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Wednesday, 25 Feb 2009
USD Stabilizes as Obama Proclaims America Will Recover
Addressing Congress yesterday, President Barack Obama made an effort to boost confidence in the economy by stating that America could recover and emerge from this crisis stronger than ever. His recent stimulus plan, he says, is meant to preserve or create at least 3 million jobs and increase infrastructure spending, but the amount of stimulus money will likely need to be increased in the near future. Meanwhile, the USD has been stabilizing as a result of positive news, and the anticipation of even better news expected today from the housing sector.
USD - Dollar Fundamentals May Generate High Volatility Today
The greenback completed yesterday's trading session with mixed results versus the major currencies. The USD fell against the EUR yesterday, pushing the oft-traded currency pair to 1.2866. The dollar experienced similar behavior against the CHF as the pair dropped from 116.70 to 115.80 by day's end. The USD did see some bullishness as well as it gained over 150 points against the JPY and closed at 96.70.
The most influential economic data coming from the U.S. yesterday was the consumer confidence report. Consumer confidence hit a record low in February as Americans feared an already deep recession was likely to get even worse. The impact of the financial crisis over the last several months has clearly taken a toll on consumer confidence. In assessing current conditions, consumers rated the labor market and business conditions much less favorably. President Barack Obama is trying to mend the breach in confidence with a stimulus plan that he says will save or create more than 3 million jobs, cut taxes and boost infrastructure spending.
USD trading will be interesting today as a number of important economic data is expected to be released. Similar to yesterday, the news will start at 15:00 GMT with a series of economic indicators being released starting with Existing Home Sales and Crude Oil Inventories. Surprisingly, almost all of these releases are expected to be higher than their previous figures meaning the USD could show relatively high levels of bullishness today. Traders should stay close to the market as there is a strong chance to capitalize on the fluctuations which will likely follow these releases.
EUR - EUR Strengthening from Global Economic Weakness
The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The EUR gained about 150 points versus the USD during yesterday's trading session, and closed at 1.2866.
German business confidence slipped in February, with a grim economic situation weighing on sentiment even as a government stimulus plan helped invigorate firms' outlook for the future. The Ifo institute's monthly index declined to 82.6 points in February from 83 last month. This wiped out the slight gain made in January, which followed seven consecutive months of decline and defied economists' predictions that the index would remain static or rise slightly.
Germany's economy, Europe's biggest, went into recession last fall as the global economic crisis sapped demand for its exports. The recession deepened in the fourth quarter, when the economy shrank by 2.1%.
Looking ahead to today, the most important financial indicator scheduled to be released from Europe is Germany's Final GDP. Analysts are forecasting this figure to be unchanged from its previous reading. Traders will be paying close attention to today's announcement, as a stronger than expected result may continue to bolster the EUR.
JPY - Japanese Economy Faces Severe Depression
The Japanese Yen saw a bearish trading session yesterday, losing ground against all of its currency crosses. The JPY fell against the USD after several days of recovery, while the EUR/JPY cross also rose to around 1.2443. The only economic events out of Japan yesterday was Trade balance; a little changed from forecasts as volatility was kept to a minimum
Japan's exports plunged by a record in January, as recessions in the U.S. and Europe smothered demand for the country's cars. The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Prime Minister Taro Aso is struggling to get approval from the opposition-led upper house to spend 10 trillion yen to aid companies and households, whose sentiment is near a record low.
There are no economic data releases expected from Japanese economy today; however there will be a nice amount of data from the U.S, which will affect the Yen's major counterparts. Traders might look for further bearishness for the JPY.
Oil - OPEC Producers asked to Lower Crude Oil Output
Crude Oil prices rose again yesterday as the U.S. stock market advanced, signaling that fuel usage in the world's biggest energy-consuming country may rebound. Moreover, the Organization of Petroleum Exporting Countries (OPEC) may begin to cut output by 3.8% a day in February in order to stabilize prices.
However, traders should be eyeing news of key U.S. economic indicators, including a government report on Crude Oil Inventories due today. Worries that weakened international economic growth will depress Oil demand remains a key dampening influence on Oil prices. If the global economic condition deteriorates more aggressively, Crude Oil prices may extend their decline faster than expected.
A pennant formation appears to be forming on the 4-hour and daily charts, signifying that a continuation of the recent uptrend may occur and push this pair higher in the near future. The weekly Momentum oscillator also shows the direction of this pair has begun to change course. Waiting for the breach and then placing long positions might be a wise strategy.
The price appears to have just entered the over-bought territory on the hourly chart's RSI, indicating a downward correction may occur shortly. The Bollinger Bands on the daily chart also appear to be tightening in anticipation of an impending volatile price movement. Going short with tight stops might be the right choice today.
The price of this pair currently floats in the over-bought territory on the RSI of the 4-hour and daily charts, signaling strong downward pressure. A bearish cross appears to have just formed on the 4-hour chart's Slow Stochastic as well, supporting the notion that a downward correction is imminent. Going short might be the right choice today.
This pair appears to be consolidating at the 1.1620 price level and is expected to make a breach in the near future. With recent indications of downward pressure, this pair may turn the corner in the near future and enter a downward correction. Going short with tight stops appears to be the right choice today.
The Wild Card
The price of this pair appears to be floating in the over-bought territory on the 4-hour chart's RSI, signaling a downward correction may take place soon. The recent bearish cross on the 4-hour chart's Slow Stochastic supports this notion. With a bearish cross beginning to form on the daily chart's Slow Stochastic, forex traders may be confident with the idea that a downward correction is imminent and capture profits by entering short positions now and riding out the impending movement.
|15:30||USD||Crude Oil Inventories||-7.5M||-||-|
|22:00||NZD||Official Cash Rate||3.25%||3.25%||-|
|22:00||NZD||RBNZ Rate Statement||*||*||*|
|02:35||JPY||Flash Manufacturing PMI||51.5||-||-|
|07:00||EUR||Spanish Unemployment Rate||25.9%||-||-|
|08:00||EUR||French Flash Manufacturing PMI||48.2||-||-|
|08:00||EUR||French Flash Services PMI||48.2||-||-|
|08:30||EUR||German Flash Manufacturing PMI||52.0||-||-|
|08:30||EUR||German Flash Services PMI||54.6||-||-|
|09:00||EUR||Flash Manufacturing PMI||51.8||-||-|
|09:00||EUR||Flash Services PMI||52.8||-||-|
|09:00||EUR||Italian Retail Sales||m/m||0.4%||-||-|
|14:45||USD||Flash Manufacturing PMI||57.3||-||-|