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Tuesday, 17 Nov 2009
U.S. Producer Price Index (PPI) to Be the Driver of USD Trading Today
The Producer Price Index (PPI) is expected to be the main driver of USD trading for Tuesday. The other major releases from the U.S. that forex traders are advised to follow are the TIC Long-Term Purchases, Core PPI and Industrial Production.
USD - Dollar Tumbles on All Fronts
The U.S. Dollar fell against all of its major currency pairs yesterday. This was in response to traders dropping the USD, as stocks climbed after U.S. Retail Sales rose more than predicted, and Asian governments pledged to uphold their economic stimulus spending. In October, Retail Sales rose 1.4 %, vs. forecasts of a 0.9 % rise. The equity market rally sent the Standard & Poor's 500 index to a 13-month high, as it rose 1.2% to over 1,105. What is impressive is that according to the U.S. Commerce Department, Retail Sales climbed from a 2.3 % dip in September.
The Dollar fell to a 15- month low against currency pairs such as the Pound. This is as the pair rose by as much as 165 pips to the 1.6876 level. The USD/JPY cross also dropped significantly yesterday by 52 pips to the 89.04 mark. The EUR/USD pair rose by 20 pips to the 1.4985 level. In addition, the greenback lost ground against the Canadian Dollar as the trading day dragged on. The U.S. Dollar Index, which tracks the currency vs. America's largest trading partners, fell by 0.7 % to 74.834, after reaching 74.679. This was the lowest level since August 2008.
Looking ahead to today, there is much exciting economic news that is set to be published from the U.S. The most significant of these will be the PPI and Core PPI at 13:30 GMT, the TIC Long-Term Purchases at 14:00 GMT and the Industrial Production publication at 14:15 GMT. All of these releases are set to have a very high impact on both the volatility and strength of the USD. The forex market is expected to go extremely volatile before, during and after these publications. Therefore, it is advised that you open your positions in the Dollar whilst the opportunity is available to make big returns today.
EUR - GBP Climbs as Optimism Kicks In
The British currency made significant gains during Tuesday's trading day against its most traded currency counterparts. This was in part sparked by the optimism coming out of the British property market. Britain's 2 largest property companies, British Land and Land Securities, are expected to announce higher than expected gains in the coming days. This helped produce much optimism in the British currency, which is very important, as the British economy is highly dependant on the British property market.
The British economy made significant gains against its major currency counterparts. The GBP/USD cross finished yesterday's trading higher by a whopping 117 pips at the 1.6828 level. The British currency made significant inroads into the EUR, as the pair fell by 53 pips to the 0.8900 level. With regards to the EUR/USD pair, it rose by 20 pips to the 1.4985 level. Much of this behavior was due to a global stock market rally that was boosted by impressive U.S. Retail Sales figures. As was seen, riskier currencies such as the Pound were the main benefactors of this.
Today, there is scheduled to be much market moving data that will be released from both Britain and the Euro-Zone. From Britain, there will be the CPI and RPI at 09:30 GMT. From the Euro-Zone, there will be the publication of the Trade Balance figures at 10:00 GMT. Better-than-expected results are likely to boost both the GBP and EUR significantly. Also, it would be wise for traders to open large positions in GBP and EUR crosses as soon as possible. Doing so would ensure maximum market participation for Tuesday's trading.
JPY - Yen Soars against the Dollar
The Yen soared against the Dollar in Monday's trading, due to the GDP (Gross Domestic Product) of Japan (the second biggest economy) growing by 4.8 % in the 3rd quarter. This was the second consecutive increase since the start of the nation's deepest postwar recession. The Yen also jumped due to Asian leaders promising to maintain the economic stimulus packages during a meeting in Singapore yesterday.
The Yen rose by 52 pips against the USD to close at the 89.04 level. The JPY also made impressive gains vs. the European currency. It seems that we are seeing evidence that the economic stimulus has helped Japan exit the recent recession. It is expected that the demand in Japan's economy will eventually pick up. As a result, the Japanese economy and the Yen will continue to build on recent gains.
OIL - Crude Oil Rises by Most in 6 Weeks
Crude Oil rose by the most in 6-weeks on a weak USD and a stock market rally in the U.S. As a result, this boosted investor's confidence that energy demand will increase significantly in the coming months. Crude Oil closed at $79.46 from an opening of $77.22. Crude was helped as traders bought-up the commodity as an alternative investment, due to the mass sell-off of the USD.
It seems that traders are optimistic about the U.S. and global economy. This has really helped Crude prices. However, the commodity may only rise significantly above $80, if we see more impressive data and significantly higher demand too. It seems that the Organization of Oil Petroleum Exporting Countries (OPEC) is happy with the current prices levels. They expect prices to rise in the very near future.
The hourly chart is showing a bullish cross has formed on the pair's Slow Stochastic Oscillator, indicating the potential for an upward price movement. As the pair fluctuates, it has been trading in the lower half of its Bollinger Bands. It appears the 20 day moving average is a significant resistance level. Traders may want to use the middle line as a level to take profits.
The GBP/USD is displaying bearish signals. The 4-hour chart has a bearish cross which has formed on the Slow Stochastic Oscillator, indicating the potential for a downward price movement. This is supported by the Relative Strength Index, floating in the overbought zone, lending further support for potential price depreciation. Traders may want to be short on this pair today.
The long term downward sloping trend continues today as the pair has fallen for the last 3 consecutive trading days. Per the hourly chart, the pair has been experiencing range trading between the price levels of 89.15 and 89.00. For the traders that recognize this established zone, significant profits can be made by placing stops and limits at these price levels.
The hourly chart shows the pair has crossed back into its upper Bollinger Band after an earlier breakout. A bearish cross has formed on the Slow Stochastic Oscillator, indicating the potential for a downward price movement. Traders may want to catch the downward fluctuation that is in the same direction as the long term trend.
The Wild Card
Crude Oil is displaying significant bearish signals after yesterday's failed breach of the $80 price level. The 4-hour chart has the pair trading in the overbought zone on the pair's Relative Strength Index, indicating a possible move lower. The chart also shows a bearish cross has formed on the Slow Stochastic Oscillator that may support this downward move. Forex and commodity traders may want to be short on Crude Oil today as a significant price move may be in the making.
|EUR||French Bank Holiday||-||-||-|
|EUR||German Bank Holiday||-||-||-|
|07:00||JPY||BoJ Monthly Report||-||-||-|
|17:00||USD||FOMC Member Fisher Speaks||-||-||-|