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Wednesday, 7 May 2008
USD's Bullish Trend Calms Down
Yesterday, the greenback saw mixed results as it was in a bearish trend versus its major currency rivals during the first half of the day. Later on throughout the day it managed to gain some bullish momentum, the most notable and volatile loss in the first half of day for the USD was 111 pips against the EUR. The pair eventually evened out mid-day to close at 1.5531.
May 6th was a slow news day for the U.S. economy with Fed Chairman Ben Bernanke's speech the only scheduled event of relevance. In his speech, Fed Chairman Bernanke spoke about the need of finding new ways to combat homeowner foreclosures. As most of the important news came from Europe and Canada yesterday, the Dollar traded largely off of investor speculation,
Today at 12:30 GMT, quarterly Nonfarm Productivity will be released and will likely contribute to some volatility within the market. Expectations are for a decreasing trend of about 0.4% compared to the previous announcements. This negative trend should have a positive effect on the USD as it helps drive down consumer prices due to salary increases. Today we expect Unit Labor Costs, Pending Home Sales and Crude Oil Inventories results to be published. Along with the aforementioned events, we will also be expecting to hear from Fed Governor Kroszner. Kroszner has affected the market in a volatile manner recently with some outgoing statements regarding the current state of the US economy. Investors should note that on Friday the Trade Balance will be published and it could be profitable to hear his words and get in on early and insightful investments.
Investors who kept their positions open yesterday in favor of the EUR profited throughout the trading day. The most notable gain in half an hour was 43 points versus the GBP. And the largest daily gain was 55 points against the CHF which closed at 1.6335.
Yesterday saw a batch of news from Europe; however the real relevant news came from outside of the Euro-Zone economy. Services PMI and PPI figures were released with no real change from previous months. ECB President Jean-Claude Trichet did speak yesterday at the formal site for the new ECB grounds in Frankfurt. The market didn't experience very much volatility as the events yesterday hardly affected the EUR traders.
Better economic results are expected today. The most important factors to emerge will be the Euro-Zone Retail Sales and German Factory Orders that are both expected to see positive results. Any positive trend by the two events should help continue to facilitate a bullish EUR. Nevertheless, more important factors, e.g. UK Industrial Production and US Nonfarm Productivity, will be published outside of the EZ, as investors should pay close attention to those scheduled events. The EZ Interest Rate Statement will be released on Thursday. The importance of the statement can not be overemphasized as it gives clues for future shifts concerning economic policy in the Euro-Economic Zone.
Given the expectations and depending on whether the policy comments will be in line with expectations, Forex Investors should look ahead to more EUR bullish movement.
Yesterday the JPY lost ground against most of the major currencies, and the USD/JPY closed at approximately the rate it opened. The Yen's movement during the day was fairly notable, including a 55 pip change in the USD/JPY.
Since Friday news halted out of Japan due to the long holiday week. The lack of news is expected to continue until this coming Friday, with the publication of the relatively minor indicator, the Leading Index.
On Saturday, the major Japanese banks publicized the loss of 1.7 trillion JPY which was affected by their undertaking of sub-prime-mortgage debts. Furthermore, in the concluding year, the Tokyo Stock Exchange lost 29.2% in the aggregate market value of firms. These two factors hurt the weakening Yen. Investors ought to be aware that Japan has championed a currency swap valued at $80 billion with the 10- member Association of Southeast Asia. The swap was initiated in order to avoid type of crisis similar to the 1997-1998 Asian financial disaster.
Today we will likely see the continuation of yesterday's JPY trading, as investors will have to be wary of JPY bearishness trend. Consequently, Forex traders should pay close attention to the subtleties of the Japanese economy as well as major economic and political news from elsewhere in the world.
After a short bullish correction the pair now resumes the bearish move. The attempt to breach the 1.5600 has failed yesterday and now all oscillators are showing fresh bearish momentum. Going short with very tight stops might be the right thing to do today.
The bearish price movement within the bearish channel on the daily chart continues. The Slow Stochastic is showing sharp negative slope and the RSI and if floating at the 50 level which indicate a possible continuation of the bearish move. Going short might be the right choice today.
The narrowing bullish channel on the daily chart still remains intact, as the pair now floats near the bottom barrier of it. The Slow Stochastic is pointing to fresh bullish momentum, and the RSI confirms. Going long might be preferable today.
The bullish break through the horizontal channel is still showing its effect. The momentum is now very high and the Slow Stochastic of the daily chart confirms the bullish momentum with no upcoming crosses on key levels. A breach through the 1.0600 level will probably unleash a much stronger move. Going long appears to be the right direction today.
The Wild Card
A very important key level has been breached, and Oil is now floating at an all time high level of around 122.00. The momentum is more bullish than ever, and it appears that there is much more room to run at the local level. Forex traders should try and utilize the momentum created by that violent breach and go long.
|01:05||GBP||GfK Consumer Confidence||7||5||-|
|01:30||JPY||Tokyo Core CPI||y/y||0.1%||0.0%||-|
|01:30||JPY||National Core CPI||y/y||0.1%||0.0%||-|
|03:00||NZD||ANZ Business Confidence||-2.3||-||-|
|03:30||AUD||Private Sector Credit||m/m||0.5%||0.5%||-|
|08:00||EUR||German Retail Sales||m/m||0.5%||0.3%||-|
|08:45||EUR||French Consumer Spending||m/m||0.1%||0.7%||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.4%||12.3%||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.2%||0.2%||-|
|11:00||EUR||Italian Prelim CPI||m/m||0.1%||0.0%||-|
|14:30||USD||Employment Cost Index||q/q||0.7%||0.6%||-|