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Friday, 31 Jul 2009
U.S. Dollar to Go Volatile on the Release of Advance GDP Figures
The USD is set to go extremely volatile today on the release of Advance GDP figures for the 2nd quarter from the U.S. economy at 12:30 GMT. The forecasted results are -1.4%, significantly better than the 1st quarter results of -5.5%. The other things that are expected to move the market to day are the publication of the CPI Flash Estimate and the Unemployment Rate from the Euro-Zone. In order to make some big profits today, open you positions in the USD, EUR, GBP, and JPY now, as Friday's trading gets under way.
USD - USD Slides on Further Signs of Recovery
The Dollar slid yesterday, as the U.S. and global economy showed further signs of recovery. This was due to both the predictions for today's U.S. GDP figures, which show the U.S. economy declined at a much slower pace the in the 2nd quarter than the 1st, and global corporate earnings figures led to a jump in optimism. In turn, this helped spark a global stock rally, as investors took advantage of the fresh optimism to snap up higher-yielding currencies, such as the EUR and Australian Dollar.
The USD fell against the EUR by 75 pips to 1.4128. This comes about as Germany and the Euro-Zone released better than expected unemployment and consumer confidence figures. The USD also tumbled against the GBP, as Britain posted optimistic consumer confidence figures. The GBP/USD pair closed higher by 150 pips at the 1.6519 level. Against the Japanese Yen, the Dollar rose 0.5% to 95.35 Yen, extending gains after government data showed a drop in continuing claims, boosting optimism about the U.S. labor market.
Today, there is a reasonably strong possibility that much of the same behavior in the forex market will continue. This is likely to occur as traders continue to trade on Thursday's optimism. This may continue to drive the USD lower against its major currency [pairs. Also, it is advisable for traders to follow the following releases from the U.S. economy: Advance GDP and Employment Cost Index at 12:30 GMT and the Chicago PMI at 13:45 GMT. So if you want to make some bug money as end-of-week trading kicks in open your USD positions now.
EUR - EUR Rallies on Improved Global Economic Sentiment
The EUR was driven higher vs. the U.S Dollar yesterday by data showing an improvement in Euro-Zone economic sentiment in July, as well as an unexpected fall in German unemployment, which was seen as an encouraging sign for the region's recovery prospects. The European currency also gained more ground versus the Yen to hit session highs on Thursday as a sharp rally in stocks boosted risk appetite. The EUR rose as high as 134.86 Yen, and finished trading at 134.67 Yen.
The EUR rose dramatically against the USD to $1.4128, rebounding from a 2 week low near the $1.40 level. The Euro-Zone single currency briefly pared gains after the International Monetary Fund (IMF) said the EUR exchange rate looks somewhat on the strong side relative to its fundamentals. According to analysts, the EUR may pare its monthly gains against the U.S Dollar today prior to reports that will show deflation deepened in the 16-nation area, and job losses increased.
The GBP leaped against the U.S. Dollar on Thursday, after a report showed British house prices climbed in July for a 3rd month. This led the British Pound to extend its gains, hitting a 4 week high against the EUR. The Pound also gained against the EUR and USD due to a report released yesterday showing British consumer confidence at its highest level since April 2008. This was yet another sign that Britain is rising out of the recession. Analysts expect much of the gains for the EUR and GBP may continue throughout today's trading.
JPY - JPY Plummets against the Major Currencies
The Japanese Yen fell against its most traded currencies on Thursday as the leading economies published a string of optimistic figures. This led to global stocks rising for a 3rd straight week, reducing demand for the relative safety of the Japanese currency. Looking at the bigger picture; positive economic data, rising stocks and better-than- expected earnings improved risk appetite, analysts said. Additionally, the improved risk appetite means that the safe-haven currencies will weaken further.
A wave of Japanese mutual funds will be launched today, keeping the Yen soft against the U.S Dollar and higher-yielding currencies, such as the Australian Dollar. But in the near term, the rush in the launching of these funds is expected to have only a limited impact, as a rally in global stocks and commodities in the past few weeks has made fund managers cautious about immediately putting money to work, many traders believe.
Crude Oil - Oil Rebounds On Market Optimism
Crude Oil rose above $67.50 a barrel on Thursday, boosted by higher stock markets in Europe and Asia, better than expected corporate results and data suggesting the economic downturn is bottoming out. The more than 5% rally yesterday, the highest gain in more than 3 months was boosted as continuing U.S. jobless claims figures improved sentiment in the energy sector. All of this is further evidence that the leading economies may rise out of recession in the coming months.
Oil may continue to gain on increased optimism that the global economic decline will ease. The number of people collecting unemployment insurance decreased for a third week, according to the U.S. Labor Department. A U.S. report yesterday showed that Crude supplies unexpectedly climbed as demand lagged behind year-earlier levels. However, this failed to drive prices lower, as the price of Crude also soared on a extremely weak USD.
The cross rose to the 1.4128 level yesterday, in response to a 2 day decline in the pair. The chart's oscillators seem to be showing mixed data. On one hand, the weekly chart's Slow Stochastic signals that the upward movement will continue today. On the other hand, the RSI and the Stochastic Slow of the hourly chart shows that the pair has run out of steam, and that a bearish correction is imminent. Entering the pair when the downward breach occurs may turn out to pay off today.
The GBP/USD cross soared yesterday and currently stands at 1.6535. The daily chart's oscillators seem to be neutral. However, the daily chart's RSI and MACD signal that the pair is overbought, and that a bearish correction may take place today. This is also supported by the RSI of the weekly chart. Going short on the pair may be a wise move today, as traders seek to make end-of-week profits.
The cross experienced its 2nd day of gains, and is currently trading at 95.35. There is some technical data that supports the pair to hit the 96.00 mark today. However, the chart's oscillators seem to be showing misleading signals. The daily chart's MACD and the weekly chart's Stochastic slow support a bullish move today. However, the hourly charts MACD and 4-hour chart's Stochastic Slow signal a bearish trend today. Entering the pair when the signals are clearer may be the right choice today.
The USD/CHF cross declined slightly yesterday, despite climbing the 2 previous days. The pair is currently trading at the 1.0860 level, and there is much technical data to support a bullish move today. The Stochastic Slow on all of the charts signals an upward direction for the volatile pair today. This is also supported by the RSI of the daily chart. Going long with tight stops may turn out to pay off today, as Friday's trading kicks in.
The Wild Card
Crude Oil soared yesterday to above $67 a barrel. The oscillators of the hourly chart seem to show that the recent bullish trend for the black gold may be short lived, and that a bearish correction may be imminent. The RSI of the weekly chart and MACD of the daily chart also support the view that the price of Crude may go bearish in the near future. Entering the trend at an early stage, may turn out to be a wise choice for forex traders today.
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