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Tuesday, 20 Oct 2009
The Forex Market Awaits Crucial U.S. Data Today
The forex market awaits crucial U.S. data today in the PPI and Building Permits figures at 12:30 GMT. These publications are set to drive the pace of the forex market throughout the trading day. It is also recommended that you pay close attention to unexpected news announcements by President Obama as this is likely to increase market volatility. As for now, open your positions in the majors, whilst the trading day gets under way.
USD - Dollar Tumbles on Ben Bernanke Speech
The U.S. Dollar tumbled in yesterday's trading following comments made by U.S. Federal Reserve Chairman Ben Bernanke in a speech in which he hinted at keeping a loose U.S. monetary policy for at least the short-medium term future. The USD also fell as a flurry of higher corporate earnings and optimism about a continued global economic recovery led to an equity rally, which led to a slump in demand for the USD. Thus traders bought-up higher-yielding assets, such as the Australian Dollar, Crude Oil and Gold. The Dollar Index, which is used to track the USD against its 6 main trading partners, slipped 0.3% to 75.363.
The Dollar extended the recent downward trend against the GBP, as the GBP/USD cross ascended by 65 pips to the 1.6403 level. This comes as the British Pound recovers from its downtrend against the USD from over a week ago. The EUR/USD cross also went significantly higher on Monday by 85 pips to the 1.4964 level. The greenback also made some significant declines vs. the Canadian Dollar and Swiss Franc. This behavior was apparent throughout Monday's trading due to the varied factors weighing down on the Dollar.
Today is the publication of the PPI and the Building Permits data at 12:30 GMT. Optimistic results will likely help push the Dollar lower. Looking at the bigger picture, the greenback may extend its losses as the global economic recovery will lead investors to go short on U.S. assets. This may come about due to the large budget deficit and an extended period of near zero Interest Rates employed by the Federal Reserve. A divestment away from the USD may be a natural process, as the global monetary system seeks to rebalance itself.
EUR - EUR Rallies against Dollar and Yen
The EUR rallied against the Dollar and Yen in Monday's trading. This comes about as the EUR/USD cross seeks to approach the 1.5000 level. Both the Euro-Zone and Britain recorded an impressive equity market rally, which was sparked by that of the U.S. However, the global equity market rally was initiated by better corporate earnings from the U.S. The EUR and GBP also benefited, as both the Euro-Zone and Britain were on the backburner of economic news yesterday. However, it should be noted that the EUR was the main benefactor on Monday.
The EUR/USD pair went 85 pips higher to the 1.4964 level. The GBP/USD cross climbed by 65 pips to 1.6403. Meanwhile, the EUR/GBP cross went marginally higher, and the EUR made some inroads into the JPY. On the other hand, the British currency fell vs. the CHF, despite rising over the previous several sessions. When we aren't speaking about the Dollar, it does get a bit harder to predict future trends for the EUR and GBP's main crosses. However, stronger economies will likely benefit these 2 currencies.
Looking ahead to today, there is set to be much vital data coming out of both Britain and the Euro-Zone. From Britain, there is the Public Sector Net Borrowing at 20:30 GMT, and the crucial speech by Bank of England (BoE) Governor Mervyn King. From the Euro-Zone, there is the expected German PPI at 06:00 GMT. The results of today's economic news are likely to set the expectations for both the GBP and EUR for mid-week trading. Additionally, these 2 respective currencies will be strong affected by developments from the U.S.
JPY - Yen Goes Mixed against the Majors
The Yen recorded some mixed results vs. its major currency pairs. The Japanese Yen rose by nearly 20 pips to the 90.69 level against the USD. Versus the GBP, the Yen lost 15 pips, as the pair failed to find a clear direction in Monday's trading. With regards to the EUR/JPY cross, the Yen lost nearly 60 pips, as the pair approaches the 135.80 level. The JPY seems to be losing out, due to being on the backburner of global economic news. Moreover, Japan's new government has been unclear on which direction it wants to take the Yen.
The Yen will be one of the key currencies to watch today. This is as mid-week trading approaches, and global investors seek to find more clues about the future direction of Japanese monetary policy. The Japanese Central Bank has yet to announce a full cut back in assisting industry. This decision is likely to be prolonged, as long as the economic situation continues to be unstable. This is likely to continue to destabilize the Japanese currency for the weeks to come.
OIL - Crude Oil Hits $80 a Barrel!
The price of Crude Oil hit $80.04 a barrel in Monday's trading, a 1-year high. This occurred as a rally in global equities drove investor confidence higher. This was due to expectations that a continued economic recovery will push fuel consumption higher. Crude has now gone higher for its 8th consecutive day, the longest time in 2 years. This comes as additional cash is added to the global economic system, and the USD has continued to decline. As a result, this has boosted demand for commodities such as Crude Oil.
As long as the USD is bearish and global equities are bullish, then Crude is likely to be a wise investment according to many economists. At the moment at least, this does seem to be correct, as Crude has been a profitable investment recently. If data from the U.S. today proves to be positive, then Crude's upward trend may continue for a 9th consecutive day. In the meantime, Oil traders should open their positions in the black gold as the trading day unfolds.
The Bollinger Bands on the 4-hour chart appear to be tightening, indicating a violent breach may occur in the future. The direction may be distinguished by the signals on the hourly chart which displays a bearish cross on the Slow Stochastic, indicating that a downward correction might take place. The hourly chart also shows the pair trading at the upper border of its Bollinger Bands, which indicates that the pair may fall to its lower border. Going short may be the right move
There appears to be a bearish cross forming on the 4H chart's Slow Stochastic, signaling an impending downward correction. As other oscillators are showing the price floating in neutral territory, and the Bollinger Bands tightening on this chart, there is a possibility of a volatile bearish movement in the making. Going short with tight stops might be a good strategy today
After yesterday's moderate downward movement, this pair now appears to be leveling off as all oscillators and indicators are displaying neutrality. It's possible a trend-reversal is in the making, but traders may want to wait for a clearer signal before going short on this pair today.
This pair's recent drop has pushed the price into the over-sold territory on the RSI of both the hourly and 4-hour charts, signaling an upward correction could be in the making. With a bullish cross recently occurring on the 4-hour chart's Slow Stochastic, this move may indeed be imminent. Going long might be a good choice
The Wild Card
The price of this commodity appears to be floating in the over-bought territory on the RSI of the daily and 4 hour charts, indicating a bearish correction to the recent upward movement may occur later today. The imminent bearish cross on the hourly chart supports this notion. As the price of this commodity has discovered a new range to trade in, forex traders can benefit greatly from selling on highs and buying on lows within this price zone.
|07:00||JPY||BoJ Monthly Report||-||-||-|
|17:00||USD||FOMC Member Fisher Speaks||-||-||-|