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Monday, 22 Jun 2009
Traders Anticipate Heavy News this Week in Forex
After depreciating consistently over the past month, the USD is now traded over 1.39 against the EUR, and over 1.64 against the GBP. This week on Wednesday, the Federal Reserve is expected to deliver an Interest Rates statement, and is widely expected to leave it on 0.25%. However, any change that might take place is prone to sow disorder in the market, and forex traders should be ready for it.
USD - Dollar to Go Bullish on Weak Equity Market
The encouraging homes sales and manufacturing figures from the U.S. last Thursday helped boost confidence in the USD against the EUR. However, the bearish equity markets drove the USD higher last Friday. The GBP/USD began Friday's trading at 1.6337, whereas now the pair is trading at the 1.6472 level. Additionally, the EUR/USD pair was trading as high as the 1.4000 on Friday, and it now trades at the 1.3915 level. This behavior signals some of the high volatility that the forex market has been experiencing recently.
Last Thursday's poor unemployment figures and the first weekly U.S. equity market loss in a month are likely to play a key role in U.S. trading today and for the week ahead. Traders are advised to follow news surrounding President Obama's economic reforms as well. Furthermore, traders should pay attention to economic news coming out of the Euro-Zone and Britain, as these factors will help determine the USD's strength against its major currency crosses.
When looking ahead to this week, we can say that there is plenty of economic data that will affect the USD. This includes Existing Home Sales, the FOMC's statement, the Federal Funds Rate, and Unemployment Claims. Additionally, the Dollar may go bullish if the equity market continues to fall rapidly, due to traders possibly flocking to the USD as a safe-haven. Furthermore, on Thursday U.S. Final GDP figures at 12:30 GMT are likely to play in the mind of traders' confidence in the Dollar later on this week.
EUR - EUR Weighed Down By Euro-Zone Banking Woes
Despite the EUR/USD rate reaching as high as 1.3982 last week, it now stands at 1.3910. This comes about as the U.S. economy is currently healthier than Europe. The British economy has also been fairing well, as the EUR/GBP rate opened at 0.8536 last Thursday. However, it now stands at 0.8445, indicating a loss in confidence for the EUR since the commencement of Thursday's trading.
As the U.S. economy leads the world in rising out of recession, the Euro-Zone isn't so far away. Nevertheless, they have a banking system which needs radical U.S.-style reforms. This was one of the main reasons for the unstable and at times weak EUR in last week's trading. This came about in response to the European Central Bank (ECB) warning that banks in the Euro-Zone may face up to $300 billion of losses by the end of 2010.
Analysts foresee a possible EUR sell-off for the beginning of the week. However, this process could reverse as the week goes by. Today, there is some important news coming out of the Euro-Zone. This includes the German Ifo Business Climate data at 8:00 GMT and ECB President Jean-Claude Trichet's speech at 12:00 GMT. There is also much data coming out of the Euro-Zone throughout the days ahead. Therefore, the EUR will likely be a key player in the forex market this week.
JPY - Yen to Dominate Forex Trading This Week!
As Japan's economy is expected to rise out of the recession faster than many analysts anticipated, we have seen some renewed strength last week for the JPY, especially vs. the USD. The reasons for this behavior are varied. However, mixed economic data releases from the U.S. does play a role in this, such as weak unemployment and inflation figures for the U.S. economy. The USD/JPY rate was as high as 97.76 last week, and is currently trading lower at 95.97
Due to the important data coming out of Japan's economy in the days ahead, there is the potential for great volatility in the JPY. A number of figures, including the CSPI report, Japanese trade balance, Tokyo Core CPI, and All Industries Activity data are to be published this week. These will assist forex traders in getting a feel of what health the Japanese economy is in. It is reasonable to say that the JPY will have a key role in dominating forex trading this week.
Crude Oil - Crude Oil to Hit $75 a Barrel?
Crude Oil managed to hold above $70 a barrel for most of last week. This was owed to a variety of factors, such as China and Japan's economies improving faster than originally forecast. In fact, Crude prices reached a near-9-month high last week at just over $73.20 a barrel. This was despite fears that demand for the black gold was dissipating. Top U.S. banks, such as Goldman Sachs, upgraded their forecasts for Crude Oil. They are beginning to anticipate black gold hitting $85 a barrel by year's end.
There were, however, arguments from the other side, implicating that demand would be unable to keep up with the current price of Crude. However, since the latter half of last week, the former argument has had more strength. Trading on Friday did see Oil drop by nearly $2 a barrel to near the $70 mark, possibly owing to the bullish USD at the end of trading last Friday. If the U.S. continues to publish predominantly positive economic news, it isn't far off to say that we may see Crude hit $75 relatively soon.
The daily chart is showing mixed signals with its RSI fluctuating in the neutral territory. However, the hourly chart's RSI is already floating in the over-sold territory, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The typical range-trading on the hourly chart continues. The price is floating in the neutral territory on the 4-hour chart's RSI. However, the pair currently sits near the upper border of the daily chart's RSI, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The hourly chart is showing mixed signals with its Slow Stochastic fluctuating in the neutral territory. On the other hand, the bullish cross forming on the 4-hour chart's Slow Stochastic implies that an upwards correction might take place in the nearest time frame. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The pair has been range-trading for a while now, with no specific direction. The daily chart's Slow Stochastic is providing us with mixed signals. The 4-hour chart's indicators do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The Wild Card
Oil prices dropped significantly last week and peaked at 69.50 per barrel. However, a bullish cross forming on the 4-hour chart's Slow Stochastic implies that an upwards correction might take place in the nearest time frame. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|