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Friday, 21 Aug 2009

USD to Go Volatile on U.S. Homes Sales and Bernanke Speech

The U.S. Dollar is expected to go volatile today on U.S. Homes Sales data and the speech by Federal Reserve Chairman Ben Bernanke at 14:00 GMT. Bernanke is expected to discuss the economic crisis and recovery. With regards to the home sales data, the figure is expected to rise to 5.03 million, up from the previous figure of 4.89 million. Forex traders should follow both of these events closely as they are set to determine the USD's main crosses for Friday's trading.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownnoupdowndown
Weekly Trendnodowndowndowndownup
Resistance1.43131.654494.521.07350.82940.8708
1.42811.651294.201.07060.82720.8686
1.42521.648093.891.06750.82490.8665
Support1.41891.642993.301.06160.82100.8624
1.41601.640192.991.05850.81890.8602
1.41281.636992.681.05570.81670.8581

Economic News

USD - Positive Economic Data Weighs in on Dollar

The Dollar declined versus most major counterparts throughout much of yesterday's trading on Thursday as U.S. equity markets rallied amid better-than-forecast data. Weighing further on the USD, the Philadelphia Fed reported that manufacturing in the region unexpectedly expanded this month for the first time in almost a year, a sign the U.S. economy is recovering. Furthermore, the Conference Board said the index of leading economic indicators rose 0.6% in July, its fourth consecutive monthly gain. The Dollar index traded at 78.331, down slightly from 78.485.

The Dollar may continue its decline today as the release of today's economic data may show sales of U.S. existing homes gained 2.1% last month, the highest since September 2008. An improvement in the U.S. housing market will further support risk appetite since the housing market crash was at the root of the current crisis.

Along with the Existing Home Sales report that will be released today at 14:00 GMT, traders should also follow Ben Bernanke's testimony, set to begin at 14:00 GMT as well, as it tends to cause great market volatility and may intensify the current bearish sentiment on the Dollar.

EUR - EUR Extends Gains as Equities Continue to Rebound

The EUR extended its gains against the British Pound ahead of a report today that is forecasted to show Europe's manufacturing and service industries contracted at a slower pace this month, adding to signs that the global recession is coming to an end.

The EUR traded at $1.4250 early this morning, from $1.4254 yesterday, and at 133.99 Yen from 134.26 Yen. Encouraging risk appetite further were recoveries in global equity markets, boosting demand for higher yielding currencies and commodities at the expense of the USD and JPY.

The French, German and Euro-Zone Manufacturing and Service data is expected to be released at 7:00 GMT, 7:30 GMT and 8:00 GMT respectively. With the recent recoveries in German and French GDPs, this data should provide an insight as to the sustainability of this recovery, and therefore have a major affect on the direction of the European currency.

JPY - Yen Boosted By a Drop in Asian Stocks

The JPY appreciated against the Dollar and Euro in today's early trading as Asian stocks dropped, boosting demand for Japan's currency as a refuge. The Yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive.

Japan's currency rose against all 16 major counterparts as Japan's Nikkei 225 Stock Average fell 0.7% and the MSCI Asia Pacific Index of regional shares lost 0.2%. The Yen traded to 93.59 per Dollar from 94.36 in New York yesterday. Japan's currency traded at 133.16 per EUR, up from 134.22. With no major news expected from Japan, movements in global equities will continue to dominate Yen sentiment for today.

Crude Oil - Crude Prices Fall Despite Global Optimism

Crude Oil finished trading at $72.14 a barrel yesterday, down $1.64, as investors felt that the commodity was overvalued. Therefore, they dropped the commodity, and put their money into even riskier assets. Traders dropped Crude for equities, as better than expected manufacturing data added to evidence the recession may be ending. Crude Oil prices also dropped yesterday, as investors realized it was overvalued, as prices soared over the previous 2 days.

In light of the continuous low demand, Oil prices have used equities to estimate the economy's progress and recovery. While Wednesday's equities rally was driven by the surprisingly low inventories, it does not appear to be the beginning of a trend, as only a sustained increase in demand can permanently bring down the inventory level, and there is still no sign for that. Therefore, if equities rise again today and the dollar weakens significantly, we may see Crude Oil prices rebound.

Technical News

EUR/USD

The hourly chart displays a price move that has originated at the lower border of the Bollinger Bands and has the potential to appreciate all the way to its upper border. Going long with tight stops may be the popular choice today.

GBP/USD

After dropping below the 1.6450 level this morning, the pair has continued its decline, creating an opportunity for traders to take advantage. The hourly chart shows the formation of a bullish cross on the Slow Stochastic Oscillator, indicating the potential for a violent breach. The pair is also trading in the oversold territory on the RSI, indicating the pair may be due for an upward correction.

USD/JPY

The pair is continuing its 10-day bearish trend with the daily chart's Slow Stochastic providing us with mixed signals. The oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today.

USD/CHF

The pair fell for the second day on Thursday, and the USD/CHF cross now stands at the 1.0654 level. The technical data seems to be showing misleading signs. On the one hand, the MACD, RSI and Stochastic Slow of the weekly chart support a bearish trend for today. On the other hand, the MACD of the 4-hour chart and Stochastic slow of the daily chart support a bullish reversal for today. Entering the pair when the signals are clearer seems to be the preferred strategy for today.

The Wild Card

Silver

Silver has experienced much bearishness in the past 2 weeks as it currently trades at the $13.74. The current bearish trend is expected to come to n end anytime soon, and a bullish correction may be in the making. This is supported by the RSI of the hourly and daily chart, and the Stochastic Slow of the hourly and daily chart. Entering the commodity when the upward breach occurs may turn out to pay off for forex traders today.

Current Time: 10/01 03:20 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/01
07:30AUD+ Commodity Prices y/y-11.5%*-1
08:15EUR+ Spanish Manufacturing PMI52.852.3-3
08:30CHF+ SVME PMI52.952.1-1
08:45EUR+ Italian Manufacturing PMI49.849.4-3
09:00EUR+ Final Manufacturing PMI50.550.5-1
09:30GBP+ Manufacturing PMI52.552.6-5
10:00EUR+ Final GDP q/q---1
13:15USD+ ADP Non-Farm Employment Change204K206K-5
14:45USD+ Final Manufacturing PMI57.958.0-1
15:00USD+ ISM Manufacturing PMI58.056.8-5
15:00USD+ Construction Spending m/m1.8%0.5%-1
15:00USD+ ISM Manufacturing Prices58.058.6-5
15:30USD+ Crude Oil Inventories-4.3M--3
00:50JPY+ Monetary Base y/y40.5%38.9%-1
10/02
01:00NZD+ ANZ Commodity Pricesm/m-3.3%*-1
01:00AUD+ HIA New Home Salesm/m-5.7%*-1
01:00EUR+ Spanish 10-y Bond Auction2.27|1.8*-1
01:00EUR+ French 10-y Bond Auction1.32|2.8*-1
02:30AUD+ Building Approvals m/m2.5%1.1%-5
02:30AUD+ Trade Balance-1.36B-0.78B-5
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