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Friday, 29 Aug 2008
U.S GDP Data Results In Appreciating Dollar.
Apparently, storm factor turns out to be a double-edged sword for Oil prices. Though traders are concerned about the storm, many are also betting that if the storm strikes, fuel demand will drop and the government will release some of its Oil in reserve.
USD - Dollar Looks to Continue Profits after Yesterday's Strong Session.
The USD underwent a bullish trading session yesterday, as it appreciated against all of its major currency rivals. The dollar rose 0.1% and closed at around 1.4710 versus the Euro in yesterday's trading session. Also, the USD saw steady gains against the GBP and CHF.
The greenback saw gains yesterday as Preliminary GDP figures beat out already positive forecasts which showed an expected rise of 2.6%. Instead, the indicator rose 3.3% and added to another day of surprising US economic data supporting the USD. In addition, a rally in U.S. stocks, seen mostly by industrial and financial companies as well as a decline in oil prices also boosted the greenback. The US economy grew at a 3.3% annualized rate in the second quarter of 2008, a sharp upward revision from the 1.9% growth reported in the US Department of Commerce's first estimate a month ago and higher than the 0.9% rise in the first quarter. The 3.3% GDP increase is the fastest pace since the third quarter of 2007, when GDP grew at a 4.8% annualized rate. The report prompted investors to buy back the dollar, with bids accelerating broadly as U.S. stocks climbed and oil prices plummeted midway through the New York session. In addition, the unemployment claims report saw a decline of 2000 from the expected mark of 427K. The swing in a Preliminary GDP, despite unemployment claims data adds even more to the growing speculation that the US could begin to see steady growth. The data also backed expectations of U.S. rate hikes this year, which fueled a rebound in the dollar during trading session yesterday.
Today we can expect a slower pace to the news cycle from the US as few events of lesser significance will be released. But those events should contribute little to volatility.
EUR - Despite Positive Data - EUR Loses Ground.
The EUR saw a small bearish trading session yesterday, losing ground against all of its currency crosses. The Euro fell 0.1% against the USD after several days of recovery, while the EUR/GBP cross also fell to around 0.8042. The only two economic events out of the Euro-Zone yesterday were German Unemployment Change and M3 Money Supply; both little changed from forecasts as volatility was kept to a minimum.
Despite the fact that the Euro surrendered points to the dollar, it remained above the six-month low touched earlier this week due to reduced expectations that the European Central Bank will cut interest rates. After ECB governing board member Axel Weber said on Wednesday that talk about lower rates was premature, traders were prompted to rethink their bets on Euro-Zone rates. The reverberations of these remarks were still felt on Thursday.
Sentiment in the US economy has brightened in the past week following better-than-expected news. However, the EUR is still showing signs of resilience as it traded in a relatively close range yesterday even though there was volatility throughout non-Euro crosses. It will be crucial for traders to identify how the preceding economic indicators from Europe will affect their positions. Today's early morning release of Italian Retail Sales, as well as CPI Flash Estimate, Consumer Confidence and Unemployment Rate should provide little fluctuation to the market as traders approach the end of this weeks trading session.
JPY - JPY Bullish On Good News from Japan.
Besides bearishness against the USD, the JPY saw bullish trends against most of its other major currency counterparts. The USD was unstoppable because of its economic data and like the Dollar's other crosses, the JPY lost grounds against it.
The most important economic data release that came out of the Japan was Prelim Industrial Production report. Japan's industrial output rose to a seasonally adjusted 0.9% in July from June as makers of cars, electronics and non-ferrous metals boosted production which in turn strengthened the Japanese Yen.
There will only be one data release from Japan today as the Housing Starts will be announced during early trading. The official forecast is much higher from the previous readings. A rising trend will have a positive effect on the nation's currency because it creates more jobs for construction workers. Today, traders should keep an eye on the Yen's counterparts before placing their orders, as we could see some volatility before market closing.
Oil - Storm Turns Out To Be A Double-Edged Sword For Oil Prices.
Fuel prices finished an erratic trading session on Thursday with lower prices, as commodities traders kept a close watch on the weather near the Gulf of Mexico. Sweet Crude for October delivery fell $2.56 to settle at $115.59/barrel on the New York Mercantile Exchange, after rising to as high as $120.50.
Apparently, storm factor turns out to be a double-edged sword for Oil prices. During this week, energy prices saw an initial rise and popped even higher on Thursday, but then reversed course. Oil has been volatile this week mainly due to the course of Tropical Storm Gustav and its approach toward the Oil-rich Gulf of Mexico. Though traders are concerned about the storm disrupting US Oil facilities in the area, many are also betting that if the storm strikes the Gulf Coast, fuel demand will drop and the government will release some of its Oil in reserve.
Few analysts are ruling out the possibility of another spike in Oil prices if Tropical Storm Gustav ends up slamming into the Gulf Coast.
The pair is continuing to provide mixed results, and has consolidated around the 1.4720 level. A bearish cross on the one hour chart's Slow Stochastic suggests that a bearish move is imminent. Going short with tight stops might be the right choice today.
There is very accurate bearish channel forming on the daily chart, as the cable is now floating in the middle of it. As all oscillators are pointing down, another bearish move might take place. Going short could be the right decision today.
The 4 hour chart shows that the pair is continuing to fluctuate within a restricted price zone. A bearish cross on the 4 hour chart's Slow Stochastic is indicating the ignition of a bearish momentum. Going short might be preferable today.
The 4 hour chart shows that the pair is moving with no distinct direction, and has consolidated around the 1.0970 level. As all oscillators are giving bearish signals, it seems that going short might be the right strategy.
The Wild Card
The 4 hour chart shows that after a few weeks of falling prices, the pair has entered a reversal, and been giving bullish signals for the past three days. This might give forex traders a great opportunity to join a very popular trend.
|07:00||JPY||BoJ Monthly Report||-||-||-|
|17:00||USD||FOMC Member Fisher Speaks||-||-||-|