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Monday, 14 Sep 2009
Obama Speech to Impact Dollar
The Dollar is likely to go volatile during and following the speech by President Obama today at 16:00 GMT. Meanwhile, forex traders are advised to take positions on trades, as a few of data releases coming out of Euro-Zone and Britain are likely to affect the greenback's main currency crosses.
USD - Dollar Finishes a Week of Falling Trends
During last week's trading session, traders that went short on the dollar made profits. The dollar dropped over 300 pips against the Euro, around 400 pips against the Pound, and slid about 350 pips against the Yen.
The Dollar weakened in light of some negative data published from the U.S economy. The U.S Trade Balance report for July showed that the difference between imports and exports increased by 16 percent, the most since 1999. The gap rose to $32 billion from a revised $27.5 billion in June. Also last week, The U.S Consumer Credit, which measures the change in the total value of outstanding consumer credit that requires installment payments, dropped by 21.6$ billion in July.
The end result of this indicator was five times lower than forecasted by analysis, and thus has a negative impact on the Dollar. The Unemployment data from the U.S continues to be bleak. It's been the 35th week in a raw on which over 500,000 individuals have filed for unemployment insurance for the first time. It appears that until the employment condition will take a turn for the better, the Dollar might continue to weaken.
Looking ahead to this week, a batch of data is expected from the U.S economy, including the Retails Sales Indices, the Producer Price Induces, the Consumer Price Indices, the Long-Term Purchases, the Building Permits and the weekly Unemployment Claims. Traders are advised to follow all these publications very closely as positive result from these indicators might have the potential to reverse the current bearish trend of the greenback.
EUR - Mixed Results from the Euro-Zone Creates Volatility for the EUR
The Euro underwent a very volatile session during last week's trading. The EUR rose significantly against the Dollar, lifting the EUR/USD pair above the 1.4600 level. However the Euro dropped against the Yen, and saw mixed results against the Pound.
The Euro began last week's session with rising trends against the major currencies thanks to a positive Factory Orders figures from the German economy. This indicator measures the change in the total value of new purchase orders placed with manufacturers. Analysts predicted a rise of 2.0% during July, yet the end result showed that factory orders rose by 3.5%, increasing for the fifth consecutive month.
However the bullish trend reached its end following poor Industrial Production data from both Germany and France. This indicator is a leasing indicator of economic health as production reacts quickly to ups and downs in the business cycle. Thus, the negative figures showed that it is still soon to declare that the Euro-Zone has pulled out of recession, and that the leading economies of the Euro-Zone are still tumbling.
As for this week, many interesting publication are expected from the Euro-Zone. The data which seems to have the potential to impact the Euro the most is the German ZEW Economic Sentiment report, expected on Tuesday 09:00 GMT. It is a survey of about 350 German institutional investors and analysts who are asked to rate the next 6-months economic outlook for Germany. This report usually has an immense effect on the market, and a positive figure might have the potential to boost the EUR.
JPY - JPY Rises Against the Majors
The Yen rose last week against all the major currencies. The Yen appreciated about 350 pips against the Dollar, sending the USD/JPY pair as low as the 90.16 level. The Yen also soared around 200 pips against the Euro and about 350 pips against the Pound, marking an all around bullish session.
The Yen's sharp bullish movements last week appears to be a correction to the over-weak Yen. It is a widely known that the Bank of Japan (BoJ) sees the weak Yen as the main tool to support the Japanese exporters in the attempt to recover the economy. Japan continues to hold the lowest Interest Rates in the industrial world, and the BoJ is making other steps as well, all in the effort to weaken the Yen. The key target that exporters are holding for the USD/JPY pair is around 94.50, and a lower rate might have severe consequences on the Japanese economy. However for now it seems that investors are still seeing the Yen as a safer haven then most of the major currencies and thus the JPY continues to strengthen.
As for the week ahead, The Japanese Interest Rates for September will be declared on Thursday. The BoJ is likely to leave interest rates, also knows as Overnight Call Rate at 0.10%. However, in case that the BoJ will surprise and will choose to alter rates, this is likely to have a large impact on the Yen. Either way, traders are advised to follow the press conference which is expected short after, as some interesting slues regarding future monetary system might be scattered.
Crude Oil - Crude Oil Drops towards $68 a Barrel
Last week's trading session started with a massive bullish trend for crude oil, which lasted until Friday. A barrel of crude oil was traded for 72.50 at its peak. However, a sudden change happened then, dropping crude oil towards $68 a barrel.
It seems that oil prices dropped as a result of an appreciation of the Dollar since Friday, and some concerns that Crude Oil became over-valued following a week of straight rising trends. It also looks that a few unsatisfying results for financial indicators have increased fear that global economies may not recover as soon as expected, which will likely weaken demand for oil.
Looking ahead to this week, traders are advised to follow the Dollar's value, and the U.S equity markets, as they tend to set the tone in crude oil trading. In addition, traders should also pay attention to the Crude Oil Inventories report scheduled for Wednesday, as its result has proven to have a large impact on crude oil's value.
There is a bearish cross forming on the daily chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the 4-hour chart's Slow Stochastic also supports this notion. When the downward breach occurs, going short with tight stops appears to be preferable strategy.
The GBP/USD cross has experienced a bullish trend for the past 2 weeks. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.
The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the 4-hour chart's Slow Stochastic. Going long with tight stops may turn out to pay off today.
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bullish cross forming on the daily chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.
The Wild Card
Gold prices rose significantly in the last week and peaked at $1003.45 for an ounce. However, the daily chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
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