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Thursday, 12 Aug 2010
The Safe Heaven Dollar, Yen Rally as Investors seek Safety
Fears about global growth prospects fueled strong gains by the USD and JPY against most of their counterparts as investors turned to safe haven currencies following a stream of negative economic data from the U.S, China and the U.K.
USD - USD Rallies on Negative Global Growth Prospects
The U.S Dollar rallied versus all counterparts except the Japanese yen on Wednesday as equities declined and investors turned to the safe heaven currencies on concerns about the stability of global growth. The USD surged against the EUR after the Federal Reserve said Tuesday that U.S. economic growth slowed, exacerbating concerns the global economic recovery will stall.
The Dollar appreciated despite the release of worse than expected U.S trade deficit data. The U.S. trade deficit expanded $7.9 billion to $49.9 billion, from a revised $42 billion in May. Markets were also shaken by a round of weak data from China; showing a decline in Chinese industrial output and weak retail sales. The Chinese economy is seen as crucial to global economic recovery, along with the world's largest economy, the U.S.
For today, traders are advised to follow the release of the weekly unemployment claims data, released at 12:30 GMT. A worse then expected result will likely intensify the current negative market sentiment, supporting the dollar and JPY further.
EUR - EUR at Two Week Low versus USD
The EUR dropped 2.3% versus the dollar, falling below $1.29, the biggest single-day fall versus the USD since December 2008. The U.K. pound tumbled against the USD after the Bank of England cut its forecasts for U.K. economic growth and long-term inflation. The pound fell below $1.57 for the first time in August. Poor performing employment numbers from the U.K. reinforced concerns about the strength of the British economic recovery, putting further pressure on the pound.
Late Wednesday, the EUR was at $1.2882 from $1.3187 late Tuesday and at Y109.45 from Y112.58. The U.K. Pound was at $1.5650 from $1.5886.
Today traders are advised to follow the release of the European Industrial Production report, due at 9:00 GMT; worse than expected result can put further pressure on the EUR/USD pair.
JPY - Yen Rallies on Flee to Safety
The Japanese yen traded near a 15-year high versus the USD and rallied against the EUR as concern over the sustainability of the global economic recovery spurred demand for safe heaven assets.
The JPY appreciated against all of its 16 major counterparts after U.S. data Wednesday showed a widening trade deficit and a European report today is expected to show industrial production grew at a slower pace in July. The Australian and New Zealand Dollars fell for a fourth day as commodity prices continue to decline.
The Yen climbed to 109.32 per EUR in today's early trading from 109.74 in New York yesterday, after earlier reaching 109.24, the highest level since July 6. It is trading at 85.05 per USD from 85.32 yesterday, when it touched 84.73, the strongest since July 5, 1995.
OIL - Crude Drops Below $78 a Barrel
Crude futures fell 2.8%, following the release of a U.S. government inventories report which showed gasoline stockpiles rose for the seventh-straight week, spurring concerns the faltering global recovery cannot support demand.
Light, sweet crude for September delivery settled down $2.23 at $78.02 a barrel on the New York Mercantile Exchange, after falling as low as $77.90. Currently Spot Oil is trading near the $77 a barrel level.
The drop in Oil was triggered by poor economic data from China and Japan along with growing concerns about the flailing U.S economic recovery. A continuous rise in Oil inventories as the U.S. nears the end of the summer driving season adds to concerns about faltering demand.
The pair is in the midst of a bearish correction and yesterday reached a 3-week low as the pair fell to the 1.2830 level. Currently, a bearish cross of the MACD on the daily chart suggests that the bearish move might continue today. Going short might be the preferable choice.
There is a very distinct bearish chart formed on the 1-hour chart, and the cable is currently floating in the middle of it. The 4-hour chart shows bullish signals from the RSI and the Slow Stochastic, which indicates that a mild bullish movement might take place. Going long with tight stop could be a good strategy.
The pair continues with the bearish momentum that was initiated 4 months ago, and yesterday has dropped to the 84.92 level. Today, the bearish trend is likely to proceed with a target price of 84.20.
The pair gained about 150 pips in yesterday's trading session and has peaked at the 1.0624 level. At the moment, the RSI on the 4-hour chart has dropped below the 70 line, indicating that a bearish correction might take place, with potential to reach the 1.0500 level.
The Wild Card
Platinum saw further bearishness during yesterday's trading, and the commodity is currently trading near the 1508.00 level. As the MACD and the RSI continue to point down, the bearish move seems to have more steam in it. This might be a great opportunity for forex traders to join a very popular trend.
|16:00||GBP||NIESR GDP Estimate||0.5%||-||0.5%|
|16:30||USD||Crude Oil Inventories||4.0M||2.2M||3.1M|
|19:01||USD||10-y Bond Auction||2.24|2.7||-||-|
|01:01||GBP||RICS House Price Balance||53%||54%||-|
|01:50||JPY||Core Machinery Orders||m/m||-3.6%||3.3%||-|
|05:45||JPY||30-y Bond Auction||1.41|3.1||-||-|
|07:00||JPY||BoJ Monthly Report||-||-||-|
|07:00||JPY||Economy Watchers Sentiment||49.3||48.6||-|
|08:00||EUR||German Trade Balance||22.8B||20.2B||-|
|13:00||GBP||MPC Official Bank Rate Votes||1-0-8||1-0-8||-|
|13:00||GBP||Monetary Policy Statement||-||-||-|
|13:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|13:00||GBP||Asset Purchase Facility||375B||375B||-|
|13:00||GBP||MPC Asset Purchase Facility Votes||0-0-9||0-0-9||-|
|13:30||EUR||ECB Monthly Bulletin||-||-||-|