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Tuesday, 27 May 2008
US New Home Sales on Tap.
Yesterday was a relatively volatile session for greenback pairs. Because of Memorial Day in the US, banks remained closed during the day, and as a result an extremely low volume was observed within USD trading. The EUR\USD saw volatile behavior from the beginning of the trading week until the end of the day yesterday, as well as the USD\JPY. The GBP\USD started the day with bearish momentum, dropping as low as 1.9768, but than made a reversal and rose back up to 1.9825.
In observance of Memorial Day no data was released yesterday from the US regarding the USD.
As for today, a basket of data is scheduled for the USD. At 12:15 (GMT) Federal Reserve Governor Kroszner will deliver a speech titled "prospects for recovery and repair of mortgage markets", in Sao Paolo. In his speech, clues regarding future monetary policy might be scattered. Later on, the National Home Price Index Composite-20 will be published, and it's predicted to decrease by 14.3%. The main event for today will take place at 14:00 (GMT), when the U.S New Home Sales is due. This survey measures the new residential buildings that were sold during the previous month, and analysts forecast it to come in at 522K, lower than last month's 526K. The previous month's figure was the lowest figure since October 1991, and further descending trends will demonstrate six consecutive months of deterioration. At the same time, the Consumer Confidence is scheduled. It measures the mood of consumers in regard to economic conditions. It is also expected to reflect a lower reading point than the previous month - 60.0, as opposed to 62.3.
If analysts' expectations of negative results for all U.S data will occur, a bearish trend is likely for the greenback. More importantly, the combination of bad results from these two events can very easily contribute to the EUR/USD testing 1.60 once again.
However, traders should follow carefully over today's developments as unpredicted figures might take place.
Yesterday, the EUR underwent volatile sessions against its major currency counterparts. The main reason for the high volatility was the low volume that was experienced in the market yesterday, which occurred due to the holidays in the U.S and the U.K, as well as the lack of data from the Euro-zone.
Looking forward to today, some vital news is expected for the EUR as several German market events are scheduled to be released. Early this morning at 06:00 (GMT), the German Consumer confidence was published. This survey, which measures the mood of consumers about the economic conditions, was forecasted by analysts to decline by 0.2 reading point, from 5.9 marks on the previous month, to 5.7. Instead it saw a steeper decline as it registered at 4.9. It contributed to depreciation in EUR bullishness, as the EUR/USD pair saw an immediate 50+ pip reduction. Meanwhile, the German Final Gross Domestic Product survey, which measures the change in the value of all goods and services produced by the economy was scheduled for this morning, and hit its forecasted increase by 1.5%. It is likely that the EUR/USD pair will bounce back from early morning bearishness.
Traders should note that today the EUR will be greatly influenced by USD developments, as traders should also be advised to watch carefully over U.S data.
Yesterday was a volatile day for JPY pairs. Just like all the other major currencies, it was mainly affected by the holidays in the U.S and the U.K, and the lack of significant news for the other major currencies, which led to a very low volume in the market. As a result, the JPY kept a steady rate against the USD, the EUR and the GBP throughout the trading day.
The only data that came for the JPY yesterday was the Corporate Services Price Index, which rose by 0.5%, reflecting 17 straight month's of positive gains. The index indicates that transportation costs in Japan rose by 3.0%, and that real estate service fees rose by 1.5%.
Later on this week, a bundle of data is due from the Japanese economy. The yearly retail sales report will be published on Wednesday. The Core Consumer Price Index and the Industrial Production will see results on Thursday.
Today, the JPY is absent from the economic calendar, and the USD should be the main catalyst for JPY developments. Therefore, traders should look over U.S data with extra caution today.
The 4 hour chart shows that the bullish channel continues with strong momentum as the pair now floats around 1.5807. Oscillators show that the momentum is still bullish and a breach through 1.5830 will validate a bigger bullish move into the 1.5900 levels.
The RSI is also forming back into bullish formation and supports the general notion.
The Hourlies indicate that local bullish momentum is still healthy. However the daily chart is showing a strong bearish cross and the 4 hour chart is also slowly joining the bearish notion. Forex traders are advised to wait for a clearer bearish sign on the hourlies before entering the market.
The hourlies are still bullish as the Slow Stochastic shows no crosses and is floating at the 50 level. The daily chart has been giving mixed signals with no distinct market direction for the past 5 trading days. Going long with tight stops appears to be the preferable strategy.
The Bollinger Bands are tightening up on the daily chart, indicating the upcoming increased volatility. RSI and Momentum are still negatively sloped indicating some bearish movement today. Both daily and 4 hour chart are showing plenty of room for the bearish trend and a breach through 1.0200 will validate a bigger bearish move into the 1.0150 levels.
The Wild Card
There is still a bullish configuration on the 4 Hour chart, indicating that the momentum is still up. The RSI is floating above 60, which supports the notion that there is still room to run. This provides forex traders with a great opportunity to go long on a relatively solid uptrend.
|04:45||JPY||30-y Bond Auction||1.46|2.7||-||-|
|08:00||EUR||German Factory Orders||m/m||4.2%||-0.8%||-|
|13:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|13:00||GBP||Asset Purchase Facility||375B||375B||-|
|13:30||USD||Challenger Job Cuts||y/y||17.6%||-||-|
|13:45||EUR||Minimum Bid Rate||0.05%||0.05%||-|
|14:30||EUR||ECB Press Conference||-||-||-|
|14:30||USD||Revised Nonfarm Productivity||q/q||-1.8%||-2.2%||-|
|14:30||USD||Revised Unit Labor Costs||2.7%||3.1%||-|
|16:00||USD||FOMC Member Williams Speaks||-||-||-|
|16:30||USD||Natural Gas Storage||-||-||-|
|23:30||AUD||AIG Construction Index||45.9||-||-|