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Monday, 3 Jan 2011
USD Starts Off New Year on a High Note
The US dollar has made gains against most of its main currency rivals as we start off the first trading week of 2011. Since markets opened, the EUR/USD pair is down 90 pips and is currently trading below the 1.3300 level. The USD/JPY is up close to 40 pips, and is trading around the 81.30 level. Analysts forecast this trend to continue ahead of the US ISM Manufacturing PMI, set to be released later today.
USD - Dollar Expected to Maintain Gains throughout the Day
The greenback made gains virtually across the board in overnight trading, as analysts are predicting positive US news to benefit the dollar throughout the week. In addition to riskier currencies like the euro and UK pound, the dollar has also been able to move up against safe-havens, like the yen and Swiss Franc. The USD/CHF pair is currently up almost 50 pips since markets opened for the week, and currently stands around the 0.9365 level.
Today, the sole piece of significant news scheduled to be released is the US ISM Manufacturing PMI. Most analysts are forecasting a result of around 57.1 for the PMI, which if true, would represent a significant increase over last month. This would be yet another sign that the US is on its way toward economic recovery, and may help the dollar maintain its bullish trend.
Turning to the rest of the week, a batch of significant US data is set to be released, including the all-important Non-Farm Employment Change figure on Friday. In addition, traders will want to pay attention to Wednesday's ADP Non-Farm Employment Change figure, as well as the official Unemployment Rate, also set to be released on Friday. Early predictions are calling for positive data on all fronts, including a possible lowering of the US unemployment rate to 9.7%. If true, investor confidence in the US economy is likely to grow, and may cause the dollar to spike.
EUR - Positive US Data Causes EUR to Turn Bearish
The euro turned increasingly bearish as last week's trading session came to an end, and the currency took losses against the US dollar as well as the Japanese yen. Analysts attributed the losses to positive US data, particularly from the labor sector, which boosted investor confidence in the American economy, and subsequently the greenback.
Since markets opened for the week, the euro has maintained its downward momentum. With a bank holiday scheduled in France, Germany and Italy today, the currency's movement will likely be decided by the result of the US ISM Manufacturing PMI. With most experts predicting a positive figure, it is unlikely that the 16-nation common currency will rebound in trading today.
Turning to the rest of the week, there are many significant economic indicators set to be released from the euro-zone. These include the German Unemployment Change on Tuesday and the Retail Sales figure on Thursday. Still, data from the US, particularly employment figures, will likely play a larger role in determining the direction of the euro. Positive US data will likely have a negative impact on the European currency.
JPY - Safe-Haven Yen Moves Up against European Currencies
The Japanese yen was able to make gains against both the euro and UK pound in overnight trading, as a lack of news has decreased investor's appetites for riskier currencies. The EUR/JPY has moved down 50 pips since markets opened for the week, while the GBP/JPY dropped 80 pips before staging a slight correction.
The yen did not gain on all of its currency rivals today. The USD/JPY pair has gone up close to 40 pips since markets opened, largely due to positive US employment data released last week.
Today, a bank holiday in Japan means that yen values will likely be decided by the US ISM Manufacturing PMI. A positive figure will likely lead to further losses for the yen against the US dollar. At the same time, should the PMI come in as expected, the European currencies will likely take further losses against the JPY.
OIL - Crude Remains Bullish To Start Off the Week
The price of crude oil is holding strong, and is now approaching the $92.00 a barrel mark. That being said, analysts are torn with regards to how long the commodity can maintain its current price. On the one hand, positive US data released last week has created optimism in the global economic recovery, which typically boosts the commodity. On the other hand, warm weather is expected in much of the US for the next few days, which could lessen demand for oil after the recent blizzards.
This week, traders will want to pay attention to the US Crude Oil Inventories figure set to be released on Thursday. US inventories have steadily been increasing over the last few weeks. Should the trend continue oil may start to move down, as it would be a sign that demand is slowing down.
Most technical data places this pair in neutral territory. While most indicators display the downward trend currently taking place, none point to a possible upward correction as of yet. Traders are advised to take a wait and see approach for this pair, as a clearer picture may present itself later on.
Technical data is not providing a significant amount of information on this pair. Most indicators show the pair trading in the neutral zone, with no clear direction at this time. Still, traders will want to keep an eye on the 2-hour chart's Stochastic Slow, as it appears a bullish cross may form. If so, an upward correction may take place.
Technical data show this pair currently in oversold territory, indicating an upward correction may take place in the near future. Both the Relative Strength Index and Williams Percent Range on the 8-hour chart are in the oversold region. Traders are advised to go long in their positions today.
The Williams Percent Range on the daily chart shows the pair in the oversold region, and points to a possible upward correction. This theory is supported by the Relative Strength Index on the 8-hour chart. Traders are advised to go long with tight stops today.
The Wild Card
The Stochastic Slow on the daily chart has formed a bearish cross, indicating that a downward correction may take place today. Furthermore, both the Relative Strength Index and Williams Percent Range on the 8-hour chart are in overbought territory. Forex traders will likely want to go short in their positions, as downward movement is likely to occur today.