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Tuesday, 10 Jun 2008
US Trade Balance on Tap
Yesterday was an extremely bullish day for the greenback. The EUR\USD depreciated from 1.5824, down to 1.5584. The USD\JPY rose from 104.65, up to 106.31.
The main reason for the USD's rising trends was the hawkish speech delivered by New York Federal Reserve President Geithner last Tuesday. Geithner said that he would never take intervention or any other policy tool off the table, raising the chances that officials might step into the foreign exchange market to support the USD.
Furthermore, Pending Home Sales, an index of future home sales, rose unexpectedly in April by 6.3%, to the highest level since October 2007. This index is considered to be a leading indicator because it is based on contract signings that usually lead to actual sale closings one or two months after. To conclude the day, Federal Reserve Chairman Bernanke gave a speech, saying that not only does the 5.5% unemployment rate for May not signal the start of a recession, but the risk of one has actually dwindled. The questions surrounding whether the economy has entered a substantial downturn appears to have diminished over the past month or so.
On tap today, the U.S Trade Balance is scheduled at 12:30 GMT. The Trade Balance measures the difference in value between imported and exported goods and services, and is expected to show a deficit of $59.5 Billion, an increase from March's deficit of $58.2 Billion. Such an outcome should generate a bearish inclination for the USD.
Also today, both Dallas Fed President Fisher and Fed Governor Mishkin will deliver speeches, and clues regarding future monetary policy are expected.
Traders should take advantage of today and open new positions on USD pairs, as the market is expected to fluctuate greatly.
The EUR saw mixed results yesterday. The EUR\USD and the EUR\GBP underwent coherent bearish trends; however, the EUR\JPY showed great bullishness.
Yesterday, the German Trade Balance report demonstrated an 18.7B surplus for April, higher than March's 16.6B mark. The Sentix Investor confidence report, which measures investor confidence towards the Euro-zone, rose by 5.2 points from the previous mark last month. Also yesterday, European Central Bank President Jean-Claude Trichet delivered a speech, saying that a rate rise in July is not certain but is still very possible.
Today, a bundle of data is scheduled for the Euro-zone. The German Wholesale Price Index, which measures the rate of inflation experienced at the wholesale level, was expected to remain at 0.6%, but saw a substantial bump in the early morning of the European session to 1.4%. French Industrial Production is forecasted by analysts to rise by 0.3%, which should generate bullish behavior for the EUR, considering last month's 0.8% decrease. Also today, Italian Industrial Production is predicted to show a 0.2% decrease from last month, yet it should not have a large impact on the EUR.
Traders are also advised to follow the USD's developments carefully, as they could be crucial for mapping the EUR's direction today.
Yesterday, the JPY underwent bearish trends against most of its major currency counterparts. The JPY saw falling trends against the USD, the EUR, the GBP and the CHF.
Yesterday, Japan's Leading Index showed a rise to 92.8% in the month of April; however it missed market expectations to rise to 93.6%. The Japanese Economy Watchers Current Index, which measures the current mood of business that directly service consumers, fell to 32.1, after last month's 35.5 reading. Also, Japan's Core Machinery Orders rose by 5.5% in April from March, to 1.0 Trillion Yen. Machinery Orders rose 0.5% in April from the same period last year after falling 6.2% in March.
Today, a batch of data is expected for the Japanese economy. First, the Machine Tool Orders, which measures the total value of new orders placed with machine tool manufacturers, was released to a 1% rise to 1.4% for April. Later on in the day, at 23:50 GMT, 4 indicators will be published. The most vital one is Japan's Final quarterly GDP mark, which measures the change in the value of all goods and services produced by the economy. Analysts forecast it to rise by 0.9%. The other indicators are the Corporate Goods Price Index, the Current Account, and the Final GDP Price Index, yet they should have lesser influence over the JPY.
Traders should follow today's news with extra caution as they should generate higher volatility than usual for the JPY.
The pair is in the middle of a bearish corrective move which seems to have some more steam in it. It looks as if there isn't any bullish sentiment to indicate even the slightest corrective move, and the bearish steam appears to be blowing at full strength. It appears that going short still looks like the right choice today.
The Hourlies and the daily chart are showing that the pair does not have a distinct direction. The 4 hour chart indicates that the moderate bearish correction continues within the wide bearish channel which still has yet to be breached. The daily chart RSI is floating near the 50 level and the Slow Stochastic also does not deliver any specific signs. Forex traders are advised to wait for a clearer signs on the hourlies before entering the market.
There is a very accurate narrowing bullish channel on the daily chart, as the pair now floats near the bottom barrier of it. The Slow Stochastic on the hourlies and the dailies is indicating that the chances of a bearish breach are quite slim and that the bullish momentum still has steam in it. A failed bearish breach through the 107.00 level will probably unleash a fresh bullish move.
The hourlies and the daily charts show that the pair continues to float without a distinct trend. The flat channel continues on the daily chart while no significant breach has been seen yet. However, the 4 hour chart is showing fresh bullish momentum, and a possible corrective move towards 1.0400. Waiting for a clearer sign before entering the market might be the smart move today.
The Wild Card
There has been a strong breach through the bottom barrier of the channel which is forming on the daily chart. The 4 hour chart is showing that the bearish move has completed a full bar beyond the barrier, and the downtrend is now accumulating steam. The momentum is bearish again as indicated by all oscillators.
Forex traders have a great chance of swing into what appears to be a very strong technical pattern. The next target price might be 888.00.
|22:30||AUD||AIG Manufacturing Index||46.9||-||-|
|23:30||AUD||MI Inflation Gauge||m/m||0.0%||-||-|
|01:35||JPY||Final Manufacturing PMI||52.1||52.1||-|
|08:00||EUR||Spanish Unemployment Change||-64.4K||-32.4K||-|
|08:15||EUR||Spanish Manufacturing PMI||53.8||54.2||-|
|08:45||EUR||Italian Manufacturing PMI||48.4||49.3||-|
|09:00||EUR||Final Manufacturing PMI||51.0||51.0||-|
|13:30||USD||Core PCE Price Index||m/m||0.0%||0.0%||-|
|14:45||USD||Final Manufacturing PMI||53.7||54.1||-|
|15:00||USD||ISM Manufacturing PMI||55.5||54.9||-|
|15:00||USD||ISM Manufacturing Prices||38.5||40.1||-|