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Tuesday, 20 May 2008
The US PPI Data on Tap.
Yesterday saw the resumption of rising trends for the greenback after bearish momentum had started off the trading week. The EUR\USD pair traded below 1.5510, and the GBP\USD traded below 1.9480.
The only data released yesterday from the US economy markets was the Leading Index which came back at 0.1%, better than the 0.0% mark that was forecasted. The main outcome of this survey suggests that the Federal Reserve (Fed) will have room to hike Interest Rates later this year in case Crude Oil prices will continue to put upward pressure on the local inflation. Yesterday, Crude Oil reached an all time record, breaching $127 per barrel.
On tap today, the Producer Price and the Core Producer Price Indices (PPI) will probably be the main catalysts of possible fluctuation in the market. These two surveys measure the rate of inflation experienced by manufacturers in the US. The inflation rate is the main concern for U.S economic chiefs at the moment, as a continuance of rising commodities prices (especially the Crude Oil) will compel them to generate Interest Rate manipulations. Later on in the day, Fed's Vice Chairman Kohn will deliver a speech regarding the economic outlook in New Orleans. His speech should include further clues regarding U.S methods of dealing with the rising inflation as well as changes in monetary policy.
Traders should focus mainly on the PPI results, as they might determine the greenback's direction for today. If results return with positive movement expect the USD to extend its bullish behavior.
Yesterday, investors were witness of volatile trends for EUR pairs, leaving the 15- Nation's currency with mixed results for the trading session. Volatile behavior was observed particularly within the EUR\JPY and the EUR\GBP. The EUR\USD underwent a staunch bearish trend, falling 0.4% from late Friday, down to 1.5508.
The strong volatility ripple that occurred in most EUR pairs came as a result of the shortage in EUR news since the beginning of the week. On the other hand, the falling trend vs. the USD took place mainly thanks to US economic data, which suggested that the U.S could be avoiding recession.
Coming up today, some crucial data is expected for the EUR. First will be the German Producer price index, which measures the rate of inflation, as analysts forecast this month's number to be lower than last months. Later on, the German and the European ZEW Economic Sentiment will be published. These surveys reflect the mood of investors regarding the economy. The German survey is forecasted to come back at -37.5, 3.2 points better than last month. The European survey is forecasted to come back at -44.2, 2.6 points better than last month, and the positive figures should create bullish inclination for the EUR.
Investors should take advantage of today's significant data which is scheduled for both the Euro zone and the U.S. The high volatility can benefit swift profits.
Yesterday the JPY underwent volatile sessions against its major currency counterparts. It saw up and down trends, as it eventually finished the trading day with figures similar to the previous trading day session.
The only data published for Japan yesterday was the Tertiary Industry Activity Index, which measures the change in spending for services. The index rose 0.3% in March, following a 1.7% decrease in February. The index contributed very little to the market movement of the JPY.
Looking ahead, a bundle of data is scheduled for the JPY throughout the day. The Overnight Call Rate will take place as it is expected to maintain Japan's interest rate as the lowest in the industrial world - 0.5%. Later on, the Bank of Japan (BoJ) Monthly Report will be published, providing a summary of the current economic climate from the Bank's viewpoint. A few hours later, the BoJ will hold a Press Conference, in which Governor Fukui will deliver a speech, revealing the factors that affected the interest rate decision and future monetary policy amendments.
Traders should expect major volatility within JPY pairs today, as all of today's data will be centered on the BoJ Press Conference that will likely determine today's trend.
The daily chart is showing that the pair is trading in a range with no specific direction for the past 3 weeks. The Bollinger Bands are widened indicating increased volatility with the flat wide range is still in place. Indicators are mixed on both the daily and hourly level. Therefore the preferred strategy today will be to buy on dips and sell on highs.
The Cable has made the first step of the bullish correction move and appears to be continuing with that notion. The Slow Stochastic of the 4 hour chart is showing positive slope, and the RSI is floating on the 50 level, which indicates that the pair still have much more room to run. The first target price might be 1.9600.
The pair is showing bearish momentum on the hourly level after a drop to the 103.70 level. The 4 hour chart and the dailies are giving mixed signal with no distinct market direction. Forex traders are advised to wait for clearer signs on the dailies before entering the market.
The pair has been quite choppy in the past two days yet no clear direction was seen. The 4 hour chart and the hourlies are in a bearish configuration while the dailies are showing that the pair still does not have a distinct direction. A preferable strategy might be to wait for the oversold hourly levels before taking a long position.
The Wild Card
Gold broke the 908.00 resistance level. Gold is in an uptrend supported by 1 Hour exponential moving averages. Bollinger Bands are widened indicating increased volatility. We should expect to see a bullish configuration today. 1 Hour and 4 Hour Elliott patterns are also implying that Gold should gather momentum during the day. The target is expected to hit 910. This provides forex traders with a great opportunity to go long on a very healthy uptrend.
|15:30||USD||Crude Oil Inventories||10.1M||-||-|
|19:00||USD||Federal Funds Rate||<0.25%||<0.25%||-|
|20:00||NZD||Official Cash Rate||3.50%||3.50%||-|
|20:00||NZD||RBNZ Rate Statement||-||-||-|
|23:00||AUD||CB Leading Index||m/m||-0.2%||-||-|
|EUR||German Prelim CPI||m/m||0.0%||-0.8%||-|
|00:00||EUR||Italian 10-y Bond Auction||1.89|1.3||-||-|
|08:55||EUR||German Unemployment Change||-27K||-9K||-|
|09:00||EUR||M3 Money Supply||y/y||3.1%||3.6%||-|
|11:00||GBP||CBI Realized Sales||61||-||-|
|15:00||USD||Pending Home Sales||m/m||0.8%||0.6%||-|