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Friday, 1 Aug 2008
USD Up Adead of the Non-farm Employment Data.
Today will be a very active trading day for the USD as there are a lot of news announcements expected from the U.S. The first major economic news event will be the Non-farm Employment Change...
USD - Nonfarm Employment Change on Tap.
Yesterday the green back saw bearish trends against most of its major counterparts following a batch of weaker than expected news from the U.S. The USD retreated from its position of a one month high and was traded as low as 1.5701 vs. the EUR. Against the JPY, the USD fell 0.3% to 107.75 from a high of 108.38 in overnight trading. However, the greenback regained most of it earlier losses and rebounded during the late U.S. trading session, backed by positive data on the Chicago-area business activity which reported a growth in July of 50.8 while forecasts expected a lower value. Another determinant that supported the USD's recovery was a decline of more than $2 in Crude Oil futures.
The early retreat of the USD from its recent momentum over the previous days was triggered by disappointing data of the GDP which came out at 1.9%, compared to a previous rise of 2.4%, causing expectations of a reduction pro of the interest rate increases this year by the Federal Reserve. The results called the attention of the market, raising the alarm of how healthy the main economy of the world is.
Today will be a very active trading day for the USD as there are a lot of news announcements expected from the U.S. The first major economic news event will be the ADP Non-farm Employment Change with an expected loss of 75K jobs from 62K in the last month. We will also see the release of the Unemployment Rate with a slight increase to 5.6% from 5.5% in the last month, and the ISM Manufacturing Index which measures the activity level, new orders, employment and supplier deliveries of purchasing managers in the services sector, and is being forecasted to see a reduction from 50.2 to 49.4. All readings are forecasted to be lower than their previous results and should hurt the USD's recent momentum from last night.
EUR - Volatile Trading Leads to Major Sell-off for the EUR.
The EUR rallied vs. the USD yesterday as the cross tested trading over the 1.57 range. Disappointing data from the U.S., as inflation in the Euro Z rise to a record of 4.1% contributed in a great manner to support the EUR. Against the JPY the Euro was at 168.56, rising from 168.28. While the ECB is setting a goal to lower the interest rate to 2%, the recent hike of the inflation rate to 4.1% is causing a dilemma for the, showing that the outlook that the interest rate will be lowered might be wrong, and could be kept at 4.25% for the rest of the year.
Despite the initial rally, the EUR lost grounds and retreated after published reports quoting unnamed sources at the European Central Bank indicating that interest rates in the Euro zone may have reached a ceiling, hurting the euro as consequence.
Looking ahead, the most important economic news to be released today from the Euro market will be the German Retails Sales, a strong sign for domestic behavior in the zone's largest economy, with a projected decrease to -0.5% from 0.5%. If the predictions will be correct, this datum should cause the Euro to incur more losses. The other release will be the Manufacturing Purchasing Manager's Index (PMI), which measures the activity level of purchasing managers in the manufacturing sector. Traders should be focused on the German Retails Sales along with USD movements which will determinate EUR developments for today.
JPY - Bearish JPY Expected.
The Japanese Yen saw mixed trends versus its rival currency pairs as each cross was greatly affected by its local news, while the JPY did not offer its own trend. The Average Cash Earnings result on yesterday came in -0.6%, which is 1.2% less than the previous publication. The only other indicators expected was the Housing Starts, which as leading indicator of economic health showed a fall of 16.7% on building construction in June.
Today is expected to be a quiet news day from Japan as there are no releases expected. The Yen's trends will be affected by its currency pairs' rallies. As it seems like both the USD and EUR are expecting much volatility today, their crosses with the JPY will see that same volatility caused by them. Traders should keep a close look on the news coming from the US and Euro-Zone as both will be the deciding factors in the Yen's movement.
Crude Oil - Weakening U.S. Economy lowers the U.S. Demand for Fuel.
Yesterday was a very bearish trading day for the "Black Gold" as traders are concerned that global consumption is falling amid slowing economic growth. Although the bad news releases hurt the USD, which would cause the Crude Oil prices to rise, they actually impacted the Crude Oil in the other direction as it seems that the weakening U.S. economy will lower the U.S. demand for fuel.
Further sparking this demand worry, the world's second-biggest energy consumer, China, saw its manufacturing decrease for the first time since 2005. Crude Oil futures for September fell as much to $123.22 a barrel on the New York Mercantile Exchange extending the biggest monthly decline since 2004. Analysts are expecting further bearishness in Crude Oil prices as Tetsu Emori, a fund manager at Astmax Co. in Tokyo said that, ``I don't think we have seen the bottom of oil prices yet. Oil refiners don't want crude oil because demand for fuels is down
After dipping sharply for the last couple of days, this pair manages to recover slightly yesterday. This cross will once again target the 1.5600 as all indications are still bearish today. If this level is breached we may see another sharper move upwards
The RSI and Momentum on the daily chart are negatively sloped indicating that this pair still has steam left in its bearish movement. However the 4 hour chart is slightly bullish, so the preferred short term strategy today will be to buy on a dip as the daily movement should still be bearish
There is a very distinct bearish channel forming on the daily chart, as the pair now floats at the middle of it. All oscillators are showing bearish momentum, and the 4 hour chart's Bollinger Bands are getting tighter which indicate an additional upcoming downwards move. The next target price of 107.00 appears to be valid
The pair has breached through the Fibonacci key level of 1.0310, and all oscillators on the 4 hours chart are indicating further bullish movement. The hourlies Bollinger Bands are showing that the price has crossed its upper border, signaling that the current trend should continue, as the pair's new target price might be 1.0550
The Wild Card
The very accurate bullish channel has been breached, and gold is now in the middle of its bearish corrective journey. All oscillators on the daily chart are indicating that gold prices should further drop. Forex traders have a great opportunity to enter a very promising bearish movement.
|10:30||AUD||AIG Construction Index||54.4||-||-|
|11:15||GBP||Autumn Forecast Statement||*||*||*|
|12:00||GBP||Asset Purchase Facility||375B||375B||-|
|12:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|12:30||USD||Challenger Job Cuts||y/y||-4.2%||*||-|
|12:54||EUR||Minimum Bid Rate||0.25%||0.25%||-|
|13:30||EUR||ECB Press Conference||*||*||*|
|13:30||USD||Prelim GDP Price Index||q/q||1.9%||1.9%||-|
|15:00||USD||Natural Gas Storage||-13B||-||-|
|07:45||EUR||French Gov Budget Balance||-80.8B||-||-|
|07:45||EUR||French Trade Balance||-5.8B||-5.1B||-|
|08:00||CHF||Foreign Currency Reserves||434.7B||*||-|
|09:30||GBP||Consumer Inflation Expectations||3.2%||-||-|