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Friday, 13 Jun 2008
The USD Bullish Bonanza Continues
Yesterday, the USD had a very strong trading day supported by a bullish trend. The greenback's positive momentum occurred because of the better than anticipated Retail Sales report. Although the other economic data released from the U.S. was less than forecasted, Retail Sales and Core Retail Sales were the most important events of the day and the main factor behind the USD's trading trend.
The USD's momentum started at 12:30 GMT yesterday after the Retails Sales were released at a rate of 1.0%, 0.5% better than expected. Core Retail Sales saw a bump to 1.2%, also better than the expected 0.7% rise. Simultaneously, the Unemployment figure was released at a higher count than initially forecasted at 389K (19K more than expectations) and the Import Price Index was slightly lower than expected. Still though, both seemed to go unnoticed by traders as the Retails Sales drove the greenback's bullish momentum. Later on, Fed Chairman Ben Bernanke held a speech at the Federal Reserve Bank of Kansas City; however nothing of any real surprise or significance regarding the USD or monetary policy was mentioned by him. Long terms traders should enjoy listening to the interesting words that have been heard from Republican presidential candidate John McCain who has been speaking out two days running on the need to strengthen the dollar and cut government spending.
Looking ahead to today, two economic released from the U.S. are expected to drive the Dollar's trading trend. The main release will be Core CPI, which is forecasted to see a small rise and help return trader confidence into the American economy. The Core CPI figure measures the change in the price of goods and services purchased by consumers, excluding food and energy. Another important release will be the Preliminary Michigan Sentiment, which has been declining over the past two months and is expected to slightly fall again this month. Traders should expect a little bullishness out of the USD as long as the Core CPI's result will be as forecasted and the Michigan Sentiment doesn't fall too drastically and hurt the CPI driven momentum
The EUR saw mixed results versus its currency pairs yesterday, as the EUR/USD cross saw the most volatility with a strong bearish trend led by positive USD news. Looking into EUR economic releases, the day was highlighted by a better than expected Industrial Production released at 0.9% after being forecasted to be neutral at a rate of 0. The hawkish comments coming out of the European Central Bank (ECB) Bulletin also impacted the EUR positively. The ECB said that it detects signs of a strong acceleration in labor cost growth, which would impact the inflation within the Euro-Zone (EZ). Following Trichet's speech this week, ECB Governing Council member Guy Quaden said that it is legitimate to consider a limited rate hike in the future, after staying untouched since June 2007.
No major economic releases are expected today from the EZ, but there will be three releases of limited relevance from the Euro-Zone. The German CPI will be released this morning and is expected to stay unchanged and not impact the EUR's trading trend. The quarterly Employment Change and yearly Labor Cost Index will also be released today and it seems like both are not too relevant and won't reveal any new hints that weren't shown by other indicators. Looking around the world, it seems like the BOJ Press Conference and American CPI will be the main releases today and should impact the EUR according to their results.
No economic data affecting the JPY directly was released yesterday and the Yen's trading was mostly directed by its currency pairs' trends. With no news coming out of Japan to help strengthen the JPY, the Yen saw bearish trends against its crosses as both the USD and EUR had positive economic releases and strengthened against the Yen. Most notably, the USD/JPY reached its 3 month high following another weak trading day for the JPY.
Making up for yesterday's boring economic day in Japan, there will be a batch of data releases affecting the JPY today. Most important of the batch will be the BOJ Press Conference and Monthly Report, which will give traders hints regarding the Japanese monetary policy. The Japanese Household Confidence is expected to slightly fall in today's release and might harm the JPY's trading trend. The Overnight Call Rate and Industrial Production are both supposed to stay unchanged and won't affect the Yen. It seems like the JPY will need hawkish comments from today's press conference in order to gain some long-lost bullish momentum and without a good press conference, the JPY's value will continue to fall.
The Bollinger Bands indicate that volatility will be increasing during the day. According to the indicators there is no clear direction so far today. Therefore traders should wait for clearer signal throughout the day to enter the market.
Yesterday's bearish momentum seems to have bottom out and the cable range traded as is shown on the daily and 4 hour charts. However on the hourly chart the RSI and Slow Stochastic oscillators show there is more room to for the pair to gain. Investors may go long with tight limits today.
The pair has tested the top barrier of the 4 hour bullish chart unsuccessfully. The indicators on the daily indicate the pair is overbought. As the there is no clear signs on the 4 hour or the hourly charts trades may go short with tight stops.
A new bullish trend is forming on the 4 hour chart, and the Slow Stochastic indicates a target price of 1.0450. The oscillators on the hourly chart show conflicting movement. A good strategy today for traders will be to go long with tight stops.
The Wild Card
The recent minor corrective bearish move is over. And with all time highs breached on a daily basis, it appears that Crude Oil is showing no signs of stopping. The very strong momentum and the price movement exceeds all normal technical logic. Forex traders have great opportunity to join the bullish bonanza while the momentum is higher than ever.
|23:30||AUD||Westpac Consumer Sentiment||-3.0%||*||-|
|23:50||USD||BSI Manufacturing Index||9.7||11.3||-|
|23:50||JPY||Tertiary Industry Activity||m/m||-0.4%||0.7%||-|
|05:00||JPY||BoJ Monthly Report||*||*||*|
|06:30||EUR||French Final Non-Farm Payrolls||q/q||-0.1%||0.1%||-|
|14:30||USD||Crude Oil Inventories||1.4M||-||-|
|17:01||USD||10-y Bond Auction||2.80|2.5||*||-|
|18:00||USD||Federal Budget Balance||-10.4B||-223.2B||-|
|20:00||NZD||Official Cash Rate||2.50%||2.50%||-|
|20:00||NZD||RBNZ Press Conference||*||*||*|
|20:00||NZD||RBNZ Rate Statement||*||*||*|
|20:00||AUD||RBNZ Monetary Policy Statement||*||*||*|