Wednesday, 3 Feb 2010

U.S. Economic Data Drives Dollar Higher in Afternoon Forex Trading

The USD surged against the major currencies during the New York trading session after the release of two positive economic reports. Spot crude oil prices also rose for the third consecutive day.

The EUR/USD fell as low as 1.3893 following the release of the two reports. The Payrolls firm, ADP, released its Non-Farm Payrolls report which showed a significant decline in the number of new job losses versus the expected outcome. Only 22K new job losses were reported after economists predicted losses to exceed 30K. Also contributing to the positive momentum for the dollar was the release of the ISM Non-Manufacturing PMI. The survey showed a slight increase in overall economic sentiment. These two data pieces were enough to push the dollar to its highest level since last Friday's release of the better than expected U.S. GDP numbers.

Spot crude oil prices rose to a high of $77.99 after opening the day at $77.01. The weekly crude oil inventories report released by the U.S. Energy Information Administration showed refineries continue to cut back on crude oil production. U.S. refineries are currently operating at 77.8% of capacity. The previous week showed refineries running at 78.5% capacity. The fall in output is a result of weakening crude oil demand in the U.S. and attempts by the refineries to reduce the excess supply in the market. This has helped to support a rise in the price of spot crude oil by 7.3% over the last three days.

Traders should be aware of tomorrow's heavy news day. Interest rate announcements are due out from both the EU and Britain. U.S. weekly unemployment numbers are also on tap. We could see the EUR/USD continue its bearish movement to its next support line of 1.3745.