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Thursday, 5 Nov 2009
Market Awaits BOE and ECB Statements
The Bank of England's (BOE) rate statement is due at 12:00 GMT while the European Central Bank (ECB) press conference is expected at 13:30 GMT. While both banks are expected to keep their interest rates at their current level, the statements should provide an insight to the current economic conditions as well as economic outlook for the near future. The BOE is expected to increase its quantitative easing program.
USD - USD Down Following Fed Statement
The Dollar traded near its lowest level in a week against the EUR after the Federal Reserve kept borrowing costs near zero. The Federal Reserve reiterated its intention to keep interest rates “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment continues to rise. Until the Fed starts signaling interest rate increases, investors will continue to be encouraged to sell the Dollar and buy higher-yielding assets
The Dollar traded at $1.4874 against the EUR in today's early trading from $1.4861 in New York yesterday, when it touched $1.4909, the weakest level since Oct. 27. The Dollar traded at 90.82 yen from 90.72 Yen Wednesday.
The USD is expected to extend declines against its major counterparts ahead of Friday's Non Farm Employment report forecasted to show U.S. employers cut fewer jobs in October than in September, damping demand for the U.S. currency as a refuge as economic sentiment continues to improve. The unemployment rate may rise to 9.9%, from 9.8%.
Looking ahead to today, the Dollar's movements will likely be affected by the Central Bank statements from the U.K and Euro-Zone, however, the release of the Unemployment Claims at 13:30 GMT will likely have an affect on Dollar sentiment as well.
EUR - Pound Gains on Optimistic Services PMI
The EUR gained against 14 of its 16 major counterparts as the Economy Ministry in Berlin is expected to report Friday that German factory orders rose 1% in September after gaining 1.4% in August.
The British Pound gained 0.9% on the day. The Pound gained on both the Dollar and the EUR, after a survey of purchasing managers indicated the U.K.'s services PMI saw activity rise at its fastest pace in more than two years. The Bank of England is expected to increase the amount of debt it will buy from the market in today's meeting.
The EUR rose to $1.4871 from $1.4712. The EUR jumped to 134.68 Yen from 132.91 Yen. The U.K. Pound strengthened to $1.6565 from $1.6412.
A heavy news day is expected from Europe today. The bank of England statement is due at 12:00 GMT and The European Central Bank is slated to gives its latest policy update at 13:30 GMT. The ECB is expected to keep rates at 1%. Furthermore, the GBP Manufacturing Production is expected to be released at 9:00 GMT.
JPY - Yen Gains ahead of U.S Unemployment Rate Report
The Yen rose against the EUR and Dollar in today's early trading as Japan's stocks declined amid concerns the global economic recovery will be slow, boosting demand for the Japanese currency as a refuge. The Yen advanced against all 16 major counterparts ahead a report Friday forecasted to show the U.S. jobless rate climbed last month. The Yen rose to 134.52 per EUR at 9:54 a.m. in Tokyo from 134.85 in New York yesterday. It climbed to 90.59 per Dollar from 90.72.
OIL - Oil Rises Above $80 a barrel
Crude futures settled above $80 a barrel Wednesday after a surprise decline in oil inventories and the Dollar dropped toward its low for the year against the EUR. Light, sweet crude for December delivery settled up 80 cents, or 1%, higher at $80.40 a barrel on the New York Mercantile Exchange.
The U.S. Energy Information Administration reported Oil inventories dropped by 3.9 million barrels last week, while analysts unanimously expected a rise. Oil and fuel inventories have declined for four consecutive weeks supporting the rally in Oil prices. Oil got another boost after the Federal Reserve said it would maintain its ultra-low interest rate policy, which is seen as likely to keep pressure on the Dollar. Dollar denominated Oil tends to rise when the dollar weakens, since it becomes cheaper.
This pair could be in for further bullish strength in the near term. A correction during the Asian trading hours has weakened the pair. As such, a bullish cross has formed on the hourly chart's Slow Stochastic Oscillator. Traders may want to be long to catch the up tick.
Yesterday the pair once again tested but failed to break the significant 1.6600 resistance line. Today the pair has continued the appreciation for the third day. Traders who see the importance of this price level may want to set an entry limit sell order at this mark to profit if the pair reaches this price level and then reverses.
The 4-hour chart shows the pair began to drop from its upper Bollinger Band, only to stall and turn up at average line. We may expect this pair to rise back up towards its upper Bollinger Band. Traders may want to go long with a stop set near the 90.90 level.
Significant depreciation from the last day and a half left the pair oversold. This is shown by the bullish cross that has appeared on the 4-hour chart. The pair may be due for some appreciation. Going long could be the right choice.
The Wild Card
The price of the commodity has soared to a new record, touching on a high at $1097.05 yesterday. This has left the commodity potentially overbought. A bearish cross has formed on the daily chart's Slow Stochastic Oscillator, signaling a potential drop in the price. Forex and commodity traders may have an opportunity to sell gold at the peak of its appreciation today.