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Thursday, 7 Aug 2008
USD Extends Gains As Oil Drops.
Yesterday, the USD had a strong trading day supported by a bullish trend against its most rivaled currencies. The greenback's positive momentum occurred thanks to yet another day of falling oil prices and renewed views in the market that the U.S. economy is showing some signs of recovery
USD - Unemployment Claims and Pending Home Sales on Tap.
Yesterday, the USD had a strong trading day supported by a bullish trend against its most rivaled currencies. The greenback's positive momentum occurred thanks to yet another day of falling oil prices and renewed views in the market that the U.S. economy is showing some signs of recovery a day after the Federal Reserve maintained interest rates at the same level. Some of the more notable currencies to fall against the greenback were the euro, which fell to a seven week low of $1.5398, its lowest intraday level since June 16. Against the JPY the USD hit a seven-month high at 109.39, its highest value since January.
On Tuesday after the Federal Reserve held its benchmark federal funds rate steady at 2% and signaled in an announcement that there is no rush to raise borrowing costs, many analysts perceived that the real reason on this decision was more based on worries about economic growth rather than on inflationary pressures. But certainly as a result of the there looks to be a renewed environment for risk appetite, propitiating investors to seek refuge in "carry trading".
Today the US economy will provide some significant market making news. Traders must follow the Unemployment Claims report, one of the most influential USD indicators, is forecasted by analysts to show a decrease of 28k jobless individuals, from 448K last week. At 2:00GMT we have the Pending Home Sales, which is forecasted to decrease by 1.0%. Such results should outcome provide a volatile session; traders should follow today's events with extra caution.
EUR - Will the EUR Bears Stay In The Game After The ECB Rate Announcement?
Yesterday the EUR saw mixed results against its major currency counterparts. It saw bearish trends against the USD and rose vs. the JPY. The EUR also fell against the GBP due to big expectations facing the BoE interest rate decision on Thursday. Demand for the 15 nation's currency fell when a disappointing report showed that German manufacturing orders for June dropped 2.9% from an expected rise of 0.5%.
Recent EUR data suggests that the Euro-Zone economy is getting close to a situation of global downturn, as demand from abroad is collapsing mainly in Europe's biggest economy, Germany. Behavior can be most closely associated with basic competitiveness from the global market. This could put the ECB in a compromising position, with signs of slowing growth in the Euro-Zone economy they will be forced to cut interest rates, despite surging inflation.
A batch of economic releases and announcements are expected for the EUR today. Following the release of the German Trade Balance and the French Trade Balance, traders await Italian Industrial Production as well as the German Industrial Production. This important indicator is forecasted to increase 0.8%, up from last month's drop of 2.4%. Later we expect the ECB meeting about the rate decision where no changes are predicted over the 4.25% Interest Rate. The EUR might finally see some signs of strengthening for the first time since the beginning of the week when ECB President Claude Trichet is likely to make some pretty hawkish statements.
JPY - Yen Provides Mixed Results.
Japan's currency for the most part lost strength yesterday versus the major currencies. The JPY underwent falling trends against the USD and the EUR as investors buoyed carry trades versus the Asian currency.
Yesterday's local news from Japan did little to move the Asian currency, as we saw Japan's composite index of leading economic indicators fall 1.7 points to 91.2 in June. This indicator measures the volume of economic activity by aggregating the percentage changes in a selected series of data. Also yesterday the Japanese machine order figures fell 2.6%, the first fall in three months, giving even more stress to the idea that the world's second-largest economy is now slipping into a recession.
Today, the JPY will be absent from the economic calendar, traders should keep watching carefully for news arriving from the U.S and the Euro-zone, as they will be the main factors in the JPY progress for today.
Oil - Falling Fuel Consumption Adds to Depreciating Oil Prices.
Oil prices slightly dropped below $118 a barrel yesterday, $30 below their record high as traders weighed a second weekly fall in gasoline supplies against an unexpected climb in U.S. Crude Oil Inventories - the first in 3 weeks. Fed also contributed to the latest drop in Oil prices, expressing beliefs that high energy prices are eating into demand. Light Crude for September delivery finished yesterday's session down 59 cents at $118.58 a barrel on the New York Mercantile Exchange.
As fuel consumption in the U.S is consistently lowering as opposed to the same time at the previous year, expressing weak demands, the USD is finally showing signs of strengthening, giving traders less and less motives to invest in Oil.
Oil market traders are paying close attention to see if whether the Crude will fall below $117, a key resistance level expected to trigger a rash of technical selling by computers programmed to dump oil contracts once prices fall below a certain threshold.
There is a very distinct bearish channel forming on the daily chart, as the pair is now floating in the middle of it. All oscillators are giving bearish signals, suggesting that the bearish move will probably continue. Going short might be the right choice today.
The bearish momentum continues with full steam, and yesterday the cable breached the 1.9480 level. The daily chart shows that the pair is still floating beneath the Bollinger Bands, indicating the continuation of the bearish move. Going short may be a good strategy.
The intensive bullish trend is growing stronger as the pair crossed the 109.50 level yesterday. All oscillators on the daily chart are pointing up, implying further bullish momentum. Next price target might be 110.15.
The pair is continuing to show coherent bullish moves, as yesterday it breached the key Fibonacci level of 1.0600. A fresh bullish cross on the one hour chart's Slow Stochastic may signify another development in the rising trend. Going long appears to be preferable today.
The Wild Card
The downtrend is growing stronger, as Silver seems ready to test new lows. The 4 hour chart is still giving bearish signals, and next price target might be 16.00.
This may be a great opportunity for
forex traders to join a very promising trend.