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Thursday, 9 Dec 2010
USD Poised to Extend Yesterday's Gains
The US dollar saw gains against most of its main currency rivals yesterday, as investors chose to focus their attention on the prospect that tax cuts will be extended in the US. The hope is that the tax cuts will help stabilize the struggling US economy. The dollar reacted positively to the news, and spiked against the yen. Whether the dollar can maintain its gains will largely depend on this week's US Unemployment Claims figure, set to be released later in the day.
USD - Dollar Continues to Make Gains on Yen
The recent news that US tax cuts will likely be extended gave investors renewed confidence in the struggling US economy. While the long term implications of the tax cut extension are not yet known, analysts are saying that short-term improvements in the economy are likely to occur.
In turn, the greenback continued to make impressive gains against the yen yesterday. The USD/JPY pair shot up some 70 pips throughout the day, before staging a minor correction in overnight trading. Currently the pair is trading around the 83.75 level.
In other news, the greenback corrected some of its recent gains against the euro in overnight trading, following the news that US Treasury yields have fallen. Since yesterday evening, the EUR/USD pair has steadily risen. Currently trading just over the 1.3300 level, it appears that there is still upward momentum for the pair.
Today, dollar movement will likely be determined by the US Unemployment Claims figure, set to be released at 13:30 GMT. Following last week's disappointing Non-Farm Employment Change figure, investors are looking for any evidence that the US employment situation is improving. Currently, analysts are forecasting a slight improvement in today's figure from last week. Should the predictions come true, the dollar may be able to extend its gains on the yen, while correcting its recent losses against the euro.
EUR - EUR Manages Gains despite Debt Concerns
Despite investor concerns regarding euro zone debt, the EUR managed to correct its losses against the US dollar in overnight trading, while extending its gains against the yen. The EUR/USD has gone up close to 70 pips in overnight trading, and is currently trading around the 1.3305 level. Meanwhile, the EUR/JPY has been moving up at a consistent pace for the last few days. In the last 24 hours, the pair has gone up some 80 pips, and is currently trading around the 111.50 level.
Analysts attribute the euro's gains to the new plan currently being implemented to tackle Irish debt. Still, traders are warned that these gains may be only temporary. The threat of a debt crisis in another euro zone country is very real. Should anything resembling the events in Ireland occur in another part of the euro zone, the currency is likely to tumble.
Today, traders will want to focus primarily on the British Official Bank Rate announcement, and subsequent Asset Purchasing Facility decision. While no change in the UK national interest rate is expected, investors will be watching for any surprise move from the Bank of England (BOE). Should rates remain the same, the euro may gain on the sterling in afternoon trading.
JPY - Yen Takes Losses across the Board
The yen continued to fall against its main currency rivals in overnight trading as investors turned to the dollar amid news that US tax cuts are likely to be extended. Japanese officials appear satisfied with the current trend the yen is taking, as it makes Japanese exports more attractive to foreigners. Assuming that this week's US Unemployment Claims come in better than last week's, as predicted, the JPY is likely to continue its downward spiral.
At the same time, should US Treasury yields drop, investors may start buying up the yen as a counterweight. Either way, traders will want to pay careful attention to any news out of the US today. Any negative rumors or data is likely to boost the JPY against the dollar.
Crude Oil - Crude Oil Inventories Decline 3.8M Barrels, Oil Price Lifted
Crude oil began to gain in value yesterday, following news that US inventories fell more than expected this week. The weekly crude oil inventories figure came in at -3.8 million barrels, after analysts predicted a decline of -1.3 million. Following the news, crude prices began to increase, and have since gone up over 100 pips. Currently oil is trading at 88.90.
Today, traders will want to pay attention to the US Unemployment Claims figure, set to be released at 13:30 GMT. Should the unemployment number come in above expectations, oil is likely to continue its bullish trend. Often times, investors turn to oil as an alternative investment when there is disappointing news out of the US.
The Stochastic (slow) on the 8-hour chart has formed a bullish cross, indicating that upward movement is likely to occur in the near future. That being said, most other technical indicators are currently in neutral territory. Traders may want to take a wait-and-see approach for this pair today.
The Relative Strength Index (RSI) on the 8-hour chart shows this pair trading in the over-bought territory, meaning a downward correction may take place. This theory is supported by the Stochastic (slow) on the daily chart, which has formed a bearish cross. Traders are advised to open short positions for this pair today.
The Stochastic (slow) on the 8-hour chart indicates that the pair is in the over-bought territory. Furthermore, the RSI on the 4-hour chart is currently around the 70 level, which typically means a downward correction could occur soon. Traders may want to go short in their positions today.
While the Stochastic (slow) has formed a bearish cross on the 8-hour chart, indicating that downward movement is possible, most other technical indicators are currently in neutral territory. Traders may want to wait for a clearer direction to present itself before opening positions with this pair today.
The Wild Card
The Williams Percent Range on the 4-hour chart is currently hovering right on the border of being in the over-sold territory. This usually means upward movement may occur. In addition, the Stochastic (slow) on the 8-hour chart has formed a bullish cross. Now may be a good time for forex traders to open long positions for the commodity at a great entry price.
|10:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.4%||12.6%|
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||0.4%|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||0.1%|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|