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Thursday, 10 Feb 2011
USD May Turn Bullish Today
Following yesterday's losses, the US dollar has the potential to stage a bullish correction today providing that this week's Unemployment Claims figure comes in as predicted. Analysts are currently forecasting a number of around 411K, which if true, would signal a further decline in unemployment in the US.
USD - Dollar Begins to Rebound in Asian Trading
Comments yesterday from Fed Chairman Bernanke sent the dollar plummeting against most of its main currency rivals, including the euro and yen. Bernanke voiced concerns regarding the high level of unemployment in the US, which investors interpreted as a sign that the Fed will continue with its stimulus package. The EUR/USD spiked well over 100 pips yesterday, peaking at just above the 1.3740 level. Meanwhile, the USD/JPY fell close to 40 pips, dropping as low as 82.18 during the evening session.
The dollar was able to stage a minor recovery in the overnight session, largely because riskier currencies like the euro lack strong fundamental news to boost them to new highs against the greenback. The EUR/USD fell over 20 pips, and is currently on its way to dropping below the psychologically significant 1.3700 level. The USD/JPY shot up some 25 pips last night, and is currently trading at 82.55.
Today, dollar traders will want to keep a close watch on the latest US Unemployment Claims figure, set to be released at 13:30 GMT. Given Bernanke's comments yesterday, today's figure is likely to carry more weight than usual in the marketplace.
Analysts are currently forecasting the number to come in around 411K, which if true, would represent a drop over last week. Barring any surprises, the positive employment data will likely lead to some gains for the dollar in the afternoon session.
EUR - Euro May Turn Bearish Today
The euro saw a bullish day yesterday following pessimistic comments from the US Fed Chairman regarding the current state of the US economic recovery. Against the dollar, the euro surged over 100 pips and was able to breach the psychologically significant 1.3700 barrier. The EUR/GBP moved up some 50 pips before staging a slight downward correction during the overnight session. In addition, the EUR/JPY has gone up close to 100 pips in the last 24 hours, and is not showing signs of a possible reversal.
Today, euro traders will want to pay attention to the fundamental news out of the UK and US. At 12:00 GMT, the UK will release its Official Bank Rate. Analysts are debating whether the MPC will raise national interest rates above their current level of 0.50%. If so, riskier currencies like the British pound and euro are likely to see strong upward movement. That being said, new unemployment claims in the US are expected to drop when the latest figure is released at 13:30 GMT. This could give the US dollar a boost against the euro in the afternoon session.
JPY - Yen Continues to Take Losses as Risk Taking Returns to Marketplace
The JPY took losses against virtually all of its main currency rivals yesterday, as speculation that the demand for Japanese exports may be weakening weighed down on the currency. The GBP/JPY moved up close to 70 pips yesterday, and peaked at just below the 133.00 level. Currently the pair is trading 132.80. The EUR/JPY continues to move up after gaining more than 100 pips in trading yesterday. The pair currently stands at 113.15.
Today, yen traders will want to pay attention to the major news out of the UK and US. Should the UK Monetary Policy Committee decide to leave national interest rates at their current levels, investors may revert back to safe haven currencies like the yen in mid-day trading. Furthermore, if the US reports a drop in the number of people seeking first time unemployment insurance, the yen is likely to see additional gains against the European currencies.
Crude Oil - Crude Down from Yesterday's Highs
Following yesterday's brief spike in the price of crude oil, the commodity has remained largely steady throughout the overnight session. Crude jumped as high as $88.14 a barrel yesterday, following the release of the US Crude Oil Inventories figure. Stockpiles in the US are smaller than what analysts had predicted, meaning that demand is up in the world's largest oil consuming nation.
That being said, the impact of the inventory figure proved to be short lived, and oil is currently trading at $86.75 a barrel. Today, traders will want to pay attention to the effect the US Unemployment Claims has on the dollar. If the dollar turns bullish in afternoon trading, expect crude to continue to drop throughout the day.
Technical data is providing mixed signals for this pair. The 8-hour chart's Williams Percent Range is currently in the overbought region. At the same time, all indicators on the daily chart are in neutral territory and are not showing a specific direction for the pair. Traders may want to take wait and see approach today, as a clearer picture is likely to present itself later on.
The Relative Strength Index on the daily chart is currently approaching overbought territory in a sign that a downward correction is likely to occur. Furthermore, the MACD on the same chart has formed a bearish cross. Going short with tight stops may be the preferred strategy today.
The Stochastic Slow on the 8-hour chart has formed a bearish cross, meaning that downward movement is likely to occur today. Furthermore, the 4-hour chart's Williams Percent Range is currently in overbought territory. Traders are advised to go short in their positions today.
The Williams Percent Range on the daily chart is in overbought territory and angling downward, in a clear sign that downward movement is likely to occur. The Relative Strength Index on the same chart is approaching the overbought zone. Going short is likely to be the wise choice today.
The Wild Card
The Relative Strength Index on the daily chart is approaching overbought territory in a clear sign that downward pressure exists for this pair. Furthermore, the both the MACD and Williams Percent Range on the 8-hour chart indicate that bearish movement is likely to occur today. Now may be a great time for forex traders to open up sell position for this pair before the downward breach occurs.
|00:30||JPY||Tokyo Core CPI||y/y||2.5%||2.3%||-|
|00:30||JPY||National Core CPI||y/y||3.0%||2.9%||-|
|00:50||JPY||Prelim Industrial Production||m/m||2.9%||-0.4%||-|
|01:00||NZD||ANZ Business Confidence||26.5||-||-|
|01:05||GBP||GfK Consumer Confidence||-2||-1||-|
|01:30||AUD||Private Sector Credit||m/m||0.5%||0.5%||-|
|08:00||EUR||German Retail Sales||m/m||-3.2%||1.7%||-|
|08:45||EUR||French Consumer Spending||m/m||-0.8%||0.2%||-|
|09:00||CHF||KOF Economic Barometer||99.8||100.1||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.6%||12.6%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.5%||12.4%||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.4%||0.3%||-|
|11:00||EUR||Italian Prelim CPI||m/m||0.1%||-0.3%||-|