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Friday, 15 Aug 2008
U.S Consumer Sentiment on Tap.
The USD continued it recent ascent yesterday versus most of the major currencies. The dollar reached a five and a half month high of 1.4776 against the Euro.
Today will be a big news day for the US economy as many crucial indicators will come to light. Expectation for the majority of the news events are negative, and could result in a bearish correction for the USD.
USD - Dollar Hits 5 Month Highs Vs. EUR - Looks To Continue Trend Today.
The USD continued it recent ascent yesterday versus most of the major currencies. The dollar reached a five and a half month high of 1.4776 against the Euro. A stronger than expected rise in Core CPI was a main catalyst in yesterday's bullishness as it rose 0.3% in the month of June. CPI also came in higher than the expected rise of 0.4% at 0.8%. In addition, Federal Open Market Committee (FOMC) Member Stern added some hawkish comments when he estimated that the US economy will improve in the short term. The Natural Gas Storage indicator came in at 50B, 3B lower than last week's publication, but once again in positive territory. Shortly following the 2:35 GMT release the USD made a strong push against the EUR, as the oft-traded pair saw a 100 pip drop. Unemployment Claims in higher than expected but lower than previously published at 450K and Federal Open Market Committee (FOMC) Member Stern supported the greenback movement for the day as his hawkish comments estimated that the US economy will improve in the short term.
Today will be a big news day for the US economy as many crucial indicators will come to light. Expectation for the majority of the news events are negative, and could result in a bearish correction for the USD. The Empire State Manufacturing Index is expected to print at -4.3 along with TIC Net Long-Term Transactions which is projected at 60.0B, 7.0B lower than its last measurement. Industrial Production is projected to see no change from last month and any positive move could offset its fellow indicators for the day.
One of the more significant pieces of data will be Preliminary University of Michigan Consumer Sentiment report. The indicator is expected to strengthen the USD; as it is projected at 62.0 which is 0.8 higher than previous recordings. With the varying change in US data, a high trading volatility can be expected today.
Traders should stay close to the market today, as there is a strong chance to capitalize on the expected fluctuation in today's trading session.
EUR - Europe's Economy Contracts Pushing The Currency Towards 1.45
The EUR depreciated against most of its major currency rivals yesterday, most notably seeing a near 1% drop in trading versus the dollar. The reason for this depreciation seems to be the poor economic results that were published yesterday from the Euro-Zone, traveling in the opposite direction of US economic news. The German Preliminary GDP came in lower than projected at -0.5% and the French Preliminary GDP came in lower than expected at -0.3%. French Non-Farm Payrolls saw 0.1% depreciation, despite projections of positive movement. CPI and Core CPI came in at 4.0% and 1.7% respectively, slightly off from expectations. The German Final CPI came in as expected at 0.6%, and the Flash GDP also released to expected forecasts of-0.2%. The Euro-Zone was unable to hold off the strong positivity from the US and equity markets as the 15-Nation currency experienced yet another day of August bearishness.
Today economic indicators are not expected to be published, as The Assumption holiday will be observed by banks in the Euro-Zone. The direction of the Euro will likely rest square on the shoulders of US economic data.
JPY - The Yen Looks to Continue Gains within Its Crosses.
The JPY finished yesterday's trading session with mixed results versus the major currencies. The yen saw very a small depreciation against the USD at 109.72 as it mostly range traded throughout yesterday's session. The JPY appreciated versus the Euro by just less than 100 points closing at 162.09 before midnight GMT. Yesterday there were no economic indicators published from Japan as most of the movement from the Asian powerhouse came from its American and European competitors. US stock markets were relatively calm, preventing any real break in carry trading.
Today we have another day of economic news without the presence of the Japanese. Investors are advised to follow news releases from the dollar especially as a change in direction from the USD could spur on healthy risk appetite.
Oil - Oil Prices See Small Drop in Response to Crippling Demand in Black Gold.
Oil prices retreated Thursday, reversing earlier gains, on worries that a weakening U.S. economy could cripple demand. The US Gasoline Demand was down 2.1% in the first seven months of the year as record prices and slower economic growth cut consumer spending. As a result, U.S. Crude for September delivery fell $1.99 to settle at $114.01 a barrel on the New York Mercantile Exchange yesterday.
Concern about slowing demand weighed on Oil after two reports pointed to further economic weakness in the United States, the world's largest oil consumer.
Oil prices were also affected by the Europe's economy contraction; spurring speculation that the slowdown in fuel consumption will spread beyond the U.S. As latest reports show, Europe's economy contracted for the first time since the introduction of the EUR almost a decade ago.
However, Crude Oil prices may rise next week as U.S. gasoline inventories fall because refineries are cutting output in response to low profit margins.
The pair continued its bearish voyage yesterday as it dropped close to 200 pips. The 4 hour chart shows that the pair's price has descended beneath the Bollinger Bands border, suggesting that another bearish move is impending. Going short seems to be preferable.
There is a very accurate bearish channel forming on the daily chart, as the cable is now floating in its lower section. All oscillators on the daily chart are floating within bearish territories, implying that the falling trend might further continue. Going short could be the right choice today.
The pair's bullish momentum continues with full steam, as it crossed the 110.20 level yesterday, and seems ready to test the 110.70 level. Should a breach occur, another bullish move might take place.
The pair's bullish sprint has passed it through the 1.0970 level yesterday. As all oscillators on the 4 hour chart are pointing up, the pair might test the 1.1100 level - making a 6 month record.
The Wild Card
Silver prices are testing new lows on a daily basis now as a breach through $12.5 was made yesterday. The daily chart shows that the price has lowered beneath the Bollinger Bands, indicating that the downtrend has more room to go. This could give forex traders a great opportunity to enter a very promising trend.
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||0.1%|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||0.7%|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|