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Wednesday, 2 Dec 2009
The U.S dollar Declines as Dubai Worries Fade
The Dollar fell to its lowest level in 15 months against the EUR and a basket of other major currencies Wednesday as concerns about Dubai's debt problems faded adding to demand for higher-yielding assets. Government-related Dubai World said it began talks with banks to restructure $26 billion of debt. The holding company is seeking to delay payments on less than half its $59 billion of obligations, easing concern a potential default may set back the global financial system's recovery from the credit crisis.
USD - U.S Currency Rises vs. Yen after BOJ Meeting
The U.S. dollar was on the defensive broadly on Wednesday while the EUR and higher-yielding currencies extended impressive gains as investor risk appetite showed little sign of waning ahead of the year end. The Dollar weakened 0.6% to $1.5088 per EUR from $1.5005 yesterday.
The greenback declined for a 2nd day against the EUR as U.S. stock gains followed advances in Europe. The Dollar also declined against the Australian and New Zealand currencies as investors shunned the low-yielding currency in favor of higher-yielding assets for a 2nd straight session. Still, the greenback advanced versus the Japanese yen after the Bank of Japan announced more loans for banks to fight off deflationary pressures. The USD stood at 86.61 yen, having retreated from a high of 87.53, with traders expecting it to hold below the 87 yen mark.
The U.S. dollar also remained lower after the Institute for Supply Management said its manufacturing index fell to 53.6 in November from 55.7 the previous month, dropping far more than economists predicted. The U.S dollar may extend its decline against most major currencies after U.S. pending home resales unexpectedly rose and Dubai World said its debt talks are constructive adding to demand for higher-yielding assets.
EUR - GBP Rises as U.K. House Prices Advance
The European currency was trading around 17-month highs against the U.S dollar at $1.5088 on Tuesday as worries about Dubai's debt problems eased, while rising stock and commodity prices dimmed the greenback's safe-haven allure.
The British pound advanced against the U.S dollar and the EUR as house prices rose for a 7th month and Dubai World began talks with banks, easing concern a delay in debt payments will hurt U.K. lenders. The U.K. currency rose to $1.6621 from $1.6440 yesterday. The Sterling strengthened to 90.86 pence per EUR, from 91.25 pence.
The GBP climbed even as an index compiled by the Chartered Institute of Purchasing and Supply and Market Economics showed U.K. manufacturing expanded last month less than economists predicted. Morgan Stanley said that U.K is likely to limp out of recession, certainly relative to its global peers.
JPY - Yen Weakens on BOJ New Operations
The Japanese yen was off its lows against the U.S. dollar, with investors disappointed by the Bank of Japan's (BoJ) steps to attack deflationary pressures. Traders said some long dollar/yen positions are likely to be liquidated further. The JPY weakened after the Bank of Japan announced more monetary easing measures to fight deflation and help the ailing economy while holding interest rates at 0.1%.
The Bank of Japan decided at an emergency meeting to make available 10 trillion yen for short-term loans to commercial banks. It also unanimously voted to keep its overnight call-rate target at 0.1%. But despite the Yen's weakness on Tuesday, some analysts said the BOJ moves will not be enough to slow long-term yen buying against the dollar. Many traders expect more Yen strength against the U.S dollar so long as U.S. interest rates also remain essentially at zero too, and that the prospects of yen-weakening intervention by Japan remains low given the Dollar's overall weakness.
Oil - Crude Trades Around $78 Ahead of EIA data
Crude Oil pared gains on Wednesday to trade almost half a percent lower after industry data showed that U.S. crude stocks rose much more than expected, more than offsetting weakness in the U.S dollar.
Crude gained after reports yesterday showed signs of increased manufacturing output in the U.S. and China, responsible for about 32 percent of global oil consumption. The commodity however pared yesterday's gains after the American Petroleum Institute reported crude inventories rose 2.89 million barrels last week. Gasoline and distillate fuel stockpiles also climbed on a drop in refinery utilization, the report said.
Oil has rallied from below $33 last December but has held in a narrow band of $70 to $82 over the past two months. Some analysts see little chance prices will push above the range, given ample supplies and little sign of strengthening demand. Fresh direction will come later today when the U.S. Energy Information Administration issues its petroleum report.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.5090 level. The 4-hour chart's Slow Stochastic is showing a fresh bearish cross suggesting that downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a bearish cross forming on the 4- hour chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short with tight stops may turn out to be the right choice today.
The price of this pair appears to be floating in the over-sold territory on the daily chart's RSI indicating an upward correction may be imminent. The upward direction on the weekly chart's Momentum oscillator also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The typical range trading on the hourly chart continues. The daily chart RSI is floating in neutral territory. However, there is a fresh bullish cross forming on the 4-hour chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.
The Wild Card
The price of the commodity has soared to a new record, touching on a high at $19.30 yesterday. This has left the commodity potentially overbought. A bearish cross has formed on the 4-hour chart's Slow Stochastic Oscillator, signaling a potential drop in the price. Forex and commodity traders may have an opportunity to sell silver at the peak of its appreciation today.