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Tuesday, 29 Apr 2008
U.S Consumer Confidence On Tap
Yesterday the greenback showed off a bullish trend against its major currency rivals. It went through a bullish volatile session vs. the EUR, yet it lost strength against the GBP and the JPY. Even though the USD went through mixed trends yesterday, its main goal remained in tact as it kept a steady rate within the EUR\USD pair, trading around the 1.5645 range.
The most significant unfavorable news for the USD came from Japan. The Japanese who hold 12% of U.S government debt (over $550 billion) have suffered their worst quarter in treasuries in the last 10 years because the USD\JPY recently depreciated to its lowest rate since 1995. As a result, more and more Japanese investors are looking for different currencies to invest in, especially the EUR. Crude Oil seems to be another factor in the greenback's trend as it reached an all time high of $119.93 yesterday.
As for today, very meaningful data is scheduled at 14:00 GMT as the Consumer Confidence survey results are due. The figures are forecasted to decrease by 2.5 points, from 64.5 down to 62.0. The main reasons for the lower confidence are the worrisome employment situation, which count greatly in the survey, and the rising price at gas pumps, that rose by $19 over the last month. Lower reading points demonstrate certain pessimism by U.S consumers regarding the American economy, which may very well create bearish inclination within USD pairs.
Traders should stay tuned to the ongoing data releases from the U.S as it's looking to be a crucial point for greenback's future. Bullish behavior is imperative for the USD at the moment, as continuity of bearish trends might result in a long term falling trend for the greenback.
The EUR saw falling trends against its major counterparts yesterday, following a negative 0.2% decline in the German Consumer Price Index. Forecasts had the German CPI rising 0.2% this month after a previous 0.5% increase in March, however results were surprisingly worse than expected and the EUR had a bearish trend against the USD, slightly falling to the 1.5650 range after ending the previous trading day at a day high of 1.5680. President of the European Central Bank, Jean-Claude Trichet reiterated in a speech yesterday that the ECB considers that its current monetary policy stance, with its main interest rate at %4, will help achieve its medium-term price stability target and anchor long-term inflation expectations. Trichet pointed out that the ECB has injected a large amount of liquidity into the money market to ease tensions, yet it is focused on containing the inflation and will avoid changing its monetary policy stance and it seems that the interest rate will remain unchanged. It should be pointed out that the German Consumer Confidence did beat expectations and was announced at a rate of 5.9 vs. forecasts of 4.6; nonetheless this positive announcement was not enough to help the EUR rise after subpar German CPI results.
As for today, there are no significant economic results expected to be announced for the EUR currency. Traders should keep a close look at the result of the U.S. Consumer Confidence Index, which is expected to weaken compared to last month's results, and might reach one of its lowest readings in the last 5 years. If the Index declines significantly, the EUR will pick up a bullish trend against the USD. On the EUR's behalf, European Central Bank's Vice-President, Lucas Papademos will hold a press briefing in Frankfurt to present the second annual report on "Financial Integration in Europe", which should hint at the European Union's expectations of its economic growth.
The Yen appreciated versus its major currency competitors yesterday. This is reversal of the Yen's bullish trend from last week. The most notable gain was against the CHF as the CHF lost more than %1 against the JPY. In other important economic news from Japan, on Sunday Retail Sales rose slightly over the forecast to 1.1%. This increase was assisted by greater spending on fuel, due to higher global prices of Crude Oil. This rise is the eighth consecutive month in which Retail Sales increased, including a 3.2% rise from last February. Showa Day was observed in Japan on Monday and economic indicators were not published.
Today the most important notable figure to be released is the Industrial Production, which measures the total value of output produced by industrial companies. The forecast is for it to come in as low as -0.7%, which should cause the JPY to trend downwards. The Japanese, who own 12% of U.S. government debt (586.6 Million), lost nearly 7% in the first quarter of the year when the Dollar fell to lowest levels since 1995 versus the Yen.
Forex traders should expect a continuation of yesterday's bullish trend for the first half of the day, and a negative trend during the second half of the day after the publication of the new economic indicators. Volatility should be the name of the game today.
The pair has been going through a strong corrective move for the past week while breaching through several key Fibonacci levels. The bearish breach through 1.5670 has been validated, and fresh bearish momentum has been created. The next test should be around 1.5580 and if breached will cause the continuation of the bearish move.
The 4 hour chart is showing the early stages of a bearish channel with the cable still floating near the upper barrier of it. The local momentum is still quite bullish and it appears that a test of 1.9920 might be quite imminent. A failure in the breach will probably lead to a fresh bearish move, with very high momentum potential.
There is a very distinct flag formation on the 4 hour chart, as the pair is now bouncing up from the bottom of it. All oscillators are pointing up and the momentum is very bullish. It appears that the next target price might be around 104.95. Going long might be preferable today.
The momentum which was created by the breach through the upper barrier of the channel on the daily chart continues with full steam. The 4 hour chart is still very bullish, as the daily chart is showing its first signs of a halt. Going long with very tight stops might do the job today, incase a bearish reversal will occur.
The Wild Card
Breaching all time highs appears to be Oil's routine lately, and the today is no different. There is local bearish momentum created on the 4 hour chart, yet the daily momentum is still very high. Forex traders should look for a good dip to go long at, as the direction appears to be up.
|15:30||USD||Natural Gas Storage||88B||79B||75B|
|00:05||GBP||GfK Consumer Confidence||-2||-1||-|
|00:30||JPY||Tokyo Core CPI||y/y||2.8%||2.7%||-|
|00:30||JPY||National Core CPI||y/y||3.3%||3.3%||-|
|00:50||JPY||Prelim Industrial Production||m/m||-3.4%||1.4%||-|
|02:00||AUD||ANZ Business Confidence||39.7||*||-|
|02:30||AUD||Private Sector Credit||m/m||0.7%||0.5%||-|
|07:00||EUR||German Retail Sales||m/m||1.0%||0.1%||-|
|08:00||CHF||KOF Economic Barometer||98.1||97.9||-|
|09:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.2%||-|
|09:00||EUR||Italian Quarterly Unemployment Rate||12.7%||12.6%||-|
|09:30||GBP||Prelim Business Investment||q/q||5.0%||2.1%||-|
|10:00||EUR||CPI Flash Estimate||y/y||0.4%||0.3%||-|
|10:00||EUR||Italian Prelim CPI||m/m||-0.1%||0.1%||-|