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Monday, 2 Jun 2008
ISM Manufacturing On Tap.
A batch of disappointing economic data left the greenback in bearish territory on Friday to end what had been a positive week for the USD. Amidst an already shaky US economic outlook, personal consumer spending indices showed a slowdown in April as both income and spending numbers came in at 0.2%. The drop in consumption numbers left some investors worried that the US is a long way from the recovery that has been mentioned for the last month or so. Combined with rising food and oil prices, and the abysmal housing market, a poor showing from the University of Michigan Consumer Sentiment report, listed at its lowest mark in 28 years resulted in a correction of the weeks bullish dollar trend.
The USD spent the early part of the week recovering versus a batch of its major currency rivals, most notably the EUR. The EUR/USD pair spent most of the week in a bearish trend of just under 400 pips, until Friday as the pair re-adjusted to close the week at 1.5557. Friday's hefty US news day was the major factor in the 84 pip rise in the EUR/USD. Along with Personal Spending and Consumption indices and the Michigan Consumer Sentiment report discussed earlier, we also saw Core PCE Price Index and Chicago PMI. Both provided little to turn around bearish results.
Looking ahead to this week, an array of US data on tap should prove to be essential to dollar movement. The news week will be highlighted by ADP Nonfarm Employment Change, ISM Non-Manufacturing Composite, Unemployment Claims and a busy Friday which will include Nonfarm Employment Change and the Unemployment Rate. Friday will likely be the main contributor to USD volatility, as historically Non Farm Payrolls is one of the more volatile events on the news calendar. The mark is expected to show a falling trend for the fifth consecutive month. We will also hear twice from Fed Chairman Ben Bernanke, who is expected to address the delicate US economic situation.
On tap for today, we expect the release of ISM Non-Manufacturing Prices and Index. The indices are not expected to vary much from last month's marks, which should turn investor attention to outside news events. Still expect steady liquidity in and around the 14:00 GMT release of the ISM figures.
Last week the EUR saw bearish trends against most of its major currency counterparts. At the beginning of the week the EUR\USD pair was set at 1.5780 and by the end of the week it fell as low as 1.5474.
Last week some crucial data was delivered regarding the EUR. The German Consumer Confidence demonstrated an ongoing decrease in confidence within German consumers regarding their economy. The German Consumer Price Index showed a 0.6% price increment, reflecting an increase in inflation in the Euro-Zone's strongest economy. The Consumer Price Index Flash Estimate reflected increasing inflation in the Euro-zone as well. At the end of the week the German Retail Sales fell unexpectedly for the second month in a row, enhancing investors' concerns regarding a forthcoming recession.
Today, the Manufacturing Purchasing Manager's Index will be published, and it is forecasted by analysts to come at 50.5, similar to last month's figure, yet it should not have a large impact over the EUR. Later on, European Central Bank (ECB) President Trichet will deliver a speech at the ECB's 10th Anniversary conference. Investors are advised to search for clues regarding future monetary policy and interest rate shifts.
Traders should also focus on news arriving from the U.S, as they should have an influence on EUR developments for today.
The Yen saw bearish momentum against most of its currency pairs losing tens of pips against each one. This trend took place last week during the last trading session on Friday. The only JPY related cross or pair that was not wise to go short on was the USD/JPY as the pair range traded for the day. The Japanese Housing Starts did not help the Yen, as the new housing market in Japan continued to decline by -8.7%.
The Average Cash Earnings came in earlier today at 0.6%, which is 0.9% less than the previous publication. Later on today, the Monetary Base result is expected to have a positive effect on the Yen, since the forecast is higher than the previous reading. The only other indicators expected to come out of Japan this week and have any potential to significantly impact the JPY are BOJ Governor Shirakawa's speech and Capital Spending. Both releases should be announced on Tuesday, which will cause the Yen to experience a lot of volatility.
It is advisable for investors to follow the news of the Yen's counterparts today to derive a superior strategy.
After the sharp drop to the 1.5450 level there has been a local bullish correction to the 1.5500 zone. The pair is now shaping into a bearish formation again which is supported by a strong bearish cross on the Slow Stochastic of the 4 hour chart. It appears that the pair is accumulating bearish momentum and that going short might be a good choice today.
The cable is the middle of a bearish trend which appears to still have a strong bearish momentum. There has been a bearish cross on the daily Slow Stochastic which implies that the bearish price direction might have some more steam in it for the next move. Going short appears to be preferable today.
The bullish channel continues with full steam after a small set back of range trading which occurred for the last 10 days. All oscillators are showing regenerated bullish momentum, and being on the buy side looks like the right side to be on.
The daily chart is showing range trading with no specific price direction and oscillators that float in neutral territory. The 4 hour chart is showing moderate bullish momentum due to a bullish cross on the Slow Stochastic, which means that forex traders might have a good shot at going long with very tight stops.
The Wild Card
There is a very distinct flag forming n the daily chart, as the pair now approached the tip of the flag with moderate bearish momentum. It appears that a target price of 205.00 is quite imminent, and there is a possibility of a breach attempt. This gives forex traders a great opportunity to join in a bearish trend with a possible breach in the very near future.
|13:30||USD||Challenger Job Cuts||y/y||-22.5%||-||42.7%|
|14:15||USD||ADP Non-Farm Employment Change||201K||212K||237K|
|15:45||USD||Final Manufacturing PMI||53.4||53.4||-|
|16:00||USD||ISM Manufacturing PMI||52.8||53.2||-|
|16:00||USD||ISM Manufacturing Prices||49.5||52.1||-|
|16:30||USD||Crude Oil Inventories||-4.9M||-1.9M||-|
|01:00||EUR||French 10-y Bond Auction||-||-||-|
|01:00||EUR||Spanish 10-y Bond Auction||-||-||-|
|03:00||NZD||ANZ Commodity Prices||m/m||-4.7%||-||-|
|05:45||JPY||10-y Bond Auction||0.45|2.7||-||-|
|09:00||EUR||Spanish Unemployment Change||-118.0K||-||-|