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Friday, 13 Nov 2009
U.S. Trade Balance Data to Set the Pace of the Dollar Today
The Dollar rate today is set to be highly determined by the publication of the U.S. Trade Balance at 13:30 GMT. Other U.S. data will also play a pivotal role in the forex market today, such as the Import Prices at 13:30 GMT and the Prelim UoM Consumer Sentiment at 14:55 GMT. It's also recommended that you follow the EUR Flash GDP results at 10:00 GMT. All the data mentioned will help determine the outcome of the USD and EUR's man crosses later today.
USD - Dollar Rises on Geithner Comments
The Dollar broke its recent trend yesterday, as the greenback strengthened against the EUR. Calls by Pacific nations for the Dollar to appreciate and comments by Treasury Secretary Timothy Geithner helped send the Dollar significantly higher. Geithner remarked that the federal government may require less borrowing than was initially anticipated to help alleviate the financial system. Also comments coming from the Asia-Pacific Economic Cooperation group were Dollar positive.
The EUR/USD rate fell sharply to its lowest level in a week, trading as low as 1.4821. The last time the pair was at this level was the previous week when the U.S. released the Non-Farm Payrolls. The pair ended Thursday's trading down at 1.4859, from an opening price of 1.4989. The pair was down 0.8% for the day.
Today traders will look at the key U.S. Trade Balance numbers which are set to be released at 13:30 GMT. The data measures the difference in value between imported and exported goods and services for the previous month. This data is directly used in the valuing of currencies. The recent weakness of the Dollar may help reduce the value of the trade balance. If the outcome is less than the expected -$31.8B, we may see the EUR/USD continue its fall below the 1.4750 level.
EUR - EUR Falls with Equity Markets
Trading of the EUR/USD continues to track the level of risk in the market. As traders feel the opportunity to trade more on risk, the EUR/USD rate begins to rise. The opposite of this theory sides with a decrease of risk taking during the trading day. Traders pile into the Dollar as financial uncertainty creeps in and risk taking evaporates. This is also seen in the stock market. As the assumption grows of a recovering global economy, stocks are sent higher. When financial data fails to satisfy investor's expectations, the stock market falls. Yesterday the Dow Jones Industrial Average was down 0.91%.
The EUR was influenced very little yesterday after industrial production in the European-Zone rose 0.3% for the month of September. The forecast for the economic indicator was expected to rise by 0.5%. Despite the negative outcome, the EUR/USD reacted mostly from negative equity markets.
Trading for the EUR/USD pair may continue to be pushed by movements of the equity markets. Traders should typically keep the values of equities in mind as the EUR/USD does see an affect from the performance of equities. The pair is currently trading near the 1.4870 mark. We can expect a potential trading range of the pair between 1.4960 and 1.4810 today.
JPY - Trade Policy on Tap with Obama in Asia
Traders are following the visit of President Barack Obama to Asian nations both today and this weekend. Any hint that he is supporting a strong Dollar policy could be beneficial to the USD/JPY cross. The president will be stopping in Japan, China, Singapore, and Korea, as he will meet with other world leaders. Traders will also be following any potential policy shifts over this weekend's Asia-Pacific Economic Cooperation meeting.
Yesterday the USD/JPY traded higher, breaking the 90.50 resistance level, but failed to hold its gains. The pair eventually settled at the 90.26 mark, up from 89.78. As for today, it would be wise choice for forex traders to follow the key data releases from the U.S. and the Euro-Zone. The results of these will help determine the level of the JPY's key crosses.
Crude Oil - Crude Falls as the Dollar Recovers
Crude Oil prices plummeted 3.7% yesterday, as U.S. data presented a lower demand and an increase in imports which raised the level of Crude Oil Inventories. A stronger Dollar also helped to accelerate the price decline in Crude Oil. Crude Oil finished the day down at $76.32 from an opening price of $79.29. This was as Crude Oil stocks rose by 1.8million barrels over the previous week. The increase was over 1 million barrels higher than market forecasts.
A stronger Dollar also helped to reduce the price of Crude. The typical relationship between Crude Oil and the Dollar has Crude Oil falling when the Dollar rises. The range trading between the levels of $78-$80 we have seen this past week was broken yesterday. Perhaps today the price may rebound back to the lower level of this range near $78.25 to close out this week's trading.
The EUR/USD pair experienced much bearishness yesterday, and now stands at the 1.4870 level. The chart's oscillators seem to be showing misleading signals. On the one hand, the MACD of the weekly chart signals that the pair may make a bearish move for today. On the other hand, the recently formed bearish cross on the 4-hour chart indicates that a bearish move for the pair may be imminent today. Entering the pair when the signals are clearer seems to be the wise choice for today.
The pair has been range trading between the 1.6510 and 1.6800 levels in the past few days. The RSI of the hourly chart shows that the cross is floating in the overbought territory, signaling that we may see a downward move for the pair in the coming hours. Entering the pair when the downward breach occurs may turn out to bring big returns today.
The pair has been range trading for a while now, with no specific direction. The daily chart's Slow Stochastic is providing us with mixed signals. The 4-hour chart does not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The bullish trend is loosing its steam, and the pair seems to consolidate around the 1.0160 level. The 4-hour chart's Slow Stochastic is showing a fresh bearish cross, suggesting that a downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be the preferable strategy.
The Wild Card
Crude Oil dropped significantly yesterday and it is currently trading around $76.80 per barrel. However, there is a bullish cross on the 4-hour chart's Slow Stochastic, suggesting that the recent downward trend is loosing steam and that a bullish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.