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Wednesday, 11 Mar 2009
New Zealand Poised to Slash Interest Rates; NZD Volatility Expected
With few economic indicators expected to be released today, all eyes have turned to the Reserve Bank of New Zealand (RBNZ) as it positions itself to cut short-term interest rates by an expected 50 basis points. New Zealand currently maintains one of the highest global interest rates, but with the global recession cutting deeper into every major economy, the gap between the different interest rates is steadily being reduced, further weakening each nation's currency.
USD - USD Volatility to Heighten from Today's Market Anxiety
The Dollar was little changed against most of its major counterparts during yesterday's trading session. Traders awaited Federal Reserve Board Chairman Bernanke's speech yesterday in which he urged a sweeping overhaul of U.S. financial regulations in an effort to smooth out the boom-and-bust cycles in financial markets. The USD began to stabilize as a result, ending yesterday at 1.2693 against the EUR and 1.3767 against the GBP.
Bernanke recommended that lawmakers and supervisors rethink everything from the amounts firms set aside against potential trading losses and deposit-insurance fees to protections for money-market funds. His remarks reflected a judgment that the U.S., just like emerging-market nations in the past, failed to properly manage a flood of capital over the past decade and a half.
Optimism in global markets was fueled by a memo from Citigroup's Chief Executive which said the troubled banking giant was profitable in the first two months of 2009 and he is confident about its capital strength after tough internal stress tests. The investors took the comments as a sign of improvement for the overall economy.
As for today, a few data releases are expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the Crude Oil Inventory report which is expected to increase from its previous reading, signaling growth expectations in the largest energy consumer. Traders pay close attention to this figure as it has a moderate correlation with the value of the U.S. Dollar. Also today, the Federal Budget Balance is scheduled and should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. market, and the USD is likely to weaken as a result.
EUR - Will the EUR Remain Bullish Today?
After a relatively negative news day, the EUR still managed to appreciate against most of its currency counterparts. The EUR gained about 100 points versus the Swiss Franc and closed at 1.4738. Against the USD and the JPY it mainly fluctuated within a small range.
The major economic event that came out of the Euro-Zone yesterday was the German Trade Balance, which was slightly lower than analysts had forecast. Exports from Germany dropped for a 4th consecutive month in January, pushing Europe's largest economy deeper into economic despair. Germany is battling its worst recession in more than 60 years as a global economic slump curbs exports, prompting companies to scale back output and eliminate jobs. The German economy has shrunk 2.1% this year alone, the most in more than 20 years, also marking the 3rd consecutive quarterly drop.
Looking ahead to today, the most important financial indicator scheduled to be released from Europe is the British Trade Balance. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to bolster the EUR in the short-term.
JPY - JPY Holds Recent Strength; Japanese Economy Continues to Sinks
The JPY saw bullish results against most of its major currency rivals. The JPY has predominantly been influenced by the other major currencies' behavior lately, as only one major indicator was published from Japan. The JPY ended yesterday's trading up at 98.53 against the USD, and has continued to hold these gains through today's early trading hours.
Core Japanese private-sector machinery orders fell for a 4th consecutive month in January, the longest losing streak in at least 20 years, as exports crashed and profits evaporated. Japan posted its first current-account deficit in 13 years in January, leaving companies with less cash to invest in plant and equipment. Companies' project profits will slide 86% this fiscal year, and exporters will bear the brunt of the decline.
Sentiment among Japan's largest manufacturers fell significantly in the last year, signaling that companies are likely to cancel spending plans and cut more jobs, pushing the economy further into recession and weakening the JPY.
Oil - OPEC Production Cut Expected Next Week
Crude Oil fell again yesterday, after an early jump above $48 a barrel, as the market anticipated OPEC's meeting on March 15th in Vienna. If OPEC decides to make another cut to oil production, prices are expected to firm up and move higher in a short-term.
Looking ahead today, one of the more influential pieces of economic data will be the U.S. Crude Oil Inventories report. This inventories report has become more and more relevant over the last few months as the movement of the price of Crude Oil has become a major market mover. Expectations show a rise of 0.1M barrels from last month's decrease of 0.7M barrels. Traders can, and should, expect wide market volatility around the 14:30 GMT release of these inventories figures because of Crude Oil's importance in today's market.
This pair appears to be leveling off as all oscillators are giving off neutral signals. However, the Bollinger Bands on the 4-hour and daily charts are beginning to tighten, indicating a volatile price move may occur in the near future. With the recent trend, and momentum, pointing in an upward direction, the volatile movement may be upward. Going long with tight stops might be a wise choice today.
This pair's recent drop in value continues to hold the price in the over-sold territory on the RSI of the 4-hour and daily charts, signaling upward pressure. While the momentum appears to remain downward, we may likely see a number of upward corrections throughout the day. Buying on the lows and selling on the highs of these fluctuations will be a good strategy today.
The sustained upward movement of this pair has begun to push the long-term oscillators, such as the daily chart's RSI, into the over-bought territory. This appears to be putting downward pressure on the price of this pair as it has begun to level off. As momentum shifts into a downward posture, going short with tight stops might be a good strategy.
The price of this pair is floating near the upper border of the Bollinger Bands on the hourly and 4-hour charts, signaling moderate downward pressure. With the price currently floating in the over-bought territory on the hourly chart's RSI, the notion of a downward correction appears to be getting stronger. Going short with tight stops might be a wise choice today.
The Wild Card
The price of this commodity has entered the over-sold territory on the RSI of both the 4-hour and daily charts, signaling an upward correction may be imminent. The recent drop in price has fallen within the range of the up-trend which goes back to October of last year and has now reached the lower limit of that range. The bullish cross on the 4-hour chart's Slow Stochastic supports the notion that an upward swing may occur in the near future. Forex traders have a great opportunity to either enter the bullish reversal after the swing occurs, or wait for the trend to be breached and go short to ride out the downward slide which may occur shortly thereafter.
|08:15||EUR||Spanish Manufacturing PMI||52.8||52.3||-|
|08:45||EUR||Italian Manufacturing PMI||49.8||49.4||-|
|09:00||EUR||Final Manufacturing PMI||50.5||50.5||-|
|13:15||USD||ADP Non-Farm Employment Change||204K||206K||-|
|14:45||USD||Final Manufacturing PMI||57.9||58.0||-|
|15:00||USD||ISM Manufacturing PMI||58.0||56.8||-|
|15:00||USD||ISM Manufacturing Prices||58.0||58.6||-|
|15:30||USD||Crude Oil Inventories||-4.3M||-||-|
|01:00||NZD||ANZ Commodity Prices||m/m||-3.3%||*||-|
|01:00||AUD||HIA New Home Sales||m/m||-5.7%||*||-|
|01:00||EUR||Spanish 10-y Bond Auction||2.27|1.8||*||-|
|01:00||EUR||French 10-y Bond Auction||1.32|2.8||*||-|