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Tuesday, 24 Jun 2008
US Consumer Confidence Could Slowdown the USD
Yesterday, traders who went long on the USD saw some significant profits. The greenback gained 142 pips against the EUR, reaching the low of 1.5468 during yesterday's trading session. The GBP\USD depreciated from 1.9755, down to 1.9594. The USD\JPY ascended from 107.25, up to 108.00.
Even though the USD was absent from the economic calendar yesterday, it nevertheless strengthened as a result of some very gloomy indicators published for the EUR, especially in Germany, which is considered the strongest and the most important economy in the Euro-zone. More support for the USD came during last Wednesday's Fed announcement, that ensured U.S Interest Rates will remain intact after a string of cuts since September, calming the rising inflation.
As for today, a batch of data is scheduled for the USD. The first one on tap will be the U.S National Home Price Index. This indicator measures the annual change in the average price of a single family home in 20 metropolitan areas and is expected to decrease by 16.0%. Later, on 14:00 GMT, several additional indicators are scheduled to be published. The most important will be the Consumer Confidence, which measures the mood of consumers in regard to economic conditions. Despite the recent boost in retail spending, U.S consumers haven't been feeling any more optimistic recently. As evidence, last month's index fell to a 16-year low, printing at 57.2. This month, analysts forecast it to drop even further, probably to the level of 56.4. The House Price Index and the Richmond Fed Index are also scheduled around the same time; however they are not expected to have a large impact over the market.
Today could be a great opportunity for traders to take advantage of the USD's movements and gain profits on USD pairs.
Yesterday, the EUR saw mixed results against most of its major currency rivals. During the first part of the trading day, the EUR dropped significantly vs. the USD, however later it gained back some of its losses. Also yesterday, the European currency fluctuated against the GBP and the JPY, and saw some rising trends vs. the CHF.
A bundle of data was published for the EUR yesterday, mainly delivering unfortunate figures. The German Manufacturing Purchasing Manager's Index (PMI), which measures the activity level of purchasing managers in the manufacturing sector, fell from 53.6 to 52.3. The German Services PMI dropped from 53.8 to 53.3. The German Information and Forschung (Ifo) Business Climate Index, a leading indicator that measures the mood of firms in manufacturing, also declined from 103.5 to 101.3 level. The German Ifo Business Expectations Index decreased from 97.3, down to 94.7 as well.
As a result, the EUR depreciated severely against the USD. The German economy, considered to be Euro-zone's strongest core economy. Yet, recent results are seriously questioning that notion. Now, many wonder weather the ECB chiefs will in fact deliver Interest Rates hikes as was recently stated.
As for today, there is no significant economic data expected to be published. Traders should keep their eyes open for developments from the US. These developments should be the main driving force in determining the EUR's development today.
Yesterday, the JPY underwent a volatile session against most of its major currency counterparts. The JPY lost 75 points against the USD, setting the USD\JPY rate at 108.00. The JPY saw mixed results versus the EUR and the GBP.
The only indicator published from the Japanese economy yesterday was the Business Survey Index Manufacturing Condition, which measures the general conditions of large manufactures. The survey showed that the sentiment among large Japanese companies have deteriorated for the third straight quarter, dropping from -12.9 to -15.1 reading.
Today, the Japanese Trade Balance, which measures the difference in value between imported and exported goods, is forecasted by analysts to reflect a significant drop from 0.61T down to 0.41T. At the same time, the Corporate Services Price Index is duo, yet is should not have a large impact on the JPY.
Traders are advised to follow global developments carefully, especially from the U.S as they should be the main catalyst for JPY movements for today.
The Slow Stochastic and the RSI on the daily chart, indicate that the pair will depreciate. The Bollinger Bands on the 4 hour chart have widened, which means volatility is high at present. Yet, the hourly chart's Slow Stochastic and Momentum indicators signal that the EUR/USD will appreciate. A good strategy for the day will be to go long with tight limits.
We are now at the beginning of a very tight bullish channel on the 4H chart. Indicators on the hourlies and the daily charts are mixed. Therefore this pair should remain within a tight range today. A preferred strategy today will be to buy on lows and sell on highs.
The bullish move the pair is going through appears to have diminishing momentum, and lacks the ability to make a significant breach above the 108.25 level. The hourly studies show mixed signals, and the daily chart's Stochastic Slow is indicating a mild bearish direction. Waiting for a clearer signal on that pair appears to be a good decision today.
The daily chart is showing flat consolidation around the 1.0400 level with no distinct price direction and the daily chart is dwelling in neutral territory as well. The 4 hour chart is showing mixed signals, however there is a bearish cross on the Slow Stochastic indicating that a bearish correction might be the next move to come. Traders are advised to wait for a clear signal on any direction or keep out of that one today.
The Wild Card
After a sharp drop to the 875 level yesterday, the 4 hour chart shows that there is a bullish correction back intact. The RSI flows low indicating that there is still a lot room for the bullish move. The hourlies also support that notion, however according to it, the uptrend is much more restrained volatility is quite low. Forex traders have a good opportunity to take advantage of an ongoing uptrend with high profit potential.
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||0.4%|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||0.1%|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|