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Monday, 11 Aug 2008
Recovering US Economic Outlook Continues To Support The USD.
The USD underwent an impactful bullish trading session last week, as it appreciated versus all of its major currency rivals. Crude Oil also affected the USD and was very volatile last week. Traders noted that the Oil was traded under $115 a barrel...
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  | |  | | | |
| Weekly Trend | | | | | | |
| Resistance | 1.5060 | 1.9255 | 110.85 | 1.0900 | 0.8945 | 0.7890 |
| 1.5040 | 1.9235 | 110.65 | 1.0880 | 0.8925 | 0.7870 | |
| 1.5010 | 1.9205 | 110.35 | 1.0850 | 0.8895 | 0.7840 | |
| Support | 1.4950 | 1.9135 | 109.75 | 1.0790 | 0.8835 | 0.7780 |
| 1.4920 | 1.9105 | 109.45 | 1.0760 | 0.8805 | 0.7750 | |
| 1.4900 | 1.9085 | 109.25 | 1.0740 | 0.8785 | 0.7730 |
Economic News
USD - USD Looks Primed To Continue Solid Recovery vs. Rivals This Week.
The USD underwent an impactful bullish trading session last week, as it appreciated versus all of its major currency rivals. The greenback saw significant bullishness towards the end of the week as the very significant and fragile Pending Home Sales that were expected to be released at a negative value, completely beat the forecasts and were measured at a positive rate of 5.3%. Crude Oil also affected the USD and was very volatile last week. Traders noted that Crude Oil was traded above $120 a barrel for part of last week, but dropped almost as low as $115 a barrel on Friday. At the end of the week, the USD was traded under the 1.50 level against the EUR and above the 110.00 level against the JPY. Traders should also notice that towards the end of last week, the USD's strength was assisted by the EUR's bearishness with a gloomy speech by the president of the European Central Bank, Jean-Claude Trichet. Trichet tried to explain the relationship between growth and inflation, obstinate that there was no bias either way, but his comments regarding second quarter growth in the Euro-Zone that had been "substantially weaker" seemed to signal an end to interest-rate hikes.
This week will start with less volatility for the USD as no news releases are expected today, but impactful news events are expected to be released from the U.S. during the rest of the week. Here are the major releases on tap this week and their forecasts are a negative and declining Trade Balance which will be announced Tuesday, a declining increase rate in Core Retail Sales and Core CPI compared to last month and Preliminary UoM Consumer Sentiment which is expected to show an increase in consumer spending. The Crude Oil prices will see extra volatility on Wednesday as Crude Oil Inventories will be released and traders should note this trend and its effect on the greenback.
Looking specifically at today's economic calendar in the U.S, there is no expectation of new economic data from the U.S. The USD's own volatility will be determined by its currency counterparts, with most of the focus expected to go to the EUR, notably the French Industrial Production which is expected to help the EUR regain some of its losses against the USD. After bullish trading to close out the trading week, the USD might begin this trading session with some bearishness.
EUR - Euro-Zone Still Reeling From Trichet's 'weak' Economic Outlook.
The EUR saw a very bearish trading session last week, losing grounds to all of its currency crosses. With the USD gaining momentum and Crude Oil prices dropping, the EUR couldn't keep up. Regardless of the greenback's own success, the economic data that came out of the Euro-Zone was very bearish and most releases were worse than forecasted. The economic releases that hurt the EUR the most were the lower than expected German Industrial Production, German Factory Orders and Italian Prelim GDP. The speech held by ECB President Trichet on Thursday were also bearish for the EUR as Trichet said that some of the risks to the Euro-Zone economic growth are now 'materializing' and mentioned that second quarter growth was weak. The EUR/USD cross dropped under 1.50 and EUR/JPY cross was traded under 165.00 in the end of the trading session last week.
Mixed results are expected from the economic releases this week and as significant as it might sound, the EUR could continue to fall. The week was expected to start strong for the EUR with the French Industrial Production forecasted to rise after posting a negative rate last month. However today's early morning release dropped 0.4% and prevented recovery for the EUR/USD pair. The Industrial Production released on Wednesday is forecasted to have the same type of positive momentum if released accordingly, but the rest of the week won't be as bullish in terms of the expectations from the economic data in the Euro-Zone. The most impactful releases from the batch on Thursday: the German Prelim GDP, Flash GDP and French Prelim Non-Farm Payrolls' rates are all expected to lower in comparison to their previous values. Specifically today, we could see a bullish trading day for the EUR sans EUR/USD according to the current forecasts and traders should trade the EUR with the expectation of Thursday's volatility in mind.
JPY - Expect Volatile JPY Trading As Market Gears Up For More Risk Appetite.
Similar to the previous week, the JPY saw a fairly bullish trading session again last week as it gained value against most of its currency crosses besides the USD. The JPY once again took advantage of the USD's bullishness and a drop in the Crude Oil prices that helped the export focused Yen gain grounds against most of its currency rivals. In terms of the economic data that was released out of Japan last week, the highlights was the better than forecasted Core Machinery Orders monthly rate, which revived belief in the JPY's future economic growth. In terms of the values of the JPY crosses, the most notable pair was the EUR/JPY that dropped to under 165.00 at the end of last week's trading session.
This week should start with volatility for the JPY as quite a few economic releases are expected. The two most impactful figures will be the quarterly Prelim GDP and Tertiary Industry Activity Index, both expected to be lower than their previous results. Most of the economic releases are expected to be bearish for the JPY and the end of the week should be quiet in terms of self made volatility as no data will be announced on Thursday and Friday. The trading for the Yen might have a mixed trend as its own data might drive it down, but momentum in the USD and Crude Oil trading will also affect the JPY greatly.
Crude oil - Will Oil Continue To Appreciates Over The Georgian Conflict?
Oil prices appreciated above US$116 a barrel today once again on concerns that Caspian Sea supplies may be disrupted.
Russian bombers targeted the Baku-Tbilisi-Ceyhan pipeline supplying Azeri Crude across Georgia and Turkey to the Mediterranean Sea as was reported by the Georgian Economy Minister. In fact, Georgia is a key link in a U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia.
Overall, the Crude prices climbed to record highs above $147 a barrel earlier the previous month, but have since fallen more than $32 as reports have indicated that record high prices of Light Sweet and gas have been motivating consumers to lower their demand.
Technical News
EUR/USD
This pair is still in the midst of a steady downtrend, however the 4 hour and the daily chart's RSI has peaked at the over-sold zone, suggesting that a bullish correction move might be quite imminent. As for the short term, a sharp bullish move has already taken place on the hourly chart and seems to have more steam in it. Going long with tight stops might be the right strategy for the nearest timeframe.
GBP/USD
After the recent intensive downtrend, the cable appears to be consolidating at the 1.9200 level. In the shorter time frame a bullish cross on the 4 hour indicates that there might be a small correction before the larger bearish move resumes. Selling on highs appears to be preferable today.
USD/JPY
The volatile trading continues without a distinct breaking direction. The hourly chart is giving mixed signals and is mostly floating in neutral territory. The dailies however, are showing a slight bullish momentum. The daily chart's Slow Stochastic is positively sloped and the RSI also confirms that the direction is indeed up.
USD/CHF
The violent bullish price movement continues within the upwards channel which still has yet to be breached. The daily chart is showing a strong bullish cross, and the 4 hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of that movement. Next testing point should be around 1.0160. Going long appears to be preferable today.
The Wild Card
Silver
The violent bearish trend continues as all technical indicators on the daily and the 4 hour charts are showing that the direction is down and the momentum is high. This provides forex traders with a great chance of enjoying the additional downwards momentum still seems to be left for the commodity.
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Print| # | Time | $€£¥ | Event | Per. | Prev. | Fore. | Act. | Imp. |
|---|---|---|---|---|---|---|---|---|
| 05/28 | ||||||||
| 00:30 | JPY |  Household Spending | 3.4% | 2.5% | - |  | ||
| 00:30 | JPY | Unemployment Rate | 4.5% | 4.5% | - |  | ||
| 00:50 | JPY | Retail Sales | 10.3% | 6.2% | - | | ||
| 05/29 | ||||||||
| 07:00 | CHF | UBS Consumption Indicator | 1.22 | - | - | | ||
| 07:00 | EUR | German Import Prices | 0.7% | - | - | | ||
| 11:00 | GBP | CBI Realized Sales | -6 | - | - | | ||
| 14:00 | USD | S&P/CS Composite-20 HPI | -3.5% | -2.7% | - | | ||
| 15:00 | USD | CB Consumer Confidence | 69.2 | 69.6 | - |  | ||
| 23:45 | NZD | Building Consents | 19.8% | - | - | | ||
| 00:15 | JPY | Manufacturing PMI | 50.7 | - | - | | ||
