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Wednesday, 26 Jan 2011
Poor British GDP Data Causes Drop in GBP Values
After a 0.5% decline in the quarterly Prelim GDP report from the UK, the pound experienced a strong bearish session, falling greatly against all of its currency counterparts. The news trickled into European trading by holding the euro steady against a number of its regional rivals as well. Traders will be eyeing today's Monetary Policy Committee (MPC) statements for a glimpse into the Bank of England's (BOE) response to yesterday's news.
USD - USD Slumps from Heightened Risk Appetite
The US dollar experienced bearish movement against almost every major currency counterpart yesterday, with the exception of the British pound (GBP). The EUR/USD was trading higher at a price just under 1.3700, up from 1.3575. The USD/JPY moved downward yesterday, hitting a low of 81.97 before rebounding back to 82.20; the pair now looks to be continuing downward as of this morning.
Mixed economic reports show growth in American consumer confidence, but a mild decrease in manufacturing and a composite housing index. Growing consumer confidence may explain a large portion of the USD's bearishness yesterday since investors took the optimism as a sign to invest in riskier assets, thereby pulling away from their safe-haven USD positions.
Today's news appears to be anticipating a continuation of the current trends. The Federal Open Market Committee (FOMC) will release its latest decision today regarding short-term interest rates - also known as the Federal Funds Rate. Rates are expected to remain unchanged, but recent figures of consumer optimism may pressure committee members to issue hawkish statements about future monetary policy. Traders should anticipate heavy USD volatility as a result.
EUR - EUR Trading Higher, but British GDP Weighs on Regional Data
The EUR experienced moderately positive results in yesterday's trading sessions. Both significant economic events released from the euro zone yesterday proved bullish for the 17-nation common currency.
The EUR/USD moved upward, climbing temporarily above 1.37 before retracing some of its movement. The pair currently trades just under 1.3690 as of this morning. The EUR/GBP underwent a rapid bullish run following Britain's publication of a less-than-forecast GDP report.
After a 0.5% decline in the quarterly Prelim GDP report from the UK, the pound experienced a strong bearish session, falling greatly against all of its currency counterparts. The news trickled into European trading by holding the euro steady against a number of its regional rivals. The Scandinavian currencies outpaced the EUR while the EUR/CHF finished the day even.
With most of today's economic indicators coming out of Britain and the United States there is a good chance the EUR will take a back seat to today's movements. However, additional negative indications from Britain could keep the EUR's gains to a minimum as the region suffers under further economic woes.
JPY - JPY Mixed as Risk Appetite Surges
The Japanese yen underwent mixed results in yesterday's trading. The USD/JPY moved bearish as the dollar slumped from a boost in risk appetite. However, the same move away from safe-haven investments also pulled some investment out of the JPY, leading the island currency to move down against a number of its higher yielding currency rivals.
The Bank of Japan (BOJ) held Japanese short-term interest rates steady yesterday and statements by the BOJ appear to hint at a continuation of such a policy so long as the yen remains stronger than Japan desires. A few indicators from equity analysts, however, did hint at modest growth among exporting industries in Japan despite the rising value of the yen, suggesting Japan's economy is on better footing than many forecasts had provided.
OIL - Commodity Prices Still Falling Despite Weakening Dollar
Despite a falling US dollar, commodity prices have continued to move bearish. A number of analysts had forecast a rising value among commodities such as Crude Oil and Gold as the greenback moved downward, but this has so far not come to fruition.
The shift into riskier assets may also have driven many investors away from physical assets like commodities. This may explain the depressed value of commodities in the short-term, but a sustained downward movement hints at a more fundamental shift tied with supply and demand.
Traders may want to follow more closely what is happening with inventory levels for Crude Oil. A rise in inventories could represent a plummet in global demand, thus driving prices lower. Warmer weather in the Northern Hemisphere may also have pushed the price of heating oil lower. Either way, the falling price of the USD will eventually be priced-in to commodities and traders will want to be on the lookout for that swing in value.
A high-rise bearish cross in the 8-hour chart's MACD of this pair suggests an impending downward correction to yesterday's upward spike. A fresh bearish cross in the daily Stochastic (slow) supports this notion. Going short with tight stops might be a wise decision today.
This pair appears to be moving in a bearish direction with few indications of change. The daily MACD reveals what looks to be an impending bearish cross, indicating a continuation to yesterday's bearishness. Traders may want to hold onto their short positions today for a bit longer.
Most indicators on this pair show the price floating in neutral territory. The Stochastic (slow) and Relative Strength Index (RSI) on both the daily and weekly chart show the price evenly between the over-sold and over-bought region, suggesting a lack of direction heading into today's morning hours. Traders may want to wait for a clearer signal today on this pair.
A very shallow bullish cross on the daily MACD highlights a mild level of upward pressure on this pair, but few other indicators reveal any clear directionality. The current trend is bearish, but technical sentiment appears to be shifting directions. Traders may want to wait for a clearer signal on the daily chart before making any long-term moves on this pair.
The Wild Card
The sustained downward movement on Gold has pushed a few indicators into revealing a potential reversal to the recent bearishness. The daily MACD has the price approaching a bullish cross, suggesting an impending upward tick in the next day or two. An impending bullish cross on the weekly Stochastic (slow) supports this notion and forex traders would definitely not want to miss out on the great opportunity to catch a large swing in the price of Gold. Going long on Gold appears to be offering a lucrative possibility this week.
|23:50||JPY||Monetary Policy Meeting Minutes||-||-||-|
|02:00||NZD||Credit Card Spending||y/y||5.2%||-||-|
|09:00||EUR||German Ifo Business Climate||105.5||106.7||-|
|09:30||GBP||BBA Mortgage Approvals||36.7K||36.6K||-|