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Friday, 9 Jan 2009
Traders Look to Obama stimulus Plan
The Dollar recovered against some of its major currency pairs yesterday, as Obama spoke late in yesterday's trading session. Traders are advised to pay close attention to unexpected rallies in the Dollar prior to January 20th, as traders are optimistic on the USD and U.S. economy as they see Obama's stimulus plan as a big plus for the U.S. economy.
USD - Dollar Tumbles against EUR and JPY
The U.S Dollar continued to slide against the EUR in yesterday's trading session, slipping by nearly 200 pips at one time. However, it recovered to close down 35 pips, at 1.3646. The greenback also lost ground against the JPY, to close down by 125 pips, at 91.25. The reasons for the Dollars decline yesterday were largely due to investors the depth of the U.S. recession and the prolonged Israel-Gaza War.
On Thursday the USD declined on the release of negative economic data, which showed that U.S. unemployment benefit rolls swelled to a 26-year high in the last week of December. Negative economic data releases such as this, has led many in U.S. political and financial circles to the conclusion that the recession will be longer and more severe than originally anticipated. Barack Obama's speech yesterday at 4PM GMT led the Dollar to gain some of the ground, which it lost against its major currency pairs. This has led many analysts to the conclusion that the Obama stimulus plan may be able to rescue the U.S. economy and the U.S. Dollar.
Today, traders should pay close attention to the release of both the U.S. Non-Farm Employment Change and the Unemployment Change reports at 13.30 GMT. Analysts expect the report for the Non-Farm Employment Change to show about 520,000 less jobs in the U.S. economy for the month of December. Also, the Unemployment Rate is expected to increase by 0.3%, from 6.7% in November, to 7.0% in December. If these data releases are the same as forecasted or worse, then this may potentially drive the EUR/USD currency pair to near the 1.400 level later today.
EUR - EUR Continues Rally Against the Dollar, But Plummets against the JPY
After the heavy losses sustained at the beginning of the week, when the EUR declined by more than 300 pips against the Dollar, the European currency reversed and recorded some bullish gains against the greenback. Despite the bad economic data coming from the Euro-Zone, the Euro was able to sustain its strength against the USD. This is in part owed a lot of negative economic data that was released form the U.S. yesterday. The weak European economy and the increasing possibility of European Interest cuts did however lead the EUR to decline nearly 200 pips against the JPY, to close at 124.55.
Yesterday's European economic news showed that German manufacturing orders plunged higher-than-expected, by -6% in November. This was caused by shrinking demand at home and abroad. In addition, EUR was negatively impacted by the release of the worse-than-expected Consumer Confidence figures. Adding to the grim data from the European Union, 3 of the Euro-Zone's leading economic research institutes cut their estimate for GDP for the 4th quarter of 2008. They adjusted their forecast to -0.6%, from an October prediction of 0%. They also lowered their forecast for the 1st quarter of this year to -0.4%, from +0.1%.
As for today, a batch of data releases is expected from the Euro-Zone. Special attention should be given to the German Retail Sales, which is scheduled at 7.00 GMT and the German Industrial Production at 11.00 GMT. Traders should also follow data releases from the U.S, such as Non-Farm Employment Change, and Unemployment Change.
JPY - Yen Spikes against USD and EUR
Building on bullish gains in recent days, the JPY continued to increase against most of its currency rivals. The Japanese currency rallied against the EUR and USD, to close at 91.25. This was thanks to the grim economic data coming from the U.S. and Europe. This took almost 150 pips from the EUR, as the European currency closed at 124.55 against the Yen. The other reason for the decline in the EUR was the pressure that Europe faces, as Britain cut her Interest Rates by 0.5% yesterday. This led investors that the European Central Bank (ECB) may do the same in the coming week.
Today, there is little economic news coming out of Japan. However, the Yen may continue to rise against the EUR and USD, as traders continue their pessimism with these 2 currencies. The JPY is likely to move on economic news coming out of Europe and the U.S. It therefore seems that the New Year rally has ended, as the USD and EUR may go back to pre-2009 levels. Consequently, the JPY may record some corrections against its major currency pairs in the coming days. However, the one thing that may prevent this from happening is unexpected negative economic data coming out of the Japanese economy.
Oil - Oil Prices Continues Decline as Gaza and Energy Dispute Prolong
Oil prices stabilized from sharp losses suffered during the middle of yesterday's trading session. The reasons this occurred was due to ongoing concerns about the deterioration in the U.S. labor market. This led prices to fall over $2 to $40.50 a barrel during the middle of yesterday's trading session. The recovery later-on, which led prices to close slightly down 30 pips to 42.37 on Thursday, was due to the prolonged conflict in Gaza and the Russia-Ukraine gas dispute returning to the minds of investors.
Crude has continued to decline from what was a rally at the beginning of the week. Oil prices reached over $50 on Tuesday. However, they declined by over $6 on Wednesday, because of the release of U.S. Crude Oil Inventories, which showed an increase of 6.7 million barrels from the previous week. This was far higher than the forecasted 0.5 million barrels. Therefore, in hindsight the result was obvious: a steep decline in Oil prices.
At the moment, the main factors that are preventing the price of Crude falling below $40 a barrel are the Gaza war and Russia-Ukraine energy dispute. Once these two issues are resolved, then the price of Crude Oil is likely to fall dramatically.
The tight range trading continues with no hint of a distinct direction. After bouncing between the borders for most of the day yesterday, the pair now seems to be consolidating around the 1.3680 level as the volatility is beginning to decrease. Indicators are giving mixed signals although there is still a lot of positive momentum. Traders should wait for a clear signal on the hourly level before entering the market today.
The pair is still traded within the bullish channel as the direction is currently unclear. No significant breach has been made in either direction, yet there is a bullish hint in the form of a cross on the 1 hour Slow Stochastic. The hourly chart's Bollinger Bands are tightening which indicates that the break is near. Going short with tight stops might be smart today.
This pair is still continue its steady downward momentum that began two days ago, which is evident from the daily chart. On the 4 hour chart however, there is a bullish cross forming on the Slow Stochastic oscillator, indicating of a possible bullish correction. Going short with very tight stops might be a good decision today.
After experiencing a mild bullish correction yesterday, the pair has fully resumed its general bearish trend. The RSI on the 4 hour chart is now floating around the 40 line, indicating that the bearish momentum still has more steam in it. Going short seems to be preferable.
The Wild Card
The pair has been trying to correct its intensive bearish move, and is now trading around 1.6190. The sharp bearish channel is in a high spot at the moment and together with a strong bearish cross on the 4 hour Slow Stochastic. This represents for forex investors a very good potential for a short position.
|08:00||EUR||German Industrial Production||m/m||0.7%||-||-1.2%|
|08:01||JPY||BoJ Press Conference||-||-||-|
|08:45||EUR||French Trade Balance||-3.3B||-||-3.0B|
|09:00||CHF||Foreign Currency Reserves||540B||-||542B|
|10:30||GBP||Manufacturing Production m/m||m/m||-0.8%||0.4%||-|
|10:31||EUR||German 10-y Bond Auction||0.69|1.2||-||-|
|16:00||GBP||NIESR GDP Estimate||0.5%||-||-|
|16:30||USD||Crude Oil Inventories||4.0M||2.2M||-|
|19:01||USD||10-y Bond Auction||2.24|2.7||-||-|
|01:01||GBP||RICS House Price Balance||53%||-||-|
|01:50||JPY||Core Machinery Orders||m/m||-3.6%||-||-|
|05:45||JPY||30-y Bond Auction||1.41|3.1||-||-|
|07:00||JPY||BoJ Monthly Report||-||-||-|
|07:00||JPY||Economy Watchers Sentiment||49.3||-||-|