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Friday, 14 May 2010
U.S. Dollar Reaches its Highest in More than a Year
The U.S. dollar rose to its highest level Thursday, gaining on the EUR and the British pound, as currency traders' appetite for risk remained restrained because of rising worries about the long-term implications of Euro-Zone debt problems.
USD - The Dollar Extends Gains after U.S. Jobless Claims Data
Encouraging data from the U.S. and expectations that the Federal Reserve will be the first to move amongst the major central banks to raise Interest Rates supported the U.S. dollar Thursday. The U.S currency was near a 13-month high, in part boosted by inflows from investors fleeing the Euro-zone and in part driven by expectations that the recovery in the U.S. was on much solid ground.
The greenback extended gains versus the EUR after data showed the number of U.S. workers filing new applications for unemployment insurance fell last week, though by an amount slightly less than expected. Initial jobless claims in U.S. fell by 4,000 to 444,000 in the week ended May 8, higher than the median forecast of economists.
EUR - The EUR Slides for a 3rd Day on Budget Deficit Concern
The EUR was struggling on Friday, holding above 14-month lows against the U.S. dollar as concerns about anemic growth in the Euro-zone dragged the EUR lower. The EUR weakened for a 3rd day against the U.S. dollar on concerns the governments may not cut budget deficits fast enough after the European Union announced a near $1 trillion bailout.
The British pound was also on the defensive, trading below $1.46, having shed 1.4% on Thursday, hurt by data showing the UK trade deficit widened more than expected in March. That came after Bank of England Governor Mervyn King said weaker Euro-zone export markets had increased growth risks for the British economy.
According to analysts the European single currency was likely to be defended around the $1.25 level on talk of some large option barriers around there. Still, the outlook for the EUR remains bearish with investors nervous over the commitment and resolve of EU member states to make significant inroads in consolidating fiscal positions. Traders say that if the EUR breaks below $1.25, investors' selling could push it toward $1.2330 in the upcoming days.
JPY - Yen Weakens Broadly on Recovery Signs
The Japanese yen slipped against 15 of its 16 major counterparts as stocks rose and economic data pointed to improving employment in Australia and the U.S. The Yen weakened for a second day against the EUR as signs the global economy is recovering reduced demand for Japan's currency as a refuge.
Japan's currency fell to 117.74 per EUR from 117.62 yesterday. The Yen was at 93.36 per dollar from 93.24.
OIL - Oil Prices Fall Below $74 a barrel
Crude Oil prices settled lower Thursday, hitting their lowest level in nearly 3 months as concerns over European economic stability weighed on the EUR and helped lift the U.S. dollar. Oil also slipped after U.S. equities retreated on widening probes of banks' mortgage-bond deals. Crude dropped as much as 58 cents, or 0.8 percent, to $73.82 a barrel. Yesterday, the contract fell $1.25 to $74.40.
Oil prices will likely continue to struggle in the near term as the tendency is still a strong Dollar and weaker oil prices according to analysts. A change in direction for Crude Oil would only come after a Dollar weakness, they said.
Yesterday the pair reached a new low at 1.2515 for the bearish trend that began in December of 2009. The strong downward movement continues as the 10, 20, 50, 100, and 200 day simple moving average lines all have a negative slope. The next major support level rests on the weekly chart at 1.2450.
The dollar continues to strengthen versus the pound and the daily chart's 14-day Relative Strength Index shows the bearish move has significant momentum behind it. The RSI is currently floating in the oversold zone and has a sharp downward sloping trend line. A breach of 1.4570 could send the pair lower to the next support level of 1.4215.
The 4-hour chart displays the Bollinger Bands tightening, indicating a breakout may occur in the near term. It can be inferred from the chart that the breakout will be to the upside as a bullish cross has formed on the Slow Stochastic Oscillator. The RSI-14 is also positive sloping, indicating that the momentum is to the upside. Traders should wait for the breakout and go long.
The recent bullish streak on the 4-chart is showing some technical resistance. A bearish cross has formed on the Slow Stochastic, indicating that the pair may fall in the near term. This is supported by the RSI-14 that has recently crossed below the 70 line, indicating a sell signal.
The Wild Card
The price of gold fell to a short term support level at $1233.20 and quickly bounced back. Momentum is sill strong to the upside for the commodity with the daily chart showing a rising MACD histogram and a rising 14-day Relative Strength Index. CFD traders should continue to be long on gold as the commodity could test the all-time high of $1248.60.