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Thursday, 7 May 2009
Interest Rate Decisions in Europe to Lead Today's Market!
The hottest news available in today's market will no doubt be the interest rate decisions by the Bank of England (BoE) and the European Central Bank (ECB) today at 11:00 and 11:45 GMT, respectively. As interest rates are one of the primary tools used to value a nation's currency, the impact of these announcements will likely push the GBP and EUR to new extremes in the minutes after they are announced. Today will be an important news-trading day for forex traders!
USD - Dollar Tumbles against EUR and GBP
The U.S. Dollar fell against major currencies yesterday as gains in world stocks and a better-than-expected U.S. labor market report dampened the greenback's safe-haven appeal. After yesterday, the USD fell against the EUR, pushing the oft-traded currency pair to 1.3320. The Dollar experienced similar behavior against the Pound and closed at 1.5123.
Companies in the U.S. cut fewer jobs in April, indicating the worst of the recession's employment losses may have passed. Payrolls fell by an estimated 491,000 workers last month, less than analysts had forecast and the fewest since October. Stabilization in consumer spending following the worst slump in three decades is stoking expectations that the recession in the U.S. will end in the second half of the year.
In today's trading, forex traders should focus on a number of important fundamental data coming from both the U.S and the Euro-Zone. We expect that these pairs may become highly volatile as the market awaits the U.S. labor market figures and Interest Rate decisions from the European Central Bank (ECB) and the Bank of England (BoE).
EUR - European Interest Rates on Tap
The EUR rose against the U.S. Dollar yesterday, but gains were capped ahead of the European Central Bank's (ECB) policy meeting today when the central bank is expected to cut interest rates by a quarter percent to 1.00%. The central bank may also announce other monetary policy measures to stimulate lending and growth. The EUR gained against the USD as the pair closed at 1.3320.
Last month the ECB reduced its target rate to 1.25% in order to stabilize the economy. These days, Europe faces the most danger from debt reduction, depression, and deflation, and from their excessive debt and deleveraging. As a result, the ECB will likely cut its interest rates today while other governments embark on state-sponsored investment programs. The market will view the ECB action of a rate cut as a step to restore investor confidence, and to mitigate the economic fallout from the financial crisis.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains. If the rates are indeed cut, a target near 1.3000 wouldn't be unreasonable for next week.
JPY - JPY Falls against Major Currencies
Yesterday the JPY saw bearish results against most of its major currency rivals. The JPY was predominantly influenced by the other major currencies' behavior, however, as only one indicator was published from the Japanese economy. It appears lately as if the JPY is being motivated by outside factors more than by the Japanese economy.
Japan's monetary base rose 8.2% in April from a year earlier. Current account deposits at the central bank soared 81.2% after jumping 69% in March. The Bank of Japan's (BoJ) injection of large amounts of dollar-funds into money market operations amid the global credit crisis are a primary cause of this increase. It will be interesting to see how the local Japanese data will interact with equity market movement for the rest of the week in relation to the JPY's recent behavior.
Crude Oil - Oil Prices Hit 6-Month High
Crude Oil was little changed after rising above $56 a barrel for the first time since November yesterday as a surprise drop in U.S. Crude Oil inventories, and a slowdown in private sector job losses in April, boosted hopes for a turnaround in the economy.
Oil prices have risen to $56 from lows around $34 in January, driven higher by stronger equity markets and hopes that the economy may begin to pull out of recession soon.
Oil prices are higher primarily because they are supported by a weaker U.S. Dollar and more positive signs from economic data releases. Last week, U.S. consumer confidence rose; U.S. construction spending and pending home sales data also surprised on the upside, further supporting sentiment towards energy. If current trends continue, a price range above $60 won't be far off for Crude Oil.
After an unusual period of price volatility, this pair now appears to be moderately calm with all oscillators showing neutrality. However, there may be a consolidation trend forming on the hourly and 4-hour charts. If the Bollinger Bands also begin to tighten over the next few hours we could see an intense volatile movement later today. Traders should wait for the breach and jump into the trend as early as possible.
The sustained upward movement in this pair doesn't seem to be receiving much resistance lately. Short-term oscillators still show the price in neutral territory. However, the daily chart's RSI indicates that the pair is floating in the over-bought territory, and this chart's Slow Stochastic displays a clear bearish cross. We may see a downward correction towards the end of this week. Waiting for the downward breach and then joining this movement might be a wise choice.
This pair doesn't seem to have a clear indication of where it's heading lately. It has been trading in a consolidating range pattern building towards the price level of 98.50. As the Bollinger Bands on the hourly chart are beginning to tighten, the climax of this consolidation may be imminent. Traders should wait for the violent movement and join at the earliest possible price.
This pair appears to be range-trading between 1.1400 and 1.1250 with no clear indication of direction. As the daily chart's RSI shows this pair floating near the over-sold territory, there may be some upward pressure. Traders can make profit by buying on lows and selling on highs within the current range.
The Wild Card
The volatile upward movement this pair has witnessed lately has pushed the price into the over-bought territory on the hourly and 4-hour charts' RSI, signaling a downward correction is overdue. The bearish cross on the daily chart's Slow Stochastic, and the impending bearish cross on the 4-hour's Slow Stochastic supports this notion. Forex traders can take advantage of this imminent downward movement by entering short positions at an excellent entry price.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|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%||-||-|