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Tuesday, 5 Aug 2008
USD Pulls To New Recent High Ahead Of Today's FOMC Meeting.
The EUR/USD pair approached a 6 week low hitting 1.5515, but failed to keep that momentum ahead of Federal Open Market Committee that is expected to deliver a statement, including the Federal Funds Interest Rate.
USD - Fed is Expected to Hold Fed-Funds Rate Steady.
Yesterday the greenback saw rising trends against its major currency counterparts; however it failed to appreciate substantially against the EUR. The oft-traded currency pair approached a 6 week low hitting 1.5515, but failed to keep that momentum. The GBP lost about 150 pips against the USD, as the pair fell to the level of 1.9599.
The USD's rally was supported by both positive data from the U.S economy and plummeting Oil prices that fell beneath $120 a barrel, a three-month low for the commodity. The Core Personal Consumption Expenditures Price Index, which measures the change in the price of goods and services purchased by consumers, excluding food and energy, rose by 0.3% in June, above the expected 0.2% rise. The U.S Consumer Spending for June also delivered better than expected figures, as the survey rose by 0.6%. Last were the U.S Factory Orders that rose by 1.7%, beating expectations for an 0.7% rise, driven once again by rising food and energy prices.
The USD kept a steady rate against the EUR, mainly because traders are waiting to see the interest rates decisions, which will be made by the Federal Reserve today and the European Central Bank on Thursday. After the recent gains that pushed the USD to a five week high against the EUR, traders are taking extra precaution on the pair, easing it down for a while.
As for today, the first significant news event release will be the Institute of Supply Management (ISM) Manufacturing Index that is expected to rise from 48.2 to 48.6. If the ISM numbers can rise above expansionary levels of 50 the dollar could see a big bullish spike. Later on, at 18:15 GMT, the market is likely to fluctuate greatly as the Federal Open Market Committee will deliver a statement, including the Federal Funds Rate. The interest rate is widely expected to remain at 2.00%, as no signs for a change were given. Any turn of events will make the Fed's announcement even more influential than usual, as a hawkish statement will most likely launch another bullish move for the greenback, and the EUR\USD pair might test new lows.
EUR - Monthly Retail Sales May Further Tumble the EUR.
Yesterday the EUR underwent bullish sessions against most of its major currency rivals. The EUR's most notable surge was against the JPY, as the pair rose by 140 pips to the level of 168.80.
Only two financial indicators were published from the Euro-zone yesterday. The Sentix Investor Confidence fell to -15.3 in August from -9.3 in July, dropping to its lowest level since July 2003, continuing a series of weak data arriving from the Euro-zone. European Producer Price Index changed momentum a bit as it rose by 0.9% in June compared to May, and went up by 8.0% from the same time in 2007, managing to pull the EUR up. Nevertheless, it appears that the EUR remained static against the USD mostly because traders only attributed secondary importance to yesterday's data, whereas most of the attention is focused on later on this week, when the European Central Bank will announce its updated interest rates.
Today, the most important indicator scheduled is the monthly Retail Sales that is forecasted by analysts to descend by 0.6%. The continuation of negative data from the Euro-zone will probably further weaken the EUR against the USD in the long-term. However today's most influential data on the pair will be the Fed's announcement regarding U.S interest rates, and traders have a great chance to benefit from a radical price movement that could take place soon after the announcement.
JPY - Descending Asian Stock Markets Drive the JPY Lower.
Yesterday was a day of falling trends for the JPY. The JPY sharply depreciated against the EUR and the USD, as it approached a 7-week low versus the greenback.
The sole indicator that was published from the Japanese economy yesterday was the yearly Monetary Base, which fell by 0.7% to 87.85 trillion yen in July from a year earlier. This was the first fall in two months, as it added to the JPY's recent downfall. Recent reports suggesting that Kuwait's Investment Authority plans to triple its investments in Japan to $48 billion in order to reduce the proportion of their dollar holdings were published. Such an investment should boost the Japanese economy, and strengthen the JPY.
Looking ahead to today, there is no significant data scheduled from the Japanese economy. Therefore, traders are advised to follow global developments in order to determine JPY direction. Special attention should be given to Oil Prices, as yesterday has proven - sinking oil prices tends to elevate the USD, and in turn run the JPY into bearish territory.
Crude Oil - Lower Demand on Commodities is Finally Easing Oil Prices.
Oil prices fell to as low as $120 a barrel during yesterday trading session as it became clear that Tropical Storm Edouard will avoid most of the offshore production facilities in the U.S. Gulf Coast as it approaches Texas.
Oil initially turned lower after the Commerce Department reported yesterday that the US consumer spending fell in June as shoppers dealt with higher prices for gasoline, food and other items. That bolstered analysts' arguments that a U.S. economic slowdown is forcing Americans to scale back on energy use. As a result the Crude Oil lost 3% during the intraday trading yesterday.
The 4 H and the daily charts indicate that there is still room for this pair to reach new lows, particularly after this pair breached the key 1.5580 support level yesterday. Both the RSI and momentum are negatively sloped indicating that this pair may continue its bearish rampage. However the hourlies indicate that we are in oversold territory, so it may be a good time to begin pairing off some of those short positions
The cable is in the middle of a very intensive downtrend that started in the middle of July and shows great momentum that on a bigger scale appears to have more room to run. In the shorter time frame a bullish cross on the 4 hour indicates that there might be a small correction before the bearish move resumes. Selling on highs appears to be preferable today.
On the daily chart the RSI is breaking the 50 mark and is indicating that this pair's bullish run has still got some steam in it. The 4 hour and the hourly charts also support that notion and this pair is now targeting the 108.30 level, once that is breached we could see even sharper upwards move.
This pair is still in the midst of a steady uptrend which is not yet showing any sign of leveling out. The RSI and Momentum are still positively sloped indicating that there is still plenty of steam left in this bullish move. Once this pair breaches the 1.0560 level it's likely to make another sharp break upwards.
The Wild Card
There is still a bearish configuration on the daily chart, indicating that the momentum is still down. The Slow Stochastic is floating around 50, which supports the notion that there is still room to run. In the shorter time frame there is a bullish cross forming on the hourleis indicates that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a currently bearish trend.
|23:50||JPY||M2 Money Stock||y/y||4.4%||4.4%||-|
|00:00||JPY||Monetary Policy Statement||*||*||*|
|00:00||JPY||BoJ Press Conference||*||*||*|
|00:00||GBP||10-y Bond Auction||2.73|1.8||*||-|
|00:01||GBP||BRC Retail Sales Monitor||y/y||3.9%||*||-|
|00:30||AUD||NAB Business Confidence||8||*||-|
|06:00||JPY||Prelim Machine Tool Orders||y/y||40.3%||*||-|
|07:00||EUR||German Trade Balance||18.5B||19.3B||-|
|10:00||GBP||Inflation Report Hearings||*||*||*|
|15:00||GBP||NIESR GDP Estimate||0.8%||*||-|
|23:30||AUD||Westpac Consumer Sentiment||-3.0%||*||-|