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Tuesday, 15 Apr 2008
U.S PPI On Tap
The dollar responded yesterday to Sunday's opening session by recovering against most of its major currency rivals. What was interesting to see was the small recovery, which was made, despite a day of positive economic figures. At the opening of the market this week the EUR/USD pair opened 150 pip below its closing point on Friday, but the dollar was not able to sustain the momentum created mainly by the G-7 Meetings. Instead, the pair raced back to its Friday mark at just above 1.58, and is now trading near 1.5860.
Yesterday, as the US and European markets came back to liquidity the remarks by G-7 nations at their annual meeting and a basket of US economic data allowed the dollar some breathing room. The G-7 expressed their concern in regards to the overall state of currencies across the world, created in most part due to interest rate movements, mostly out of the US. The cause for concern toward the dollar sent investors on the hunt to buy the greenback, which helped it form a bullish trend.
Yesterday, we saw the release of several key US news events, namely Core Retail Sales. The figure, which measures overall retail sales (excluding automobiles), saw a 0.1% rise from its previous result, which did help bring some confidence back to the dollar as it saw positive activity in the Forex market. In addition, Retail Sales saw a 0.2% rise as well, but was offset some what by another month in rising Business Inventories. On any other day, the dollar should have seen more substantial gains, but the overall concern over the state of the US economy has kept investors skeptical of any real change in the dollar.
Look ahead to today, we have a batch of very important US data. We expect the release of the Empire State Business Conditions Index that measures the general business conditions of manufacturers in New York State. It can be used as a precursor to National Manufacturing numbers. The figure is expected to be negative, shedding almost 5 points of its previous mark. Also we await the 12:30 GMT release of PPI, which measures inflation in the US. The result should see a 0.6% boost since last month. Finally expect TIC Net Long Term Transactions to come back with a slight drop since last month. Overall these events should move the dollar up if they return with as forecasted positive results.
After the initial hit of Sunday's opening to the market, which saw such a drop in EUR/USD, the Euro recovered nicely throughout the late Asian/early European Trading session. This time it can be said, that positive Euro-Zone data as well as the still weary dollar investor contributed to such movement. Yesterday, saw the release of Industrial Production numbers from the Euro-Zone, which saw positive gains for yet another month. We also heard remarks from the hawkish President of the European Central Bank (ECB) Jean-Claude Trichet. Trichet continued to note the steady growth from the major EU economies as the 15-Nation currency continues to strengthen in the long term.
Today we can expect to see economic data released from both France and Germany. 9:30 GMT will see the release of French CPI figures, which are forecasted to return with 0.5% increases from last month. Also expected is ZEW Economic Sentiment indices from Germany as well as the whole of the Euro-Zone. Both figures will improve slightly but still show that there is some negative sentiment regarding the overall outlook of the Euro-Zone economy.
We should expect the EUR to remain consistent, as it could see small drops against the dollar, but should remain in bullish trends throughout most of the market.
Risk behavior was characterized with the JPY market yesterday as positive US economic data finished its 8 days bullish momentum since the Tool Orders report and the Core Machinery Orders release in Japan on April 9th. In the first hours of the trading session, the JPY added 0.9% to its value almost reaching the psychological level of 100 JPY to one USD. However, the JPY depreciated later due the US positive economic data release and the pair back to be traded above the level of 101.00.
At yesterday's Monetary Policy Meeting Minutes, the BoJ members reiterated the need to pay close attention to increased downside risks in Japan as a result of the intensifying slowdown in the U.S. and lingering turbulence on global financial markets. Japan's economy is the most sensitive economy in the industrial world, and is mainly affected by the Asian economics. The high Yen prices effected and will continue to affect the country's exports, which is the second largest exporter in the world. Traders should pay attention to the BoJ behavior in the short term as it will try to avoid the country from entering a sharp local recession while the other industrial world economies seems to start passing the credit crisis slowly.
There is no important data release expected from Japan today, traders should follow March PPI release from the US at 14:30 GMT.
The pair has been going through choppy sessions with no distinct direction for the past seven trading days. Several attempts to breach through the 1.5900 level failed, and the pair is consolidating around 1.5830. The 4 hour chart is showing signals of local bullish momentum, as the Slow Stochastic have a positive slope. Going long with tight stops could be a good strategy today.
The bearish flag formation on the daily chart is still valid, as no major breaches occurred. The momentum is still very bearish as pointed by the daily RSI. Forex traders should wait for an additional break through the 1.9600 level to validate the next sharp bearish move.
After bottoming at 100.00, the pair now shows a relatively volatile price movement with moderate bullish momentum. The daily chart is showing a double doji formation with very tight Bollinger bands which indicate an upcoming break. Traders are advised to wait for the move and swing.
The pair has been range trading for a while now, as no clear trend direction is in sight. The daily chart is showing mixed signals and the 4 hour chart is showing moderate bearish movement. Traders are advised to stay out of that one today.
The Wild Card
There is a very strong bullish trend, as the slope of the uptrend is very sharp. Crude Oil has performed a very important breach through the key resistance of 111.70. The bullish break is now validated which provides forex traders with a great opportunity to swing in a very strong and healthy trend.
|01:50||JPY||Prelim Industrial Production||m/m||1.1%||-||-|
|02:30||AUD||MI Inflation Gauge||m/m||0.2%||-||-|
|03:00||AUD||HIA New Home Sales||m/m||0.5%||-||-|
|03:00||NZD||ANZ Business Confidence||-15.3||-||-|
|03:30||AUD||Company Operating Profits||q/q||0.2%||-||-|
|03:30||AUD||Private Sector Credit||m/m||0.4%||-||-|
|09:00||CHF||KOF Economic Barometer||99.8||-||-|
|10:00||EUR||Italian Retail Sales||m/m||-0.1%||-||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.2%||-||-|
|11:00||EUR||Italian Prelim CPI||m/m||-0.1%||-||-|