fix and are turning to the metal as a safe heaven investment. Furthermore, Gold is again proving to be a popular hedge against inflation.
USD - USD Rises on Sign of Strengthening Economic Recovery
The US Dollar rose Wednesday against the EUR and other currencies as the release of the Trade Deficit data signaled the US economic recovery is strengthening and as Euro-Zone sentiment remains negative despite the passage of the aid package.
The data showed the country's trade deficit widened for the second consecutive month in March but exports jumped to their highest level since 2008, signaling improved growth prospects. Imports also rose which signals a strong rebound in business and consumer spending.
The EUR/USD is currently trading at 1.2642, recovering slightly from 1.2615, yesterday's closing price. The Dollar also rose against the Japanese currency to 93.18.
Today traders should pay attention to the release of the Unemployment Claims at 12:30 GMT and Ben Bernanke's testimony at 16:30 GMT for further sign of the U.S recovery which will likely support the Dollar further.
EUR - EUR Declines as Euro-Zone Debt Issues Endure
The EUR declined against the Dollar as concern persist over Euro-Zone sovereign debt issues and as the euphoria over the $1 trillion aid package continued to dissipate. The overall negative sentiment overshadowed better than expected economic data from the Euro-Zone which was published Wednesday
The UK Pound also declined yesterday, erasing previous gains after the Bank of England indicated it wouldn't move quickly to raise interest rates and left the door open to expanding its quantitative easing program and resume purchasing of British government bonds.
Late Wednesday, the EUR was at $1.2628, down from $1.2683 late Tuesday. The U.K. Pound was at $1.4826 after dropping below $1.50 overnight. It is currently trading at $1.4859.
JPY - Yen Declines on Improved Market Sentiment
The Yen dropped against 12 of its 16 major counterparts in today's early Asian trading as Asian stocks rose ahead of a report forecasted to show unemployment claims in the U.S. fell. As signs the global economy is recovering, demand for the Japanese currency dampens as investors turn to higher yielding assets.
Japan's currency fell to 117.84 per EUR from 117.62 in New York yesterday. The JPY is at 93.19 per Dollar from 93.24. Australia's Dollar was at 89.77 U.S. cents from 89.36 cents. It traded at 83.43 Yen from 83.32 Yen. The New Zealand Dollar rose 0.4% to 71.69 U.S. cents. It advanced 0.3% to 66.71 yen.
OIL - Crude Prices Drop below $76 a Barrel on Record Inventories
Crude Oil traded below $76 a barrel in New York Wednesday as the U.S. Energy Information Administration reported that inventories at Cushing had grown over the past week to a record 37 million barrels. The report showed that inventories climbed for the 14th time in 15 weeks as refiners reduced processing rates.
The report also showed that refineries operated at 88.4% of capacity, down 1.2 percentage points from the prior week and the first decline since March.
Light, sweet crude for June delivery dropped 72 cents, or 0.9%, lower at $75.65 a barrel. Currently the price of spot Crude Oil is $75.47 a barrel.
The cross has been dropping for the past several days and stands at the 1.2660 level. However, the daily chart's RSI is already floating in the oversold territory, indicating that a bullish correction might take place in the nearest future. Going long with tight stops may turn out to be the right choice today.
There is a bullish cross forming on the 4-hour chart's Slow Stochastic, indicating a bullish correction might take place in the near future. The upward direction on the daily chart's RSI also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy.
The daily chart is showing mixed signals with the RSI fluctuating in neutral territory. However, there is a fresh bearish cross forming on the 4-hour chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.
The momentum behind the pair's appreciation over the past month appears to be fading. The daily chart shows the 14-day Relative Strength Index has crossed below the 70 line, indicating a sell signal. The MACD histogram is also downward sloping, yet another signal that the pair's bullish move may be coming to an end. The next support line for the pair rests at 1.0920.
The Wild Card
Gold prices closed yesterday at an all-time record high of $1236.60, supplanting the previous record high of $1224.70. Since the breach of the 1169 resistance level, gold prices have jumped. The commodity has both a strong long term trend line and sharp upward sloping short term trend line. CFD traders should look to be long on gold with a minimum target of $1248.