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Wednesday, 29 Sep 2010
USD Tumbles Against Rivals Following Disappointing News
A disappointing US consumer confidence report released yesterday, caused the greenback to take heavy losses against virtually all of its main currency rivals. The dollar appears to have stabilized in overnight trading, but only after it hit a more than 2-year low against the Swiss franc. Analysts are doubtful about whether the USD can bounce back from these losses in the near future.
USD - Greenback Falls Among Rumors of Fed Intervention
A worse than expected consumer confidence report released yesterday has sparked rumors that the Fed will take definitive steps in order to help stimulate the ailing US economy. The CB Consumer Confidence report came in at 48.5, well below the predicted figure of 52.5. The steps, which are commonly referred to as quantitative easing, have yet to be implemented. That being said, even the possibility of a new Fed stimulus plan has sent the dollar down.
USD/CHF dropped to its lowest level since March of 2008. Currently the pair is trading steadily around the 0.9760 level. Meanwhile, the greenback has hit a new low against the yen since the Bank of Japan moved in to devalue the JPY earlier this month. USD/JPY currently stands at 83.87, down over 30 pips from yesterday afternoon.
Today, most analysts are forecasting the dollar's bearish trend to continue. While the Swiss KOF Economic Barometer, set to be released later today, is forecasted to come in below last month's levels, the USD is unlikely to see major gains as a result. As long as investors feel that quantitative easing is still a plausible move by the Fed, the dollar will likely remain low, making riskier currencies more attractive.
EUR - EUR Makes Big Gains in Dramatic Trading Day
Rumors that the Fed will take new measures to boost the struggling US economy sent riskier currencies soaring during trading yesterday, with the euro making some of the most dramatic gains. With the value of the US dollar low, and still dropping, higher yielding currencies remain attractive to investors looking for short term gains in the currency market.
The EUR/USD pair approached the 1.3600 level yesterday, soaring almost 200 pips in the span of a few hours. The pair has since only staged a marginal correction, and is currently trading around the 1.3580 level. Against the yen, the euro saw gains of over 100 pips during the same time frame yesterday. The EUR/JPY pair currently remains steady around the 113.85 level.
Today, analysts are forecasting further gains for the euro, as a lack of significant global economic news will likely keep dollar prices low. Traders will want to watch out for any surprise announcements from the Fed regarding the falling greenback. Any news about a fresh US stimulus plan could send the euro up once again.
JPY - Yen Continues to Make Gains on the US Dollar
The USD/JPY pair dropped well below the 84.00 level yesterday, marking a fresh low for the pair since the Bank of Japan (BoJ) intervened to devalue the yen earlier this month. While the main catalyst for the drop was yesterday's disappointing US consumer confidence report, the dollar has been falling consistently against the yen over the past few weeks. Further gains by the yen are likely to fuel investor concerns that the BoJ will step in once again to drive the Japanese currency down. Japan's economy is largely export based, meaning a weak yen is in the country's best interests.
Barring any major moves from the BoJ today, the yen will likely continue to make gains on the dollar, especially if the rumors of a Fed stimulus package persist. At the same time, the JPY took substantial losses against the euro and Swiss franc yesterday. Should investor risk taking continue to dominate market sentiment, the yen will likely remain low against its riskier counterparts.
Crude Oil - Oil Sees Heavy Fluctuations Ahead of Inventories Report
Over the last few days, the price of crude oil has been bouncing back and forth between around $75.50 a barrel and $77.00 a barrel. While prices have been somewhat influenced by the value of the US dollar, the commodity has not been able to establish a clear trend. In yesterday's trading alone, oil jumped around 150 pips, followed by a steep drop of around 70 pips, and finally by another upward correction.
This trend may change later today when the latest US Crude Oil Inventory figure is released. Analysts are forecasting a drop in US inventories from last week. Should today's figure come in at the predicted level of -0.4M, oil may restart the bullish trend it experienced throughout last week. At the same time, traders will want to pay attention. If the figure comes in above the predicted level, prices may fall in afternoon trading.
Most technical indicators show this pair in overbought territory, meaning a downward correction is likely to take place. The RSI on the 8-hour chart is right on the border of the upper resistance line, while the Stochastic Slow on the 4-hour chart is very close to forming a bearish cross. Traders may want to go short on this pair today.
After a heavy trading day yesterday, most technical indicators show this pair in neutral territory. These include the Williams Percent Range on the 4-hour chart, and the Stochastic Slow on the 8-hour chart. Traders may want to take a wait and see approach with this pair today, as a clearer picture is likely to present itself later on.
The Relative Strength Index and Williams Percent Range on both the 4 and 8-hour charts are showing this pair well into oversold territory. Typically this means that a bullish correction is likely to occur in the very near future. Traders may want to go long with tight stops in their positions today.
After a steep drop yesterday, technical indicators show that this pair may be poised for an upward correction. The Williams Percent Range on the 4-hour chart and the MACD on the 8-hour chart both show the pair in oversold territory. Going long may be the preferred strategy today.
The Wild Card
Dow Jones Industrials
After making some fairly significant gains yesterday, technical indicators are showing that the Dow Jones may be due for a downward correction. The Stochastic Slow on the 4-hour chart is close to forming a bearish cross, while the Williams Percent Range on the 8-hour chart is well into overbought territory. CFD traders may want to go short in their positions today.
|01:00||AUD||CB Leading Index||m/m||0.4%||-||-|
|02:30||AUD||RBA Financial Stability Review||*||*||*|
|02:35||JPY||Flash Manufacturing PMI||52.2||52.5||-|
|07:00||CHF||UBS Consumption Indicator||1.66||-||-|
|09:00||EUR||German Ifo Business Climate||106.3||105.9||-|
|14:00||CHF||SNB Quarterly Bulletin||*||*||*|
|14:00||EUR||Belgian NBB Business Climate||-7.3||-7.1||-|
|15:00||USD||New Home Sales||412K||432K||-|
|15:30||USD||Crude Oil Inventories||3.7M||3.7%||-|