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Friday, 21 Mar 2008
Today U.S. market is closed for Good Friday Holiday
Yesterday, the greenback continued its sharp bearish turn, in what has been a wild week for world economies. Separated less than one week from all time lows against a basket of currencies, the greenback has made a push in the last few days, most notably versus the EUR. Taking into account that the EUR suffered from a good deal of in house issues, the dollar's 200 pip rise versus the 15- Nation currency, could be just what is needed to bring some calm to the US market. Data released from the US was mixed yesterday, as we saw a 22K rise in Unemployment Claims to 378K in February, and at the same point, a rise in the Philadelphia Fed Manufacturing Index. Still, it seems that after several tries, Fed Chairman Ben Bernanke finally got it right with the Interest Rate Cut. Since the March 18th cut the greenback has gained against major world currencies and looks prime to continue in this gradual bullish trend.
Another clear indication of the dollar revival is the tumbling of commodities prices traded in the Forex market. Gold and Crude Oil have both eased, after hitting very high rates over the last few weeks. A large part of the drop in the commodities can also be attributed to the sell-off of positions held by traders who collected high profits over the last period.
Today, the US Markets are closed in observance of Good Friday, and we should expect little liquidity and volatility as a result. Looking ahead to next week, we expect a resumption of the normal US calendar as a set of significant economic data is to be released in the US. Non- Farm payrolls, new home sales, consumer confidence, and ISM manufacturing figures are all expected to shape what should be an interesting week. The dilemma will be whether or not this late week push will be continued on into next week or if negative US data will once again resume dollar woes.
The Euro was bearish all across the board yesterday, as the 200 point slide in EUR/USD led the charge in EUR losses throughout the Forex market. One of the big problems facing the Euro-zone is inflationary scares throughout the sectors of the Euro-zone economy. With production prices on the rise, due to local matters and competing with the drop in US production prices, the Euro-zone will have to cope with the ever-changing outlook of the world economies. Still though, this tension could be temporary as German manufacturing and service PMI figures returned with similar results to previous months, and big European companies have reported no real detriment to production due to higher prices.
The EUR has had a tumultuous week seeing a steady drop from its high numbers in weeks past. The stock market in Europe also has seen some trouble as it has dropped for 6 straight days, but it still doesn't seem to be enough to warrant ECB intervention. We have repeated on many occasions the hawkishness of ECB President Jean-Claude Trichet, whose monetary policies have not changed even amongst sharp changes in the EU currency. After a week's worth of soft Eurozone data, the ECB seems content in letting the currency fend for itself.
Today, we expect French and Italian consumer spending reports which will likely contribute little to what is already expected to be a clam day of trading. It will be interesting to see how next week begins as no scheduled events are expected from the Eurozone until Wednesday. At least, for today expect range trading throughout the market.
The JPY is currently being held hostage by world markets, as movement in the currency, has been solely attributed to the volatile world markets. This week we have seen stock markets around the world make gains and losses of remarkable proportion. The Dow Jones, alone has swung 200+ points in either direction throughout the week, leaving carry traders flummoxed. There seems to have been a distinctive split in JPY related currency pairs, as USD/JPY and GBP/JPY both saw gains yesterday while the rest of the JPY crosses all saw losses. The overall assumption amongst traders is that carry trades will continue to suffer as the world markets show no signs of stabilizing, which provides the currency market with enough volatility to shy investors away from JPY trading.
As if market nervousness wasn't enough to throw off JPY progression, the Japanese economy now finds itself in the odd position of having no leader. The Bank of Japan (BoJ) was set to name a new governor as then current Governor Fukui was to finish his term., but the Japanese government has still not found one. So, for the first time since WWII, the Japanese economy's highest position is vacant. Since Fukui stepped down the management of the Japanese economy and its prided JPY have been left to interim Governor Shirakawa and Deputy Governor Nishimura. Japanese investors have linked this issue to the reasoning behind the sudden stop in JPY progression. News outlets have reported that the position should be filled before April's World Finance meeting in Washington D.C.
Next week, holds several key economic events for the JPY in the retail and production sectors. Still, we should see JPY prices dominated mostly by the movement of global markets.
After making a sharp correction to the 1.5400 level, the pair is now consolidating on that area. The 4 hour chart is showing a strong reversal cross after a three top formation with negative slope. The daily chart is supporting the reversal notion, and it appears that going long might be a good choice today.
The cable is floating around the key Fibonacci level of 1.9850 and is now regaining bullish momentum. There is a bullish cross forming on slow stochastic of the 4 hour chart, which indicates that this might a good entry point for a long position.
The pair is about to make a second attempt to breach through the 100.00 level after the first attempt failed to validate the bullish breach. The momentum is very strong at the moment and if a breach will occur, it will validate a possible additional bullish trend that might take the pair back to the 101.00 levels.
The daily chart is showing 4 consecutive days on an increase, as the momentum is bullish than ever. The slow stochastic of the daily chart is floating on mid levels and shows no crosses. Going long might be a great position today.
The Wild Card
After a very sharp breach through the bullish channel, gold is showing first signs of correction. The daily chart is showing first bar of an increase and the slow stochastic is forming a cross. This could be a great opportunity for forex traders to enter the market with a long position on a great entry price.