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Friday, 20 Jun 2008
Will the EUR Push Ahead From Here?
Yesterday the greenback saw rising trends against most of its major currency rivals. During the prior trading session the EUR\USD dropped 98 points from 1.5573 down do 1.5475. In addition the USD experienced bullish behavior against the JPY and the CHF. Yesterday was packed with data for the U.S economy. The most important indicator was the Unemployment Claims, which showed that the U.S weekly jobless claims rose by 5,000 to 381,000 individuals filing new claims for unemployment. The Philadelphia Fed Manufacturing Index, which measures the general business conditions of manufacturers in the Philadelphia Federal Reserve district, fell to -17.1 in June from -15.6 in May. This figure is much lower than the -10.0 reading that analysts expected. Later on in the day Treasury Secretary Henry Paulson spoke in Washington DC. In his speech, Secretary Paulson stated that energy prices could extend economic slowdown, stating that "the headwind of high energy prices has potential to lengthen the economic slowdown". The last event to come out yesterday was a speech delivered by Federal Reserve Governor Donald Kohn. Governor Kohn articulated his belief "that primary dealers are strengthening liquidity and capital positions to better protect themselves against the extreme events", thus this achievement will prevent the risk of widespread financial market deterioration in the future.
Today, there isn't any significant data scheduled to come out for the U.S economy. Yet the USD is expected to experience a rather volatile session. However traders are advised to notice news originating from the Euro-zone as it may determine today's general trend
Yesterday, traders who shorted the EUR earned significant profits. The EUR lost 98 points versus the USD, dropping to 1.5475 in a single continuance drop since the opening of the market. Additionally The EUR lost 90 points against the GBP when the pair bottom out at 0.7850. The only data originating from the Euro-zone yesterday was the Italian Unemployment Rate. The indicator showed a rise in unemployment up to 6.5% in the first quarter in Italy from 6.2% from the previous quarter. The figure for the fourth quarter was reviewed up from the previous reading of 6.0%.
Looking ahead today, the German Produce Price Index, which measures the change in price of goods sold by manufacturers, printed it's result at 1.0% after rising 1.1% in the prior month. On the annual basis, the index is forecasted to grow 5.8% compared to April's 5.2% gain. Later on, the European Central Bank President Trichet is expected to speak at the Forum of the Financing of Enterprises, in Belgium.
Traders are advised to pay close attention to Trichet's speech, as it is the most important event scheduled for the end of the trading week, and should have a large impact on EUR pairs.
Yesterday the JPY saw mixed results against most of its major currency counterparts. The USD\JPY dropped to 107.50, before bouncing back to 108.00. The EUR\JPY fell from 167.65, down to 167.33. The Bank of Japan Governor Masaaki Shirakawa delivered a speech yesterday at the annual meeting of the National Association of Shinkin Banks, in Tokyo. In his speech, Shirakawa said that the Bank of Japan will continue to act flexibly on monetary policy as it gauges risks to Japan's economy and prices posed by uncertainties in the U.S and the global economy, rising the expectations for a forthcoming interest rate hike for Japan.
Today, the JPY is absent from the economic calendar, and it is safe to say it will continue to be manipulated by world economic movement. Hence, traders should follow global developments with extra caution today.
Since yesterday's drop to the 1.54 level, the pair has corrected to the 1.55 level, and now shows some positive momentum again. The 4 hour chart RSI swings in a neutral territory indicating that the bullish correction still has more fuel in it. The daily chart supports that bullish notion, and it looks as if the pair is heading back to the 1.56 level.
The Cable was looking for resistance at 1.9750 and found it, as a breach through that level was unsuccessful. It appears that a breach through that level would indeed validate an additional upwards move. Yet another failure to break might define that point as a potential reversal point for the ongoing uptrend.
The bullish move the pair is going through appears to have diminishing momentum, and lacks the ability to make a significant breach above the 108.15 level. The hourly studies show mixed signals, and the daily chart's Stochastic Slow is indicating a mild bearish direction. Waiting for a clearer signal on that pair appears to be a good decision today.
The hourlies show that after a sharp ascend which took the pair on a high of 1.0475 yesterday; it has been trading within quite a narrow range with no specific direction.
The hourly chart's Bollinger Bands are getting tighter which indicate an additional upcoming volatility. The daily chart also provides no signal with the pair now floating within a narrow flat channel. Traders should wait for a clearer signal on the hourlies before entering the market with this pair.
The Wild Card
After quite a clear signal for a bearish move, this commodity now makes a local correction, ascending to the 901.50 level on a daily chart once again. However, it did not breach the upper barrier of the bigger downwards channel. Its inability to break the 908.00 resistance level will provide forex traders with a fair entry point for a short position within a mid range time frame.
|16:00||USD||Pending Home Sales||m/m||0.9%||1.2%||-|
|16:30||USD||Crude Oil Inventories||2.5M||-0.1M||-|
|20:00||USD||Federal Funds Rate||<0.25%||<0.25%||-|
|EUR||German Prelim CPI||m/m||-0.1%||0.2%||-|
|01:50||JPY||Prelim Industrial Production||m/m||-2.1%||0.4%||-|
|09:00||CHF||KOF Economic Barometer||89.7||90.3||-|
|09:00||EUR||Spanish Flash CPI||y/y||0.1%||0.1%||-|
|09:00||EUR||Spanish Flash GDP||q/q||0.9%||1.1%||-|
|09:55||EUR||German Unemployment Change||-1K||-5K||-|
|10:30||EUR||Italian 10-y Bond Auction||2.35|1.4||-||-|
|14:30||USD||Advance GDP Price Index||q/q||0.0%||1.5%||-|