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Thursday, 24 Feb 2011
US Dollar Tumbles as Investors Turn to Riskier Assets
The US dollar slid against the euro following a rally in global equity markets. The rally prompted investors to turn to higher yielding riskier assets and away from the USD. With recent market optimism, traders may continue to see a small downward trend in the dollar as its positions are unwound in exchange for higher yielding assets.
USD - US Dollar in Decline from Renewed Risk Appetite
The US dollar slipped against the EUR and CHF Wednesday, erasing some early morning gains after encouraging European data sent traders into riskier, higher-yielding assets. By yesterday's close, the greenback had fallen against the EUR, pushing the oft-traded currency pair to 1.3750. The dollar experienced similar behavior against the Swiss franc, closing at the 0.9900 price level.
Existing home sales in the US rose by 5.36M last month, slightly higher than the consensus forecast of a 5.27M increase.
The economic reports from Tuesday also bolstered US Treasury yields, but weren't enough to get active market participants to continue buying dollars. Instead, traders saw the upbeat news as a reason to search out riskier assets. American stocks and crude oil were among the biggest beneficiaries of this increased risk demand.
Looking ahead to today, the most important economic indicators scheduled to be released from the US are the Core Durable Goods Orders report at 13:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost risk appetite in the short-term.
EUR - EUR Bullish after as Regional Industries Report Growth
The euro rallied broadly against most of it major currency pairs on Wednesday as US stocks rose. The 17-nation currency extended gains against the US dollar and closed around 1.3750. The EUR experienced similar behavior against the GBP as the pair rose from 0.8420 to 0.8490 by day's end.
The EUR was affected by a US stock market rally and a bearish dollar. Growth in stocks led investors to buy-back into the EUR, as they looked for returns on buying commodity-linked and higher-yielding currencies in Wednesday's trading.
Turning to today, traders will want to pay particular attention to the string of data emanating from the United States, beginning with the reports on last month's durable goods orders. Should tomorrow's figures indicate further improvements in the US economy, the euro could maintain its current course, and may even push towards the 1.3800 resistance level against the greenback.
JPY - Yen Higher vs. Major Currency Pairs
The Japanese yen saw a relatively bullish trading session yesterday, gaining ground against most of its currency crosses. The JPY outpaced the USD and closed around 82.50. Moreover, the yen gained approximately 100 points versus the GBP, closing at 133.70 from the earlier mark of 134.65.
The JPY's trends today will be affected by the rebounds in its primary currency pairs. It seems that the USD and EUR are expected to continue trading volatile today, especially against the Japanese currency. We could see some retracement as the day progresses.
Traders should keep a close look on the news coming from the US today as it is set to drive today's market events. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
OIL - Crude Oil Holds above $98 a Barrel
Oil prices continued to sustain their recent surge in value as upbeat European and US industrial data reinforced optimism about economic and energy demand growth. So long as traders seek out higher yielding assets, commodities appear poised to gain ground.
Tensions spreading throughout the Middle East and North Africa are no doubt feeding this price rise. Crude prices climbed to $99.91 a barrel yesterday, its highest settlement since September 2008, before rebounding back to $98.97 at the day's close. Industrial output in Europe accelerated in February helping to fuel a move by investors into commodity-link and higher-yielding currencies.
The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a fresh bearish cross forming on the daily chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.
The pair has been range-trading for a while now, with no specific direction. The daily chart's Stochastic (slow) is providing us with mixed signals. The 4-hour chart does not provide a clear direction either. Waiting for a clearer sign on the hourlies chart might be a good short-term strategy today.
The USD/JPY continues to decline after failing to move above its 200-day moving average at 84.00. The long term downtrend appears to have resumed. As such, traders should be short on the pair with a first target at the rising trend line offo fo the November and December lows.
The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic (slow) indicates that a bullish reversal is imminent. An upward trend today is also supported by the RSI. Going long with tight stops may pay off.
The Wild Card
Crude Oil prices rose significantly in the last two days and peaked at $92.50 a barrel. However, the 4-hour chart's RSI is floating in the over-bought territory suggesting that the recent bullish trend is losing steam and a bearish correction may be impending. This might be a good opportunity for forex traders to enter the new trend at a very early stage.
|13:30||USD||Challenger Job Cuts||y/y||-22.5%||-||42.7%|
|14:15||USD||ADP Non-Farm Employment Change||201K||212K||237K|
|15:45||USD||Final Manufacturing PMI||53.4||53.4||-|
|16:00||USD||ISM Manufacturing PMI||52.8||53.2||-|
|16:00||USD||ISM Manufacturing Prices||49.5||52.1||-|
|16:30||USD||Crude Oil Inventories||-4.9M||-1.9M||-|
|01:00||EUR||French 10-y Bond Auction||-||-||-|
|01:00||EUR||Spanish 10-y Bond Auction||-||-||-|
|03:00||NZD||ANZ Commodity Prices||m/m||-4.7%||-||-|
|05:45||JPY||10-y Bond Auction||0.45|2.7||-||-|
|09:00||EUR||Spanish Unemployment Change||-118.0K||-||-|