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Friday, 9 May 2008
USD Trade Balance on Tap
Yesterday, the greenback lost its newly acquired bullish momentum and returned to the 1.54 range against the EUR. Unemployment claims in the U.S. this month beat out the forecast of 370K and were measured at 365K, 18K less than March. The USD was on a bearish momentum against most of its currency rivals throughout the trading day, and while it would seem like the positive Unemployment Claims would raise the USD's value, the USD dropped even further after the figure was announced. Monthly Wholesale Inventories also beat our forecasts and a -0.1% change was announced. The negative change actually is a good sign for the American economy because it shows that wholesalers order more goods from manufacturers when they have depleted inventories. Despite the economic news that seemed encouraging for the greenback, the USD lost ground to most of its rivals, specifically the EUR following European Central Bank President, Jean-Claude Trichet's hawkish speech at the ECB Governing Council meeting. As the European Central Bank disappointed markets by providing no hints that it might ease interest rates any time soon in the single currency zone, the USD lost all the value it gained on Wednesday against the EUR.
Looking at the big picture, it seems that the surprising fall in Wholesale Inventories and the dropping amount of unemployed Americans are good signs for the USD's future. As the US moves further away from the credit crisis, it seems like the American economy is rebounding quite well. While there has been a lot of helpful economic data recently the U.S. economy isn't catching a break with oil prices placing a huge tax on the US economy. The American economy will have to face the rising Crude Oil price as the "Black Gold" is trading at its all-time high.
Today, all eyes will be on the Trade Balance which will be announced at 12:30 GMT. Economists predict the value to be -61.4B which is a 0.9B improvement and it seems like the USD will see its trend's direction based on the Trade Balance's value.
Following two straight days of losses, the EUR saw a bullish momentum, most notably against the USD as the ECB kept the Minimum Bid Rate at 4.00% and seemed to reject the idea of easing interest rates any time soon in the single currency zone. ECB President, Jean-Claude Trichet stated that the decision to leave rates unchanged was unanimous and that euro zone inflation is expected to 'remain high over a rather protracted period of time' before gradually declining again. In his hawkish speech, Trichet also said that economic data continue to point to moderate but ongoing GDP growth in the first half of 2008 and the euro zone's economic fundamentals remain sound. Following his words, the EUR rose above 1.54 and was traded at that range throughout the trading day. The Bank of England kept its Official Bank Rate unchanged as well.
The ECB has actively assisted the EUR in the forex market with a bundle of successive hawkish statements and decisions. The German Trade Balance value was 16.7B, lower than forecasts, as it reiterated that the E.U. economy still has to prove tat its consumer behavior can pick up. Although Trichet assured traders that there shouldn't be any inflationary concerns, trades should be aware of an obvious slowdown in the Euro-Zone economy.
Today, the only EU announcement that is on tap is the French Industrial Production rate which is forecasted to be negative at a rate of -0.4%. It seems like the decline in output produced by France is part of the overall European Zone trend which hasn't been too bright recently.
Yesterday, JPY crosses saw neutral results as the daily trend was very calm. With a halt in any Japanese news this week due to the Golden Holidays week, the Asian powerhouse has been subject to external news and movement in the markets. The Japanese Yen has been reacting to investment houses' orders since no Japanese economic news have been released this week. With inflationary pressures at nearly a decade high, many investors believe that the Bank of Japan and its new leadership will be forced to raise the lending rate. Market makers have begun to notice indicators that hint for such future change coming within the next year.
Today, the first Japanese economic figure of the week will be announced as overall economic health will be predicted by the Leading Index. Following last month's 54.5%, a significantly lower value of 20.0% is expected to be released today. The value forecasted by experts combined with the very high price of Crude Oil could cause the Yen to see a bearish trend.
After bottoming out at the 1.5300 level, the pair is showing signs of a corrective move. The Slow Stochastic indication on the 4 hour chart is showing no crosses and the RSI suggests the constitution of the correction. It appears that a test of the key Fibonacci level 1.5500 might be quite imminent.
The strong channel formation on the daily chart is still intact, as the cable now floats in the middle of it. The momentum is quite bearish as clearly seen by the 4 hour Slow Stochastic chart. The daily oscillators are showing that a test of the bottom barrier of the channel might occur before the weekend. Going short might be preferable today.
There has been a breach through the bottom barrier of the very accurate bullish channel on the daily chart. The breach has not been validated yet, but if the pair will close today's trading beneath the barrier of the channel, we might see a very strong bearish move corrective move. Going short with tight stops might be the way to go today.
The daily chart is showing that there is still some strength in the bullish channel. The hourly's are indicating that the local bearish corrective move is losing power, and the cross on the Slow Stochastic should point toward the continuation of the daily bullish trend. It appears that going long might be a good choice today.
The Wild Card
There is a very interesting flat channel forming on the 4 hour chart as the pair now made its first validated breach. The break should resolve in a very sharp bearish corrective move with high momentum. Forex traders have a great opportunity to join the bearish trend at a very early stage.
|19:30||USD||FOMC Member Lockhart Speaks||-||-||-|
|01:30||AUD||AIG Construction Index||50.1||-||-|
|07:45||CHF||SECO Consumer Climate||-6||-11||-|
|08:00||EUR||German Factory Orders||m/m||-0.9%||1.6%||-|
|08:45||EUR||French Industrial Production||m/m||0.0%||0.1%||-|
|08:45||EUR||French Trade Balance||-3.4B||-3.5B||-|
|09:00||CHF||Foreign Currency Reserves||522.3B||-||-|
|10:15||EUR||Spanish 10-y Bond Auction||-||-||-|
|13:30||USD||Challenger Job Cuts||y/y||6.4%||-||-|
|16:30||USD||Natural Gas Storage||81B||-||-|