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Friday, 7 Aug 2009
U.S Non-Farm employment Change Set to Determine USD Volatility
The U.S. Dollar is expected to go extremely volatile today on the release of the ever so important U.S. Non-Farm Employment Change at 12:30 GMT. The other releases that are expected to drive trading between the USD and its main crosses today are the British PPI Input at 08:30 GMT, the U.S. Unemployment Rate at 12:30 GMT, and the Canadian Unemployment Rate at 11:00 GMT. Forex traders are advised to open their USD positions now, prior to the release of the vital economic data from the leading economies.
USD - Dollar Climbs on Increased Risk Aversion
The U.S Dollar rose broadly yesterday against the GBP and EUR, due to uncertainty about the global economic outlook, and a renewed bout of risk aversion ahead of a key government report on the U.S. labor market due today. By yesterday's close, the USD rose against the GBP, pushing the oft-traded currency pair to 1.6769. The Dollar experienced similar behavior against the EUR, and closed at 1.4360.
A leading indicator released yesterday from the U.S was the Unemployment Claims report. Data showed a drop in U.S. weekly jobless claims failed to support expectations that the labor market and the economy were stabilizing. The report showed claims fell by 38000 to 550000 last week, the fifth straight time claims were under 600000, after being above that level since January.
The other factor that led to the bullish Dollar yesterday was that U.S stocks fell, which boosted demand for the USD as a safe-haven currency. Moreover, renewed demand for the Dollar comes after a sharp drop earlier in the week, when the greenback hit multi-month lows versus the EUR, as investors favored foreign currencies and other riskier assets such as equities.
Looking ahead today, the news event that may have a very large impact on the Dollar and its main currency pairs in today's trading is the Non-Farm Employment Change at around 12:30 GMT. This report is very important as it is likely to impact Dollar volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.
EUR - EUR Falls against the USD on Interest Rate Decision
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Pound Sterling during yesterday's trading session, to trade above 0.8560 amid a broad sell-off in the GBP. This was largely owed to the Bank of England (BoE) increasing quantitative easing to ₤175 billion from ₤125 billion. The EUR did see bearishness as well, as it lost over 50 pips against the USD, and closed at the 143.60 level.
A leading indicator released yesterday was the EUR Minimum Bid Rate. The European Central Bank (ECB) left Interest Rates at a record low of 1%, as it tries to get credit flowing again to strengthen an economy that may return to growth this quarter. Some reports show the outlook is brightening for the Euro-Zone. Economic confidence rose to an eight-month high in July, and the contraction in the region's manufacturing and service industries has slowed. In Germany, Europe's largest economy, Factory Orders posted their biggest gain in two years in June.
As for today, the most important economic indicator scheduled to be released from the Euro-Zone is the German Industrial Production at 10:00 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term. Traders are also advised to follow the Non-Farm Employment Change figures coming out of the U.S at 12:30 GMT, as this result may set the EUR's main currency pairs for the day.
JPY - JPY Set to Move on Key Economic Data
The Yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 137 level. The JPY experienced bullishness against the GBP as it jumped around 250 points to close at the 159.86. This behavior comes about as exports improve and manufacturers boost production. However, deflation may escalate as households, whose spending accounts for more than half of the nation's GDP, delay purchases on the expectation that goods will get cheaper, restraining a recovery in the world's second-largest economy.
The JPY's trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially the U.S. Non-Farm Employment Change at 12:30. 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.
Crude Oil - Oil Prices Stabilize Near $72
Crude Oil ended yesterday's trading below $72 as equities declined and the Dollar strengthened, undermining the need to use commodities as an alternative investment. Crude dropped to an intra-day low of $70.24 a barrel before rebounding to the settlement level of 71.55, which was little changed compared with the previous session.
Oil prices were pressured by the weaker equity markets and the strong Dollar yesterday, as the USD strengthened against the EUR and GBP, limiting the demand for Crude Oil as an alternative investment. Today, the U.S monthly Non-Farm Employment report will likely determine Crude's next moves, with any mildly positive elements within the data is likely to keep the Crude price in an upwards direction.
The EUR/USD cross experienced much bearishness in yesterday's trading. The pair is now trading at the 1.4355, and the technical indicators signal that there is much bearishness that may take place in this pair today. The daily and weekly chart's Slow Stochastic shows that the pair is in the overbought territory, and a downward move may be expected for today. This is also supported by the chart's 4-hour MACD. Going short with tight stops may turn out to pay off today.
The pair went through much bearishness in yesterday's trading, despite much bullishness in the week prior to this. It seems that the pair may be oversold, according to the chart's main oscillators. The 4-hour Stochastic Slow signals a bullish correction for today. This is also backed up by the chart's 1-hour MACD and Slow Stochastic. Entering this trend at an early stage may turn out to pay off in today's trading.
The USD/JPY pair has been range trading for the past several days between the 94.30 and 95.60 levels. The chart's oscillators seem to be showing mixed signals. On one hand, the daily chart's MACD indicates an upward trend for today. On the other hand, the hourly chart's MACD indicate that there may be a bearish trend in today trading. Entering the pair when the signals are clearer may turn out to be a wise choice today.
The pair currently stands at the 1.0646 level after experiencing much bullishness in the past 2 days. It seems that this trend may be under threat, as the chart's 4-hour RSI signals that the cross has run out of steam, and that a bearish correction is imminent. Today's possible bearish correction is also supported by the hourly chart's MACD. Going short with tight stops may turn out to pay off as the trading week comes to a close.
The Wild Card
Crude Oil has experienced much bullishness in the past week-and-a-half of trading, as it now stands at the $71.78 level. The daily chart's MACD and Bollinger Bands signal that there may be some bullishness left in the pair for the coming day. The chart's weekly Bollinger Bands and MACD also support this view. Going long with tight stops may turn out to pay off today for forex traders.
|10:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.4%||12.6%|
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||0.4%|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||0.1%|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|