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Wednesday, 16 Dec 2009
The U.S Dollar Rises to 2-Month High
The U.S dollar rose to the highest level in more than 2 months on Tuesday as stronger-than-expected U.S. economic reports lifted the greenback and as concerns over the potential for European banks encountering a new round of problems weighed on the EUR. Currency traders also positioned themselves ahead of the Interest Rate decision as the Federal Reserve began its 2 day monetary policy meeting which will come to an end this evening.
USD - Dollar Trades Higher vs. EUR on Rate Outlook
The U.S dollar held near a 2-½ month high on the EUR and kept a firmer footing against the Japanese yen on Wednesday as the market waited to see if the U.S. Federal Reserve would give any signal on when Interest Rates might begin to rise.
The greenback was near a 1-week high against the Yen before reports forecast to show U.S. housing starts rebounded and consumer prices gained. Traders increased bets that the Fed will raise its policy rate by June as the Federal Open Market Committee (FOMC) began a 2 day rate-setting meeting.
The U.S dollar traded at $1.4542 per EUR from $1.4538 yesterday when it reached $1.4504, the strongest level since Oct. 2nd. The U.S. currency was at 89.58 yen from 89.61 yesterday after reaching 89.95, the strongest level since Dec. 7th.
Fed policy makers are expected to keep benchmark rates steady and retain the vast majority of the forward-looking portions of its statement on the economy due this afternoon. With data pointing to the upside in the U.S. economy, there is a growing speculation that there will be a change in rhetoric on monetary easing. Analysts said investors were keen to close short positions built up in the Dollar all year before 2009 book closings and that this may support the USD for the rest of the week and into next.
EUR - EUR Falls Broadly on Bank Concerns
The EUR was under pressure amid worries about the health of Austria's financial institutions after a report that the country's fourth-largest financial institution was facing capital problems. The single currency fell on Tuesday on Euro-Zone bank concerns and data suggesting growth in the region remained weak, while a slip in German economic sentiment also prompted traders to dump the single currency. The Austrian news added to worries over debt in Greece and Dubai, putting more pressure on the European currency.
The EUR held steady at $1.4525 in early Asian trade, after falling nearly 1% the previous day and hitting $1.4503; its lowest since early October. Against the British Pound, the EUR traded at 89.35 pence from 89.36 yesterday when it dropped 0.6%. The European currency may fall for a 5th day versus the Pound as Greece struggles to address concerns that it isn't doing enough to reduce its debt, and as Austria has nationalized Hypo Alpe-Adria Bank International AG.
Demand for the EUR broadly weakened after a European Central Bank (ECB) council member said he sees no need to raise Interest Rates in the first half of 2010 as inflation pressures stay muted. A report by Austria's Die Presse which said monetary authorities had put Oesterreichische Volksbanken, the nation's No. 4 bank, on a watch list also knocked the EUR. The bank said the report was inaccurate. Still, risk-averse traders sold the currency following the report, which came a day after Vienna said it would nationalize one of its banks to avoid a collapse.
JPY - JPY Falls on Dubai Default Concerns
The Japanese yen fell against 12 of its 16 major counterparts as easing concern of a default in Dubai curbed demand for the Japanese currency. Abu Dhabi yesterday pledged $10 billion of aid to Dubai, allowing Dubai World's real-estate unit to avoid default on $4.1 billion of bond payments.
With a vast majority of economic news today focusing on Europe and the United States, the Japanese Yen may take a backseat to today's other major currencies. If the USD can hold its recent strength, and if the EUR continues to fall amid international concerns such as Greece and Dubai's recent woes, then the JPY may also continue its recent trends.
Crude Oil - Crude Advances on U.S. Industrial Output
Oil prices were near $71 a barrel Wednesday, after rising for the first time in 10 days, on a report that U.S. factories churned out more goods in November than anticipated, a signal that fuel demand will increase.
Crude Oil traded at $70.78 a barrel, up 9 cents. Yesterday, the commodity rose $1.18, or 1.7%, to settle at $70.69. Oil gains were pared after the American Petroleum Institute reported yesterday that crude inventories rose by 924,000 barrels last week.
Crude Oil posted a 1.7% gain, ending a 9-session losing streak, as the Organization of Petroleum Exporting Countries (OPEC) lifted its global demand forecast. Traders also bet on a drop in U.S. inventories but the API estimated these rose by 924,000 barrels last week. The Energy Information Administration will release its more closely followed report Wednesday at 15:30 GMT.
This pair is giving off mixed signals between the hourly and 4-hour charts. On the hourly side there appears to be a bearish cross on the Stochastic (slow) while the RSI has also entered the over-bought territory. However, the 4-hour chart shows the RSI in the over-sold territory and a fresh bullish cross on the Stochastic (slow). This pair is definitely awaiting a volatile movement with tightening Bollinger Bands on the hourly chart, but the direction is uncertain. Waiting for a clearer signal may be a wise choice.
With many indicators floating in the neutral territory, and as this pair continues to float inside a flat trading range, it may also be wise to wait for a more clear indication of direction. However, there do appear to be bullish crosses on both the hourly and 4-hour MACDs, which suggest an impending upward movement. Going long may not be a bad tactic for the next few hours.
There appear to be fresh bearish crosses on the hourly and 4-hour MACD indicators, suggesting an impending bearish move. Another bearish cross has been completed on the 4-hour Stochastic (slow) and the price is now slowly cascading downward. Going short today may be the best strategy.
The price of this pair appears to be floating in the over-bought territory on the 4-hour RSI, suggesting downward pressure. With bearish crosses on the hourly and 4-hour MACD, as well as on the 4-hour Stochastic (slow), a downward movement seems imminent. Going short may be a good choice.
The Wild Card
The Bollinger Bands on the hourly chart have begun to tighten which suggests a volatile movement is impending. There appear to be fresh bearish crosses on the 4-hour and daily charts' Stochastic (slow) and the price is also floating in the over-bought territory on the daily RSI, all suggesting a strong bearish expectation. Forex traders won't want to miss out on what appears to be an imminent downward movement on this pair.
|22:45||NZD||Overseas Trade Index||q/q||1.3%||-2.5%||-|
|23:30||AUD||AIG Manufacturing Index||50.2||-||-|
|USD||Total Vehicle Sales||18.2M||18.0M||-|
|02:35||JPY||Final Manufacturing PMI||52.8||52.8||-|
|04:30||AUD||RBA Rate Statement||-||-||-|
|04:45||JPY||10-y Bond Auction||0.32|2.8||-||-|
|08:00||GBP||Bank Stress Test Results||-||-||-|
|08:00||GBP||BoE Financial Stability Report||-||-||-|
|09:15||EUR||Spanish Manufacturing PMI||51.3||51.9||-|
|09:45||EUR||Italian Manufacturing PMI||54.1||54.3||-|