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Thursday, 18 Nov 2010
Irish Debt Crisis Remains the Center of Attention
Slight optimism is apparent in the markets this morning as European Union and International Monetary Fund officials travel to Dublin to discuss a possible aid package for the nation's troubled banking sector. The Irish debt crisis is expected to be the center of attention for the rest of the week and traders are strongly advised to follow any developments from the region.
USD - USD Falls on Negative Economic Data
The dollar declined versus the euro for the first time in 3 days after week economic data bolstered the Federal Reserves' decision to buy $600 billion in bonds.
The greenback dropped against 13 of its 16 most-traded counterparts after a report showed U.S. Core CPI had the lowest annual increase on record. This result helps defend the Fed's asset-purchase program against the growing criticism it's been receiving from both home and abroad. Building starts data released also showed a decline, pressuring the currency further.
The dollar weakened to $1.3529 at the end of trading in New York, from $1.3489 Tuesday, when it touched $1.3448, the strongest level since Sept. 28. It is currently trading around $1.3590. The greenback stayed relatively unchanged versus the yen and is currently trading around 83.28.
The dollar negative trend may continue today as well as the Unemployment Claims report expected today at 13:30 GMT will likely show the number of Americans filing initial jobless claims increased by 7,000 last week. Along with the unemployment data traders are advised to follow the release of the Philly Fed Manufacturing Index at 15:00 GMT.
EUR - EUR Recovers from 7-Week Low
The euro recovered from a 7-week low versus the greenback after surprisingly weak U.S. economic data defended the Fed's recent decision to embark on further stimulus efforts. The euro also benefited as talks of European support for debt-laden Ireland calmed the markets and reduced demand for the safe heaven dollar.
Despite the modest rise, the common currency continues to trade near a 7-week low versus the USD as investors are eagerly awaiting the resolution of the euro-zone's recent debt crisis.
The euro was at $1.3590 this morning in Asian trading from $1.3529 in New York yesterday. The euro recovered to 112.95 yen from 112.55 yen.
The Irish debt crisis is likely to set the direction for the EUR for the rest of the week and traders are advised to follow any developments that arise from this region.
JPY - Yen is Steady Despite Dollar Weakness
The yen is mainly unchanged versus the greenback and is currently range trading between 83.00 and 83.50. With the uncertainty over the euro-zone debt crisis on the one hand and the Federal Reserve's asset buying program on the other the yen remains as a reliable safe haven currency.
The New Zealand and Australian dollars held yesterday's gains on speculation Ireland will accept aid restoring demand for higher-yielding assets.
New Zealand's dollar is currently trading at 77.41 U.S. cents from 77.03 cents in New York yesterday when it climbed 0.3 percent. It bought 64.33 yen from 64.10 yen. Australia's currency rose to 98.40 U.S. cents from 97.97 cents, and 81.85 yen from 81.49 yen.
OIL - Crude Declines on Demand Concerns
Crude-oil futures fell to the lowest level in nearly a month Wednesday despite a surprise drop in U.S. oil and gasoline inventories. The Energy Department said stockpiles dropped 7.3 million barrels last week. However, concern about global demand in light of the current debt crisis in the euro-zone and China's efforts to cool its economy outweighed the positive data.
Light, sweet crude for December delivery settled $1.90, or 2.3%, lower at $80.44 a barrel on the New York Mercantile Exchange. The spot price did recover during Asian trading session and is currently trading at $81.65 a barrel.
The pair seems to be exhibiting mixed signals. While a bearish cross is seen on the hourly chart's Slow Stochastic as well as a breach of the upper Bollinger band, the RSI for the pair on the daily chart is heading into the oversold territory while a bullish cross is seen on the 8 hour MACD. Waiting on a clearer direction for the pair may be advised.
The RSI for the pair is floating in the oversold territory on the 8 hour chart with a fresh bullish cross seen on the chart's Slow Stochastic. An impending bullish cross can also be seen on the 4 hour MACD. Going long for the day may be advised.
The pair may be seeing some downward correction today as the RSI for the pair is floating in the overbought territory on the 8 hour and daily chart while a bearish cross is seen on the Slow Stochastic. Going short may be preferred for the day.
Some downward trend may be expected of the pair today as a bearish cross is evident on the 8 hour and daily charts' Slow Stochastic while the RSI for the pair is floating in the overbought territory on the 8 hour chart. Going short for the day may be advised.
The Wild Card
After a sharp downward trend it seems that there is room for some recovery for crude. A bullish cross is evident on the daily and 8 hour Slow Stochastic as well as the 2 hour MACD. The RSI for the pair is floating in the oversold territory on the 4 hour and 8 hour charts. Forex traders are advised to go long for the day.