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Thursday, 10 Apr 2008
Interest Rate Announcements Expected For EUR & GBP
Yesterday, the greenback fell to its lowest mark since the beginning of April decreasing sharply against a majority of it's currency rivals. The EUR/USD pair shot up 150pts yesterday, crossing the key psychological rate of 1.5800 for the first time since the positive ISM Manufacturing Index release on April 1st.
Expectations for the near future look to hold similar characteristics as the upcoming US calendar doesn't look to have much that can help pull the dollar out of trouble. Yesterday's bearish dollar trend was especially concerning due to the lack of indicators released from both the US and the Euro-zone, as it seems that the greenback crash comes mainly on the heels of traders fearing the US economy woes are not over.
Yesterday's standout event from the US calendar was a speech by Fed Chairman Ben Bernanke; the speech did include criticism of the financial literacy system in the US. Bernanke said that the financial education of Americans, mainly the younger generation is not what it should be and this is one of the main reasons behind sub-prime problems in the US. Only 15.3% of the American youth are supplied with personal finance courses before high school graduation compared with 52.4% in Germany and approximated 48.2% in Japan.
Looking ahead to today, two leading indicators are expected to show small improvements from within their respective sectors of the US economy. The Trade Balance report (12:30 GMT) is expected to come in at a reading of -57.4B, just under 1 billion dollars less than last month's reading month, mainly due to higher levels of exports from the US. Also on tap are Unemployment claims, which are forecasted to depreciate from 407K to 385K this week. Lastly, we expect to hear from Ben Bernanke as he addresses the World Affairs Council of Greater Richmond.
If data returns according to expectations, we should see a slight recovery in dollar movement.
The EUR made gains against its major currency rivals yesterday, mainly due to positive economic news from the Euro-zone as well as US economic worries.
Investors have taken to the fact that during the last week or so, Euro-zone figures have for the most part been positive and it has reflected in bullish behavior for the EUR. Yesterday, the German trade balance came back well above expectations showing higher than expected levels of exports sold by Germany to the world. The report reading came back at 16.9B, only a minute fall from last month's figure of 17.1B.. Also, the GDP report for the last quarter was released yesterday as forecasted, staying put at 0.4% growth.
Today, the ECB is expected to announce that the 15-nation currency's interest rate will remain unchanged at 4%. ECB President Trichet is expected to speak today as well, as he will likely keep to his hawkish monetary stance, despite inflationary worries due to the jump in Euro-zone CPI in March, which hit an all time record.
Expect volatility during the European session as today's events are critical to short and long term trends.
Yesterday, the JPY traded with mixed results, as we heard from the newly appointed Governor of the Bank of Japan(BoJ) Massaki Shirakawa. The JPY added 1.3% to its value against the USD, mainly as a result of worries from the US sub-prime related economic problems, and 0.6% against the Sterling. However, the JPY kept its bearish trend since the beginning of the week against the EUR, losing 40pts.
Mr. Shirakawa's speech yesterday supplied many indicators for JPY investors and carry traders. Shirakawa said that the risks to the Japanese economy are now increasing, led by a slowdown of the U.S. economy, while the global financial and capital markets continue to be unstable due to the sub-prime loan problems. Investors seem to have taken Shirakawa's remarks as confirmation that the sensitive Japanese economy will continue to be badly affected by the financial crisis from across the Pacific.
The only important report from Japan yesterday, outside of the BoJ Governor's remarks was the yearly Machine Tool Orders index, which surprisingly came back well above expectations. The figure showed a 2.9% rise in the total value of new orders placed with machine tool manufacturers in Japan.
Looking ahead to today, both the Current Account and the M2+CD money supply reports are expected to fall from previous readings, if those expectations come true, expect the JPY to slightly depreciate against its major rivals.
The pair is testing the very important key resistance level of 1.5810 and is looking to breach. The daily RSI and slow stochastic are very bullish and it appears that the breach might be imminent. A preferable strategy for today might be to wait for the bullish breach and swing into the trend.
There appears to be a narrowing bearish channel on the daily chart as the cable now floats in the middle of it. The slow stochastic is showing moderate bearish momentum as it shows a double top formation with a negative slope. Going short appears to be the right choice today.
There is a very distinct bullish channel forming on the 4 hour chart as the pair now made the first breach through the bottom barrier. The breach has been validated by an additional bearish bar, and the momentum now is extremely bearish. The next target price might be 100.50 on the first move.
Narrow range trading continues as the pair did not make a significant move in either direction. The daily chart is showing first signs of a bearish momentum as the slow stochastic shows no crosses and the RSI floats near the 50 level. The Bollinger Bands are tightening and a breach might be imminent to any side. A good strategy might be to wait for the signal and ride the momentum.
The Wild Card
Oil is traded in a very accurate bullish channel on the 4 hour chart and is now accumulating fresh bullish momentum. The Slow Stochastic indicates rising momentum, and the RSI supports the growing bullish notion. This is a great opportunity for forex traders to enjoy a very strong technical signal and swing into the trend.
|22:30||AUD||AIG Manufacturing Index||46.9||-||-|
|23:30||AUD||MI Inflation Gauge||m/m||0.0%||-||-|
|01:35||JPY||Final Manufacturing PMI||52.1||52.1||-|
|08:00||EUR||Spanish Unemployment Change||-64.4K||-32.4K||-|
|08:15||EUR||Spanish Manufacturing PMI||53.8||54.2||-|
|08:45||EUR||Italian Manufacturing PMI||48.4||49.3||-|
|09:00||EUR||Final Manufacturing PMI||51.0||51.0||-|
|13:30||USD||Core PCE Price Index||m/m||0.0%||0.0%||-|
|14:45||USD||Final Manufacturing PMI||53.7||54.1||-|
|15:00||USD||ISM Manufacturing PMI||55.5||54.9||-|
|15:00||USD||ISM Manufacturing Prices||38.5||40.1||-|