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Thursday, 29 Sep 2011
U.S. Pending Home Sales to Set the Level for the USD Today
Today, traders should pay close attention to the release of the U.S. Pending Home Sales report. This indicator always provides for extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 14:00 GMT.
USD - Dollar Drops on Renewed Risk Appetite
The U.S dollar drifted lower against most of its major currencie on Wednesday as riskier assets remained vulnerable to doubts over the ability of European policy makers to stem a debt crisis that threatens to trigger a global recession. By yesterday's close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.3650. The Dollar experienced similar behavior against the CAD and closed at 1.0230.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains.
Today's Pending Home Sales release is expected to have a strong impact on the U.S currency. Any result could be a surprise, and the Dollar could go either way as a result. In any case, traders are unsure how the market will react to today's data. A weak report could feed risk aversion, boost Treasuries and actually aid the U.S Dollar. Then again, a better than expected result might be seen as a sign of relative U.S. economic strength, and lift the Dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the Dollar's expense.
EUR - EUR Moves Up against Safe Havens
The EUR rose for the third straight day against the dollar on Wednesday on cautious optimism Greece's lenders will allocate the bailout funds necessary for it to avoid a near-term default. The 16-nation currency extended gains versus the USD on Wednesday, to trade above $1.3650 amid a broad sell-off in the dollar. The EUR experienced similar behavior against the GBP as the pair rose from 0.8670 to 0.8730 by days end.
While the euro briefly turned negative against the dollar as U.S. stocks fell, the euro was supported also by data showing inflation in Germany ticked up, which should ease pressure on the European Central Bank to lower rates.
Fears of near-term Greece default and its impact on Europe's banking system is largely behind the euro's 5.2% slide against the dollar this month.
Looking ahead today, the main news event that may have a very large impact on the EUR and its main currency pairs in today's trading is the German Unemployment Change around 7:55 GMT. This report is very important as likely to Impact the EUR 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.
JPY - Yen Sees Mixed Results Yesterday
The Japanese Yen completed yesterday's trading session with mixed results versus the major currencies. The JPY fell against the EUR yesterday, pushing the oft-traded currency pair to 104.15. The JPY was broadly unchanged vs. the USD yesterday and closed its trading session at around the 76.50 level. The JPY did see some bullishness as well as it gained 50 points against the NZD and closed at around 59.80.
Household Spending and the Prelim Industrial Production are the sole news event on tap from Japan today and will likely have little effect on the market as it released at 23:30 and 23:50 GMT respectively. Forex traders invested in JPY related crosses should stay tuned to stock market movement today for indications on positions.
Crude Oil - Crude Oil Decline on Economic Concern
Crude oil prices fell to $81.80 a barrel on Wednesday as investor concerns about Europe's attempts to solve its sovereign debt problems helped pulled oil prices back after a more than $4 rally the previous session.
Greece's lenders are sending a team to Athens to inspect a government austerity plan they want implemented in exchange for aid, while Germany suggested a new bailout may have to be renegotiated
As for today, traders should pay attention to the U.S Pending Home Sales report scheduled, as it tends to have a large impact on Crude Oil's prices recently, especially for the short-term.
It seems as though there is steam to the pair's recent bullish turn. A breach of the lower Bollinger Band is evident on the weekly chart with a bullish cross evident on the Slow Stochastic. Entering a long position may be advised for the day.
The recent bullish turn for the pair may continue today as well as supported by the weekly Slow Stochastic chart and Bollinger Bands which show an imminent bullish correction. Going long with tight stops may turn out to pay off today.
The pair has been range-trading for a while now, with no specific direction. The Weekly chart's Relative Strength Index shows the pair floating near the lower boarder indicating some upward movement may be possible. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The pair's recent bearish turn is likely to continue today as well. a bearish cross is seen in the weekly chart's slow stochastic with both the daily and weekly Relative Strength index showing the pair floating near the upper boarder. Going short with tight stops appears to be preferable strategy.
The Wild Card
This pair's recent rally has finally pushed its price into the over-bought territory on the daily chart's RSI. Furthermore, a bearish cross is imminent on the daily chart's Slow Stochastic pointing to a possible downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.