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Friday, 16 May 2008
The U.S. Housing Data on Tap.
Yesterday, the greenback maintained its volatile trading momentum against its rivals, while mixed important economic figures were released from all over the world. The greenback rate hit a 10 day low against the EUR at the rate of 1.5542 before recovering most of its losses following positive economic releases from the U.S. markets.
Yesterday was an important news day on the US economic calendar. The release of some key economic indicators showed that some improvement or more importantly stability has returned to the US economy. The Unemployment Claims report showed a moderate increment, with the final figure of 371K. The Philadelphia Fed Manufacturing Index recovered to the level of -15.6, which is a great deal healthier than the April reading of -24.9. Overall, yesterday's mixed fundamental data imposed a very volatile and risky session.
Today should provide some expected volatility in the market, ahead of a day full of U.S. news events highlighted by the housing market and consumer confidence data.
Traders may expect another fall in Housing Starts and Building Permits in April. However, the University of Michigan Confidence index in May could rise to 65.0 from a record low of 62.6 in April.
For the time being EUR/USD seems trapped in a range between 153.50 and 155.75. As long as market participants are in doubt whether the U.S. economy will weather the storm without any further rate cuts, traders should not expect drastic moves on the currency cross rate.
Yesterday, the mixed economic figures releases from all the economical sectors made the EUR trade volatile and risky. The trading day started off with bullish trends for the EUR, and than reversed into coherent falling trends against its major counterparts.
The bullish inclination that was observed with the beginning of the trading day came as a result of a series of positive data coming out for the European markets. The German, French and European Gross Domestic Products (GDP) delivered better than expected figures. The German GDP came at 1.5% after last month's 0.3% mark. The French GDP came at 0.6% after last month's 0.3%, and the European GDP came at 0.7%, after last month's 0.4% figure. Such favorable results must have initiated the rising EUR trend. Later on, a bundle of data began flowing from the U.S, delivering unexpected positive figures. Relatively strong printing of the TIC Net Long-Term Transactions and the Philadelphia Fed Manufacturing indices promptly generated a rising trend for the greenback and respectively a drop of the EUR.
As for today, the European Central Bank President is expected to deliver a speech at the 9th Brussels Economic Forum as it may supply traders with important indicators for the short term trading. As always, high volatility is expected throughout his speech.
Traders should follow carefully European developments, yet they are ought to keep one eye open for U.S news, as they are suppose to be more vital.
Yesterday, the JPY moderately rose across the board as investors reduced demand for riskier assets such as stocks after a series of relatively weak U.S. economic data added to anxiety over the country's growth picture.
The JPY rising trend was further supported by the Preliminary GDP figure which showed that Japan's economic growth unexpectedly picked up pace in the first quarter thanks to firm exports and consumption. Such a result allayed fears that deepening global financial market problems may take a toll on the world's second-largest economy.
The JPY hiked to a session high of 104.40 and was last trading around the 104.50 level, up 0.4 % on the day.
The low-yielding Yen tends to attract flows during periods of uncertainty as the low Interest Rates reflect Japan's capital surplus. Considering that the Japanese Interest Rate is only 0.5%, an ascending inflation is a real risk for the economy and investors are well aware of that.
Today, traders should look forward for some more bullish attitude regarding the JPY, and keep watching carefully for news arriving from the U.S and the Euro-zone, as they will be the main factors in the JPY progress for today.
The daily chart is showing that the pair still does not have a distinct direction, although it consolidates around the 1.5500 and appears to be accumulating momentum ahead of the next break. The 4 hour chart is showing moderate bullish momentum, however the hourlies and the daily charts do not show a distinct direction. Forex traders are advised to wait for clearer signs on the hourlies before entering the market.
The moderate bearish price movement continues within the bearish channel which still has yet to be breached. The daily chart is showing a strong bearish cross, and the 4 hour chart is also slowly joining the bearish notion. The RSI is floating near the 50 level and the Slow Stochastic is pointing to the continuation of the bearish movement. Next testing point should be around 1.9650. Going short appears to be preferable today.
After the bullish breach through the daily channel accumulated its momentum, the pair has returned to its bearish trend. Currently, there is an accurate narrowing bearish channel on the daily chart. The Slow Stochastic is indicating that the chances of a bullish breach are quite slim and that the bearish momentum still has steam in it. All indications are that there is room for further downward movement and the preferred strategy today will be to go short on highs.
After touching a base at 1.0486, the pair now consolidates a bit higher at 1.0500. All oscillators show that the bearish momentum will probably continue. The Slow Stochastic of the 4 hour chart is showing no crosses in the horizon, and the bearish momentum appears to be intact. The RSI and Momentum are negatively sloped. This pair is still trending downwards and there are no imminent indications of a reversal. Therefore traders can maximize profits by entering a steady short position.
The Wild Card
The violent bullish trend continues as all technical indicators on all time frames are showing that the direction is up and the momentum is extremely high. A fresh all time high has breached on a daily basis, and the end doesn't appear to be close. Forex traders are advised to join the bullish trend with relatively loose stops, until the first signal of a slowdown is received.
|13:30||CAD||NZD Core Retail Sales||m/m||1.0%||0.6%||0.6%|
|14:45||USD||Flash Manufacturing PMI||55.5||56.2||-|
|15:00||USD||New Home Sales||440K||455K||-|
|15:30||USD||Crude Oil Inventories||10.0M||2.6M||-|
|22:00||NZD||Official Cash Rate||2.75%||3.00%||-|
|22:00||NZD||RBNZ Rate Statement||*||*||*|
|01:00||EUR||Spanish 10-y Bond Auction||3.29|2.1||*||-|
|09:00||EUR||German Ifo Business Climate||110.7||110.5||-|
|10:00||EUR||ECB President Draghi Speaks||*||*||*|
|11:00||GBP||CBI Realized Sales||13||18||-|