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Monday, 19 Apr 2010
Will Crude Oil Continue To Drop?
Over the past week, Crude Oil saw an extremely volatile session. After peaking at $86.60 a barrel, crude oil sharply dropped and is currently trading at $83.30 a barrel. At the same time, the Dollar is correcting losses against the Euro and the two trends seem to be correlated. Will this proceed?
USD - Dollar Corrects Losses vs. the Euro
The Dollar Saw mixed trading during last week's session. The Dollar began last week with a sharp drop against the Euro, and since then managed to erase all losses. The Dollar also rose against the Pound. On the other hand the Dollar saw a bearish trend against the Yen.
The Dollar began last week with a deep fall against the Euro. The main reason for the fall was the Greek rescue plan. After several weeks of speculations, the EU countries have finally gathered a bailout plan for the Greek debt crisis. As a result the Euro rose against all the major currencies. However as the week progressed, the Dollar began to erase the losses, mainly due to positive U.S. economic data. The U.S. Retails Sales rose by 1.6% in March, beating expectations for a 1.1% rise. This showed that the U.S. consumers have confidence in their financial outlook and that they feel safer to consume. In addition, the U.S. Building Permits report showed that the number of new residential building permits that were issued on March rose by 0.69M, also beating expectations for a 0.63M result. Considering that the U.S. housing sector was the catalyst for the recent recession, inventors follow carefully after every release on this subject. As a result, every positive data from the U.S. housing sector tends to instantly boost the Dollar.
Looking ahead to this week, many interesting economic publications are expected from the U.S. The leading publications look to be the Producer Price Index, the Unemployment Claims, the Existing Home Sales, the Durable Goods Orders reports and the New Home Sales. Analysts currently forecast rather positive results for these publications. If the end result will indeed turn to be positive, the Dollar is likely to strengthen as a result.
EUR - Euro Drops against the Majors
The Euro saw a very volatile session during last week's trading. The Euro began last week with a sharp uptrend against the major currencies. However, by Friday the Euro saw a bearish correction that erased all its gains. At the moment the Euro continues to drop against the Dollar and the Yen.
The Euro began last week's trading session with a sharp rise, mainly due to the Greek rescue plan. The European countries have agreed on a bailout plan for the Greek debt crisis over the past weekend. As a result, the Euro promptly rose against all the major currencies. However, as the week progressed the Euro saw a bearish trend, and erased profits. As it appears, the main reason for the Euro's downtrend was that there was no development to the Greece rescue plan. While investors were looking for every piece of data regarding the Greek debt crisis, it suddenly seemed that the Euro-Zone fails to deliver any updates on the issue. This has led investors once again to look for safer assets, such as the Dollar and the Yen. In addition, a series of positive data have been released from the U.S. economy. This has supported the Dollar against its major rivals, such as the Euro. In general, when the Dollar rallies, the Euro tends to drop and vice versa.
As for the week ahead, a batch of data is expected from the Euro-Zone. The most significant publications look to be the German ZEW Economic Sentiment on Tuesday and the German Business Climate on Friday. Traders should also follow the six leading publications which are expected from the Euro-Zone on Thursday morning.
JPY - Risk Aversion Boosts the Yen
The Yen rallied against all the major currencies during last week's trading session. The Yen gained about 100 pips against the Dollar, about 400 pips against the Euro and about 250 pips against the Pound.
It appears that concerns that an aid package to Greece will falter have turned investors to look for safe-haven assets, such as the Yen. By the beginning of last week, it seemed that the European leaders have finalized a rescue plan to the Greek economy, however a lack of progression on the aid package have created concerns that the Greek economy might continue to trample. As a result, the Yen has corrected its losses, and continued to rally against all the major currencies. In addition several positive data from the Japanese economy has also supported the Yen. The M2 Money Stock report showed the change in the total quantity of domestic currency in circulation and deposited in banks has rose by 2.6%, which created speculations that the Bank of Japan might hike rates soon.
As for this week, many significant economic data is expected from Japan. Traders are advised to provide special attention to the Trade Balance publication on Wednesday. This report measures the difference in value between imported and exported goods during March. Analysts have forecasted that the Japanese Trade Balance has widened by 0.66T. If the actual result will be similar, it has potential to further boost the Yen.
Crude Oil - Crude Oil Drops Below $83.50 a Barrel
Crude Oil saw an extremely volatile session during last week's trading. With the beginning of last week, Crude Oil dropped to $82.50 a barrel. Then by Thursday, crude bounced back to $86.60 a barrel, just to drop to $83.30 a barrel by Sunday night.
It seems that speculations that gains have outpaced demand have weakened oil for the third day in a row. For the past few weeks, oil prices have been growing constantly on speculations that global recovery will increase demand for energy. However, the continuing uncertainty over the Greece debt crisis has supported concerns that global recovery could be damaged. In addition, the strengthening of the Dollar has also added to the falling oil prices. Crude Oil is traded in Dollars, and thus whenever the Dollar rises vs. the Euro, Crude Oil tends to drop.
Looking ahead to this week, traders should follow the major economic publications from the U.S. and the Euro-Zone, as they seem to have the largest impact on Crude Oil. In addition, traders are advised to follow the U.S. Crude Oil Inventories report which is expected on Wednesday, as this report tends to have an immediate impact on the market.
A much needed correction may be taking place for the pair today following its recent bearish trend as the 2 hour and 4 hour RSI are floating in the oversold territory indicating an impending upward movement. Furthermore, a bullish cross is evident on the 2 hour and 8 hour charts' Slow Stochastic. Going long for the day may be advised.
The RSI for the pair seems to be floating in the oversold territory on the hourly, 2 hour and 4 hour while a bullish cross is evident on the 2 hour and 4 hour charts' Slow Stochastic. Furthermore a breach of the lower Bollinger Band is evident on the 4 hour and 8 hour charts. Going long for the day may be a good option.
The pair's RSI seems to be floating in the oversold territory as evident on the 2 hour, 4 hour and daily chart and with a bullish cross seen on the 4 hour and 8 hour charts' Slow Stochastic. Going long for the day may be a good option.
A correction might be taking place for the pair today as the pair's RSI seems to be floating in the overbought territory on the 2 hour and 4 hour charts and with a bearish cross evident on the 2 hour, 4 hour and 8 hour charts. Going short for the day may be advised.
The Wild Card
After last weeks drop a correction may be seen today as the hourly, 2 hour and 4 hour RSI seen floating in the oversold territory and a bullish cross is seen on the 4 hour and 2 hour charts' Slow Stochastic. Forex traders may be advised to go long for the day.
|08:00||EUR||German Industrial Production||m/m||0.7%||-||-1.2%|
|08:01||JPY||BoJ Press Conference||-||-||-|
|08:45||EUR||French Trade Balance||-3.3B||-||-3.0B|
|09:00||CHF||Foreign Currency Reserves||540B||-||542B|
|10:30||GBP||Manufacturing Production m/m||m/m||-0.8%||0.4%||-|
|10:31||EUR||German 10-y Bond Auction||0.69|1.2||-||-|
|16:00||GBP||NIESR GDP Estimate||0.5%||-||-|
|16:30||USD||Crude Oil Inventories||4.0M||2.2M||-|
|19:01||USD||10-y Bond Auction||2.24|2.7||-||-|
|01:01||GBP||RICS House Price Balance||53%||54%||-|
|01:50||JPY||Core Machinery Orders||m/m||-3.6%||3.3%||-|
|05:45||JPY||30-y Bond Auction||1.41|3.1||-||-|
|07:00||JPY||BoJ Monthly Report||-||-||-|
|07:00||JPY||Economy Watchers Sentiment||49.3||48.6||-|