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Friday, 8 Aug 2008
The USD Appreciates Over Strong Housing Data.
The USD underwent a bullish trading session yesterday, as it appreciated against all of its major currency rivals. The greenback saw significant bullishness yesterday as the Pending Home Sales beat our forecasts which showed an expected rise of 1%.
USD - USD looks to test 1.50.
The USD underwent a bullish trading session yesterday, as it appreciated against all of its major currency rivals. The dollar rose 0.5% and closed under 1.5320 versus the euro in yesterday's trading session. Also, the USD saw steady gains against the GBP and CHF.
The greenback saw significant bullishness yesterday as the Pending Home Sales beat our forecasts which showed an expected rise of 1%. Instead, the indicator rose 5.3% and added to another day of surprising US economic data supporting the USD. The indicator was also the first real sign of housing improvement in the US in recent history. Although foreclosures are accounted for in the figure, it is nice to see some positive housing numbers out of the US to support the latest bullish trend for the greenback in Forex trading. Yesterday's numbers mark the second positive pending home sales this quarter, in June homes sales saw a 6.3% rise.
In addition, the gain in pending home sales offset a bleak U.S. jobless claims report which saw a 35K rise from the expected mark of 420K. The swing in home sales, despite jobless data adds even more to the growing speculation that the housing sector has hit its bottom and will now begin to see steady growth. The data also backed expectations of U.S. rate hikes this year, which has fueled a rebound in the dollar over the past two weeks.
Today we can expect a slower pace to the news cycle from the US as 3 events of lesser significance will be released. Preliminary Nonfarm Productivity and Unit Labor Costs along with Wholesale Inventories are forecasted to see positive gains, but should contribute little to volatility. If data returns inline with expectations we should see the Dollar's resurrection continue as traders will look to infuse bullish USD positions.
EUR - EUR losses continue following Trichet's weak economic outlook
The EUR saw a very bearish trading session yesterday, losing ground against all of its currency crosses. The Euro fell to a seven week low against the USD and closed under 1.5320, a remarkable number when considering that less than a month ago the oft-traded currency pair set record highs above 1.60. Moreover, the 15 nation currency lost almost 100 points versus the CHF, closing at 1.6253 and just under 150 points versus the JPY.
EUR bearishness yesterday could be attributed in part to words from European Central Bank President Jean-Claude Trichet, who said he expects economic growth in the Euro- Zone to weaken substantially this year, even as he sees inflation remaining above the bank's target. As has been the case for quite some time now, Trichet's speeches cause substantial volatility in the market. Yesterday was no different, as Trichet's 12:30GMT speech at the ECB Press Conference led to a 100 point drop in the EUR/USD pair. There has been a series of recent data signaling the economy is now in the grips of a slowdown while commodity prices have fallen, easing some of the inflationary pressures. However the ECB raised rates last month and analysts believe it will be reluctant to alter its rhetoric until official data shows pricing pressures are starting to subside.
Sentiment in the US economy has brightened in the past week following better-than-expected news. However, the EUR is still showing signs of resilience as it traded in a relatively close range yesterday even though there was volatility all across the board. So it will be crucial for traders to identify how the preceding economic indicators from Europe will affect their positions.
Today's early morning release of French Government Budget Balance and Italian Preliminary GDP, the sole data from the Euro-Zone today, should provide little fluctuation to the market as traders approach the end to this weeks trading session.
JPY - JPY gains against crosses as risk appetite rises
Besides the bearishness against the USD, the JPY saw bullish trends against all of its other major currency counterparts. The USD was unstoppable because of its economic data and like the Dollar's other crosses, the JPY lost grounds against it. The JPY showed its strength against the rest of its crosses, especially against major currencies as it saw a 100 point rise against the GBP, EUR and a 70 point rise against the CHF.
There will only be one data release from Japan today as the Economy Watchers Current Index will be announced during early trading. There is no official forecast for this measure and a rising trend will have a positive effect on the nation's currency. Traders should pay close attention to the response of equity markets to the rising dollar, to determine how to continue with JPY positions.
Oil - Crude Oil prices look primed to fall as USD strengthens
Oil prices dropped under US$120 a barrel today in Asia as a strengthening dollar and worries about economic growth offset supply concerns and a stronger USD.
The US dollar has strengthened significantly against the EUR and the JPY after the European Central Bank and the Bank of England both left their benchmark Interest Rates unchanged under conflicting pressure from higher inflation and mounting concern about economic growth. As a result, Crude for September delivery fell 42 cents to US$119.60 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
Overall, the Crude prices climbed to record highs above $147 a barrel earlier the previous month, but have since fallen more than $29 as reports have indicated that record high prices of Light Sweet and gas have been motivating consumers to lower their demand.
There's a very accurate bearish channel forming on the daily chart as the pair is now floating on the bottom barrier of it. The 4 hour chart shows that the pair is still moving beneath the Bollinger Bands, suggesting that the downtrend should further continue. Going short might be a good strategy.
The pair is continuing its bearish development, as the cable dropped over 200 pips yesterday. All oscillators on the 4 hour chart are pointing down, indicating that the falling trend has more room to go. Next price target might be 1.9230.
There's a very distinct bullish channel formed on the daily chart. The Bollinger Bands on the hourlies are tightening, suggesting that a strong movement is impending. As a bullish cross on the 4 hour chart's Slow Stochastic has recently took place, going long appears to be the right choice today.
The bullish momentum continues with full steam as the pair breached the key Fibonacci level of 1.0700. Currently, all oscillators on the daily chart are giving bullish signals; hence, going long seems to be preferable.
The Wild Card
Gold prices have descended for about a month now, and no signs for a reversal are noticeable. All oscillators on the daily chart are locating in bearish territories, giving forex traders a good opportunity to join a very popular trend.
|01:00||NZD||GDT Price Index||-1.3%||-||-|
|01:00||USD||Total Vehicle Sales||17.8M||17.2M||-|
|01:30||AUD||AIG Manufacturing Index||52.3||-||-|
|01:50||JPY||Tankan Manufacturing Index||12||12||-|
|01:50||JPY||Tankan Non-Manufacturing Index||19||23||-|
|03:35||JPY||Final Manufacturing PMI||49.9||49.9||-|
|09:15||EUR||Spanish Manufacturing PMI||55.8||55.6||-|
|09:45||EUR||Italian Manufacturing PMI||54.8||55.2||-|
|09:50||EUR||French Manufacturing PMI (p)||50.5||50.5||-|
|09:55||USD||German Manufacturing PMI||51.9||51.9||-|
|10:00||EUR||Final Manufacturing PMI||52.5||52.5|
|11:30||GBP||BoE Financial Stability Report||-||-||-|
|13:30||USD||Challenger Job Cuts||y/y||-22.5%||-||-|
|14:15||USD||ADP Non-Farm Employment Change||201K||212K||-|
|15:45||USD||Final Manufacturing PMI||53.4||53.4||-|