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Tuesday, 19 Aug 2008
The USD Brace For Tough Day As Important US data Expected.
USD trading will be more interesting today as a batch of important economic data is expected to be released. Most of the news will come out at 12:30 GMT with the Building Permits, Housing Starts, PPI and Core PPI expected to be announced.
USD - Be Prepared! Building Permits May Redefine USD Trend.
The greenback completed yesterday's trading session with mostly bullish trends against its top currency crosses, besides vs. the JPY. The only economic data release that came out of the U.S. was the NAHB Housing Market Index that was released at the exact forecast and didn't cause much volatility. The USD took advantage of the European currencies as they showed bearishness, but lost momentum to the JPY.
Against the EUR, the USD was traded under 1.47, however it lost strength against the Yen and was traded under 110.
The economic survey of the NAHB Housing Market Index showed a bad outlook for housing starts, but it was released at the exact forecast so there was no big surprise and the USD wasn't affected much. The USD did lose some momentum because of speculation that the U.S. government will be forced to bail out Fannie Mae and Freddie Mac, the biggest mortgage-finance companies. An anonymous Bush administration source, reported that the government is pressing the companies to raise more money to guard against losses but doesn't expect the companies to succeed and this caused weakness for the USD. The USD did take advantage of the weak EUR that lost strength because of the much lower than expected Trade Balance that was released.
USD trading will be more interesting today as a batch of important economic data is expected to be released. Most of the news will come out at 12:30 GMT with the Building Permits, Housing Starts, PPI and Core PPI expected to be announced. All of these releases, besides the Core PPI are expected to be lower than their previous figures and thus the USD could show bearishness today. The Core PPI is expected to stay unchanged at 0.2% and not affect the USD much. Look for more volatility at 2:00 GMT with Federal Reserve Bank of Dallas President Richard Fisher is expected to deliver a speech titled "Monetary Policy in a Technology Driven World" at the Progress and Freedom Foundation 2008 Summit in Aspen.
EUR - Will Today's German ZEW Economic Sentiment Help to Revive the EUR?
The EUR saw bearish trends against all of its currency counterparts in yesterday's trading session. The weakness was caused by the much lower than expected Trade Balance that was released. The Trade Balance was expected to be positive; however the actual result surprised the experts' forecast and was released at -0.3M. The EUR/USD cross was traded under 1.47 and against the JPY, the EUR reached 161.01, the lowest figure since May 13. Although its major counterparts' didn't have much news of their own, the sole EUR release was enough to hurt it very much yesterday.
Three economic releases are expected today as two of them will come out from the biggest Euro-Zone economy, Germany. The German PPI is forecasted to be lower than previous month's result, but still positive. The German ZEW Economic Sentiment, which measures institutional investor sentiment, is expected to slightly rise compared to its previous result, but is still forecasted to be very low as most of the investors seems to be pessimists. The general ZEW Economic Sentiment of the EUR is expected to decline versus the previous result and also be very low. Overall it seems like investors are pessimistic of the EUR's economic future and today should be a bearish trading session for the EUR as it could fight the USD for the worst economic data of the day.
JPY - JPY Grows Stronger Following Unchanged Japanese Interest Rates.
The JPY underwent a bullish trading session yesterday, as it appreciated against all of its major currency rivals. The USD/JPY cross was traded under 110 and against the EUR, the Yen reached 161.01, the lowest figure since May 13. As the EUR had a bearish day and the Fannie Mae and Freddie Mac situation in the U.S. is worrying traders, the JPY had a bullish day without any news of its own. The export based Japanese economy also took advantage of the drop in Crude Oil prices, which should help lower the transportation prices of Japanese exported goods across the world.
A few economic news events are expected today and the JPY will see much volatility with the interesting trading sessions expected from the USD and EUR as well as the Japanese economic data. There will be a tentative Overnight Call Rate, which is expected to stay unchanged at 0.50% as it has been for a long time. Bank of Japan Gov. Masaaki Shirakawa will hold a normal press conference and his words will affect the JPY trading. Lastly, a minor release of the All Industries Activity Index is expected in the late trading session and is expected to be lower than last month's and actually become negative. Although there will be self made volatility from Japan today, the direction of the JPY could be mostly caused by its major counterparts' trends.
Crude Oil - Oil Prices Looks To Continue To Declining Trend.
Crude oil was little changed juts above $112 a barrel amid signs Tropical Storm Fay will miss rigs and platforms in the Gulf of Mexico, which accounts for about a fifth of U.S. production. U.S. Crude Oil and gasoline inventories fell last week, according to an Energy Department report on Aug. 13. The report showed that U.S. fuel demand averaged 20.2M barrels a day, down 2.8% from a year earlier.
At a time when U.S. energy policy is increasingly focused on importing crude from Canada and replacing gasoline with alternative fuels, the situation in Georgia and the interruption of Azerbaijani shipments makes a bearish statement for this week's Oil trading as well. In addition, an OPEC forecast of lower demand put downward pressure on prices. In its monthly Oil report, the organization forecast world appetite for Oil this year overall will fall by 30,000 barrels a day.
The pair has been showing a strong and consistent downtrend since the beginning of this month, and the momentum appears that it will continue uninterrupted. The small local correction is slowly losing its energy, and the daily chart is showing that the renewal of the bearish trend is quite imminent. Selling on highs might be a good strategy today.
The bearish trend continues with plenty of steam. On the 4 hour chart the bearish momentum is still intact as the cable now floats in the middle of it. The dailies also support that notion; however the RSI implies that in the near future the ongoing bearish correction might run out of steam. Traders are advised to take advantage of the cable bears.
The float within the narrowing bullish channel on the hourly chart continues, as no significant breach has been made. The positive slope on the daily Slow Stochastic indicates the continuation of the bullish movement within the channel. Going long with tight stops appears to be the preferable strategy.
On a daily chart the pair is showing consistent bullish momentum for a while now and today is no difference. Although the signal is not strong the pair might have a local target at 1.1050, which might make it feasible for forex traders to go long with tight stops.
The Wild Card
There has been a sharp breach through the flat channel on an hourly chart this commodity is now in the middle of its bearish corrective journey. All oscillators on the 4 hour chart are bearish as well, and forex traders have a good opportunity of taking advantage of this sharp technical event. Going short appears to be the right direction today.
|01:00||EUR||German Prelim CPI||m/m||0.2%||-0.1%||-|
|01:00||EUR||Italian 10-y Bond Auction||-||-||-|
|01:00||ALL||Jackson Hole Symposium||-||-||-|
|01:05||GBP||GfK Consumer Confidence||4||4||-|
|01:30||JPY||Tokyo Core CPI||y/y||-0.1%||-0.1%||-|
|01:30||JPY||National Core CPI||y/y||0.1%||-0.2%||-|
|09:00||EUR||Spanish Flash CPI||y/y||0.0%||-0.1%||-|
|10:30||GBP||Second Estimate GDP||q/q||0.7%||0.7%||-|
|10:30||GBP||Prelim Business Investment||q/q||2.0%||1.6%||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|16:00||USD||Revised UoM Consumer Sentiment||92.9||93.2||-|
|16:00||USD||Revised UoM Inflation Expectations||2.8%||-||-|