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Monday, 4 Jan 2010
Non-Farm Payrolls Week Begins
Now that the holidays are behind us, it's time to regain focus. This week will provide unique opportunities to make profits, as one of the most important economic publications is expected on Friday - the U.S. Non-Farm Payrolls. As employment numbers in the U.S. improve, the Dollar generally increases in value. Will this week see a similar trend?
USD - EUR/USD Close to 4-Month Low
The Dollar continued to strengthen last week. The Dollar rose close to 100 pips against the EUR, and over 100 pips against the Yen. The EUR/USD pair is now trading near a 4-months low.
The Dollar's bullish trend comes as a direct result of the positive economic indicators coming out of the U.S. lately. According to a report published last week, U.S. consumer confidence reached a 4 month high at 52.9 points. This simply states that U.S. citizens are feeling more secure regarding their financial security, and are consequently spending more. In addition, the weekly Unemployment Claims Numbers showed that 432,000 people filed for unemployment insurance for the first time during the past week. This is the lowest level seen since July 2008. Both of these publications have increased investors' optimism, and thus boosting the value of the Dollar.
As for this week, many interesting economic publications are expected. The most significant new event will likely be the Non-Farm Employment Change on Friday. The Non-Farm Employment Change is one of the most deep impacting publications, and it usually creates mayhem in the market. Analysts are forecasting that employment conditions continued to improve during December. If the end result will prove the predictions true, the Dollar will likely be supported as a result. Traders are also advised to follow the ADP forecast on Wednesday, as it has a large impact on the market as well.
EUR - Euro Slides Against the Majors
The Euro failed to extend its bullish trend from two weeks ago, and last week it dropped against most of the major currencies. The Euro dropped almost 100 pips against the Dollar and about 250 pips vs. the Pound.
The Euro continues to weaken due to the recovery of the Dollar. It seems that while the U.S. economy was lagging, the Euro strengthened based on the positive news coming from the Euro-Zone countries. However, now that the U.S. is showing signs that its economy will pull out of the recession by early 2010, the Dollar is strengthening at the expense of the Euro, its major rival. Considering that the European Central Bank prefers to see a weaker Euro in order to support European exports, it appears that the current trend may continue.
Looking ahead to this week, the economic calendar is packed with publications from the Euro-Zone. Traders should focus on the news releases from Germany and France, as they tend to have the largest impact on the Euro. Special attention should be given to the German Unemployment Change on Tuesday and the German Retail Sales on Friday. If the end results of these indicators come in as expected, they are likely to support the Euro.
JPY - Yen Drops on All Fronts
The Yen saw an extremely bearish session during last week's trading. The Yen dropped close to 200 pips against the Dollar and the Euro, and over 400 pips vs. the Pound.
The Yen continues to lose ground against the major currencies as Japanese economic indicators continues to be negative. The Japanese Retails Sales report for January dropped by 1.0% compared to October. This is the 15th consecutive month in a row in which the total value of sales at the retail level decreased in Japan. The Japanese Average Cash Earning, which measures the change in the total value of employment income collected by workers during November, dropped by 2.8% as well. It appears that for as long as the Japanese economic data remains negative, the Yen is likely to waken further.
The week ahead will have less Japanese economic publications relative to previous weeks. Nevertheless, traders are advised to follow the Leading Indicators report on Friday. This report is a composite index based on 12 economic indicators. Analysts forecast that the Leading Indicators rose by 91.4% during November. If the end result comes in as expected, it could erase some of the Yen's recent losses.
Crude Oil - Crude Oil Prices Continue to Rise
Crude Oil saw a bullish trend during last week's trading session, continuing its appreciation of recent months. Crude oil rose to a 1-month high, trading at $80 a barrel.
The main reason for the rise of oil is the positive figures coming out of the U.S. economy. A solid American economy generally creates optimism in the market leading to an increase in fuel demand. In addition, the cold weather also created speculations that stockpiles of winter fuels, including heating oil will decrease further. When oil stockpiles are down, prices typically go up.
Looking ahead to this week, traders should continue to focus on the major publications from the U.S. economy, as they usually have a significant impact on oil prices. In addition, traders should pay attention to the Crude Oil Inventories report on Wednesday, as this report has proven to create an immediate reaction in the market.
The pair has resumed its bullish activity for the past couple of days and is currently trading at the 1.4289 level. However, it failed to breach the 1.4360 level and has provided mixed results ever since. If the pair will indeed breach the 1.436 level, a sharp bullish move might take place.
There is a very distinct bearish channel formed on the 4H chart, as the cable is now floating near its upper border. Now, as all oscillators on the hourly charts are pointing down, it appears that another bearish session could take place today.
The pair is in the middle of a very intensive uptrend that started last week and shows great momentum that on a bigger scale appears to have more room to run. The Slow Stochastic bullish cross on the 30min chart indicates that there is still plenty of steam left in this bullish move. Once this pair breaches the 93.20 level it's likely to make another sharp break upwards.
After a moderate bearish correction, a bullish momentum on the 4H chart continues with no signs of a stop. The chart's Slow Stochastic is showing a double top formation with a positive slope, indicating the possible continuation of the upwards trend. Going long appears to be the right move today.
The Wild Card
There is still a bullish configuration on the daily chart, indicating that the momentum is still up. In the shorter time frame there is a bearish cross forming on the hourly charts indicates that there might be a small bearish correction before the bullish move resumes. Forex traders can maximize profits by buying on lows and taking advantage of a currently bullish trend.
|07:00||JPY||BoJ Outlook Report||-||-||-|
|08:00||EUR||German Retail Sales||m/m||2.5%||-0.8%||-|
|08:45||EUR||French Consumer Spending||m/m||0.7%||-0.3%||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.4%||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||-|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|