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Wednesday, 4 Jan 2012
Riskier Assets Turn Bullish Following Positive British Data
Riskier currencies like the euro and UK pound turned bullish yesterday, following the release of the British manufacturing PMI in morning trading. Meanwhile, the price of crude oil is steadily rising as tensions between the US and Iran continues to generate supply side fears.
USD - USD Moves Downward as Investors Move to Riskier Currencies
The US dollar saw a largely bearish day yesterday, as positive economic data out of Europe generated risk taking among investors. The safe-haven greenback took losses against most of its main currency rivals, including the euro and GBP. The EUR/USD once again shot up above the psychologically significant 1.3000 level, while the GBP/USD crossed the 1.5600 barrier. The dollar also tumbled against other safe-haven currencies like the Swiss franc and Japanese yen, largely due to a lack of faith in the US economic recovery.
Turning to today, news out of the euro-zone is once again forecasted to dominate the trading day. Traders will want to pay particular attention to the UK Manufacturing PMI. Analysts are forecasting a drop from last month's number, which if true, may cause investors to revert back to the safe-haven buck.
With regards to the rest of the week, traders will not want to forget about the US Non-Farm Payrolls figure set to be released on Friday. Early predictions are saying that the US increased their payrolls dramatically in December. If true, risk activity may continue, thereby extending the dollar's bearish run.
GBP - UK Manufacturing PMI Sends Pound Soaring
The GBP saw its recent downward trend reverse itself in trading yesterday, following positive news that helped boost confidence in the British economic recovery. The UK Manufacturing PMI came in well above expectations and resulted in gains for the pound versus the USD and CHF. While it is too soon to say whether the figure was an actual signal that the UK was heading toward recovery, it was enough to get investors to move to riskier assets in trading throughout the day.
Today, pound traders will want to pay attention to the UK Construction PMI set to be released at 09:30 GMT. Analysts are predicting the PMI to come in at 51.8, which if true would signal expansion in the British construction industry and may help the pound extend yesterday's bullish momentum.
Traders will still want to take note that the European economies are extremely fragile. While positive news is likely to help currencies like the pound and euro in the short term, the overall trend is still overwhelmingly bearish and the markets could reverse themselves at any moment.
CHF - Franc Sees Mixed Trading Amid a Return to Risk Taking
The positive news out of the UK yesterday resulted in a mixed session for the Swiss franc, as it was able to make gains against the USD and JPY while taking losses against the euro and pound. While investors did move their funds to riskier assets, they were unwilling to completely abandon the safe-haven's which helped the franc against the dollar and yen.
Today, traders will want to pay attention to the news out of the UK and euro-zone. Any further positive news may result in the franc taking further losses against riskier currencies like the euro, pound and Australian dollar. That being said, the franc's safe haven status may help it against the US dollar.
Crude Oil - Oil Prices Shoot Up Following Middle East Tensions
Tensions between the US and Iran have sent the price of crude oil soaring, as investors have begun worrying about crude supplies out of the Middle East. Oil is trading well above the psychologically significant $100 a barrel level. With relations between Iran and the west unlikely to improve in the near future, traders can count on prices to continue rising for the near future.
Today, any positive news out of the euro-zone could help oil's bullish movement. Investors are currently investing in more volatile assets like crude oil. Further signs that the European economies are improving will likely help boost the price of the commodity.
Technical indicators are showing that the pair may see an upward correction this week. The Relative Strength Index on the weekly chart has entered the oversold region, while the Stochastic Slow on the same chart has formed a bullish trend. Taking a bullish long term trend may be a wise choice.
Most long term indicators show this pair trading in neutral territory, meaning that major market movements are not expected this week. That being said, the Williams Percent Range on the weekly chart is creeping toward the oversold region. Should the indicator fall below the -90 level, it may be a sign for traders to go long in their positions.
Following the bearish trend late last week, technical indicators are showing that the USD/JPY may be due for an upward correction this week. Daily chart indicators, like the Relative Strength Index and Stochastic Slow, are showing the pair in the oversold region. Going long this week may be a wise strategy for the pair.
Following the slight upward movement the USD/CHF experienced last week, technical indicators are showing that the pair may turn bearish in the coming days. The Williams Percent Range on the daily chart is creeping toward the -20 level. Should it go above this level, it may be a sign that the pair will stage a downward correction. Traders will want to keep an eye on the daily and weekly chart for further signs of bearish movement.
The Wild Card
Technical indicators are currently showing that gold may increase its recent upward trend in today's trading session. The Relative Strength Index on the 8-hour chart is pointing upward, but has yet to cross over into the overbought zone. This is a sign that the upward trend still has more room to grow. Forex traders may want to go long in their positions today, while the commodity is still bullish. forex
|13:30||USD||Non-Farm Employment Change||204K||180K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.1%||0.2%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|14:55||USD||Prelim UoM Consumer Sentiment||75.1||76.2||-|
|14:55||USD||Prelim UoM Inflation Expectations||2.9%||-||-|
|20:00||USD||FOMC Member Evans Speaks||*||*||*|