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Thursday, 5 May 2011
Traders Eye European Interest Rate Decisions Today
Today's data releases out of Europe and the United Kingdom regarding short-term interest rates will likely be predominant in today's market valuations and traders would be wise to keep an eye on policy statements. The buck is still weakening from the rate differentials, but dovish statements from Europe today may close part of that gap.
USD - US Dollar Declines to 3-yr Low as Data Disappoints
The US dollar experienced bearish results yesterday as traders began to shift away from the greenback following a string of negative data sets which underlined the weakness of the dollar versus its primary rivals. The USD initially moved lower against the safe haven Swiss franc and Japanese yen yesterday on global concerns, while stocks and commodities began to trade flatter in anticipation of a bounce.
The USD lost most of its recent gains against the EUR yesterday following the release of ADP non-farm employment data that revealed sluggish growth in the job sector of the US economy. With Friday's NFP figure on the way, traders appear to have lost some optimism about the support of the greenback. The US economy also published a disappointing manufacturing report which showed further weakness growing in global industry.
The issue of American interest rates remains ever-present in economic analyses lately; leading many speculators to claim that this recent return to safety may leave the dollar exempt from the shift, as it usually is during times of uncertainty. Today's data releases out of Europe and the United Kingdom regarding short-term interest rates will likely be predominant in today's market valuations and traders would be wise to keep an eye on policy statements. The buck is still weakening from the rate differentials, but dovish statements today may close part of that gap.
EUR - Powerhouse EUR Fights Through Poor Data
The euro appears to have gained against its currency rivals yesterday regardless of the European Union and International Monetary Fund's (IMF) announcement for a bailout of Portugal. The data releases published over the last several days have pushed many traders away from riskier assets, but the EUR has fought through the pain and appears poised to continue through today with interest rate decisions from the euro zone and Britain.
The bullishness may end up being short-lived, however, as investors returned temporarily to safe haven investments in expectation of an al Qaeda reprisal following bin Laden's death this weekend. Portugal's bailout was structured as expected and should not have a lasting impact on the region's currency value. The bullishness on the EUR today was a continuation of a previous sentiment towards the EUR/USD, but dovish statements by the ECB today could undo much of these recent gains.
As for today, the euro looks like it may make further gains as trader sentiment shifts around the data releases out of the region. The major news today is the interest rate decision expected at 12:45 GMT, shortly after a similar announcement from the Bank of England (BOE) at 12:00 GMT. The rate statement by ECB President Jean-Claude Trichet is expected for 13:30 GMT. Rates are expected to be held steady by both, but any dovish statements like Trichet's a few weeks back may hurt the value of the euro in the days ahead.
JPY - Yen Absent from Market, Gaining from Flight to Safety
The JPY has been trading with largely positive results since yesterday as investors turn their focus elsewhere amid global reactions to the death of Osama bin Laden. After reaching upwards of 82.75 on Monday, the USD/JPY quickly dropped to a daily low of 81.00 by Tuesday evening, but so far the pair has remained stable between the two prices with minor downticks in favor of the yen.
With Japan celebrating Children's Day, amid Golden Week, liquidity throughout the region will be somewhat lower. The JPY could gain from this absence as the rest of global traders shift towards Europe, as well as safe havens, amid strong data releases like today's interest rate decisions out of Europe. As for today, the JPY will be absent from the market again, meaning global investors will continue to focus their attention elsewhere, creating mixed results for the yen. But the recent shift into safe havens following expectations of an international reprisal from al Qaeda in response to bin Laden's death has helped lift the yen and should continue to do so for the remainder of the week.
Crude Oil - Crude Oil Prices Continue Dropping; $107 in Sight?
The prices of Crude Oil ended Wednesday lower as traders largely began to speculate an imminent reprisal from al Qaeda following Osama bin Laden's death. The result has been a moderate dip in stock prices, also weighing on the price of assets like oil, silver, gold, and a variety of industrial metals. The biggest gainers on the day were the Swiss franc and Japanese yen, making strides from the shift in sentiment.
Recent events have made speculating about oil prices more difficult. The plummeting value of the US dollar should have helped lift oil prices, but the commodity remains in free fall for the second consecutive day. Rising stockpiles in the United States, reported yesterday, may have helped fuel the shift away from oil as rising inventory tends to suppress price hikes. As for the rest of the week, oil prices actually appear on the downside, with targets near $107 a barrel in sight.
Over the past few days the EUR/USD pair has been trading within a restricted range, between the 1.4750 and the 1.4950 levels. Currently, as a bearish cross is taking place on the 1-hour chart's Slow Stochastic, it seems that the pair might be on its way towards the 1.4750 level.
After falling about 300 pips since the beginning of the week, the cable has stabilized near the 1.6500 level. In addition, as the 4-hour chart's RSI has crossed the 30-line and continues to point upwards, it seems that a bullish move could take place today, with the potential to erase recent declines. Going long with tight stops might be the right strategy today.
The USD/JPY continues with its free-fall, and is currency trading near the 80.40 level. In addition, as all oscillators on the daily chart are providing bearish signs, it seems that the downtrend is likely to continue today, with potential to reach the 79.00 level.
A very accurate bearish channel has formed on the daily chart, and the pair is currently trading in the middle of it. Nevertheless, a bullish cross taking place on both the daily and the 4-hour charts' Slow Stochastic, suggests that a bullish correction may occur. Going long might be the right choice today.
The Wild Card
Crude oil fell about 650 pips over the past few days and is currently trading near $109 a barrel. However, as both the MACD and the Slow Stochastic on the 1-hour chart are providing bullish signals, and as the 4-hour chart's RSI is pointing upwards, it seems that crude might begin to correct its losses today. This might be a good opportunity for forex traders to catch the bullish correction at its beginning.
|13:30||USD||Empire State Manufacturing Index||14.7||-||-|
|14:15||USD||Capacity Utilization Rate||79.2%||-||-|
|00:01||GBP||BoE Quarterly Bulletin||*||*||*|
|01:00||AUD||RBA Assist Gov Kent Speaks||*||*||*|
|02:30||AUD||Monetary Policy Meeting Minutes||*||*||*|
|06:30||JPY||BOJ Gov Kuroda Speaks||*||*||*|