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Monday, 28 Dec 2009
Will the Euro Continue to Rise?
Last week's most significant event was the halt of the Dollar's bullish trend against the Euro. After the EUR/USD pair dropped over 900 pips, it seems that the bearish correction could be limited. The main question now is whether the Dollar will manage to rise against the Euro again, this year.
USD - Dollar's Strengthening Halts against the Euro
The Dollar continued to climb against most of the major currencies during last week's trading session, except for the Euro. The Dollar strengthened against the Pound and rose over 100 pips against the Yen. However, the Dollar failed to extend its bullish trend vs. the Euro, and the EUR/USD pair even rose a bit towards the 1.44 levels.
The Optimism regarding the U.S. economy, which strengthened the Dollar, especially during the beginning of last week, was due to the positive Existing Home Sales publication. The report showed that 6.54M residential buildings were sold during November, well above expectations for a 6.29M figure. This result led investors to gain confidence that the U.S. economy is indeed recovering. Due to the fact that the cause of the economic crisis was the deterioration of the U.S. housing sector, such a positive result, created a sentiment that a full recovery may take place sooner than expected.
However, the main reason that the Dollar's appreciation was halted, and even followed by a bearish correction vs. the Euro, was another housing sector publication - the New Home Sales. This report measured the number of new single-family homes that were sold during November. While analysts expected a 442,000 figure, the end result was quite disappointing, as merely 355,000 new homes were sold. Naturally, this had the exact opposite effect on the Dollar. The unfortunate figure created pessimism that the U.S. housing sector isn't doing so well after all. The Dollar promptly dropped against the Euro as a result.
As for the week ahead, several interesting publications are expected from the U.S. economy. The data which is likely to impact the most on the market this week is the U.S. Consumer Confidence scheduled for Tuesday. The Consumer Confidence is a survey of about 5,000 households which are asked to rate the level of current and future economic conditions. A positive end result is likely to support the Dollar.
EUR - Euro Rises on All Fronts
The Euro saw an extremely bullish session during last week's trading. The Euro rose close to 200 pips against the Pound and over 200 pips against the Yen. In addition, the Euro even managed to climb against the Dollar, as the EUR/USD pair reached above the 1.4400 level.
The Euro's bullish trend from last week wasn't caused by an extraordinary economic data from the Euro-Zone. The most significant positive publication from the Euro-Zone was the German Import Prices report. The report showed that the price of imported goods purchased domestically rose by 0.4% during November. A rising inflation in Germany, which holds the strongest economy within the Euro-Zone, usually has a positive impact on the Euro, as investors interpret it as a sign that the economic recovery is in place.
In Addition, it seems that the strengthening of the Euro was a reaction to the weak currencies. The main reason for the Euro's appreciation was the negative housing data from the U.S. It seems that for as long that the U.S. economy will provide disappointing data, the Euro is likely to strengthen a result.
Looking ahead to this week, many impacting news events are expected from the Euro-Zone. Traders are advised to focus on the M3 Money Supply, scheduled for Tuesday 09:00 GMT. The report shows the change in the total quantity of domestic currency in circulation and deposited in banks during November. If the end result will show that this indicator continues to rise, it could strengthen the Euro further.
JPY - Yen Continues to Slide
The Yen's bearish trend continued last week. The Yen dropped close to 200 pips against the Dollar as the USD/JPY pair rose above the 91.80 level. The Yen also dropped over 200 pips against the Euro.
The Yen's falling trend is a combination of 2 leading factors. The first one is an instable economic data which shows that the Japanese economy is yet to pull out of recession. The second one is the Bank of Japan, which keeps it as its main interest to weaken the Yen, in order to support the Japanese export. The Mixed results from the Japanese economy continued last week; one hand, the Trade Balance, which measures the difference in value between imported and exported goods and services rose to 0.49T during November, on the other hand, the Tokyo Core Consumer Price Index, a leading gauge for inflation, dropped by 1.9% during December. This shows that Japanese consumers did not regain their confidence regarding their financial security, and thus prefer to avoid expenses at the moment.
As for this week, not many economic publications are expected from Japan, as Japanese banks won't work during most of the week. Traders are advised to follow the leading publications from the U.S. economy and Euro-Zone, as they are likely to impact the Yen this week.
Crude Oil - Could Crude Oil Reach $80 a Barrel?
Crude Oil continued to rise during last week's trading session. Crude Oil began last week's trading with a falling trend, as a barrel of crude oil was traded for less than $73. However later on the trend reversed and crude oil reached over $78 a barrel for the first time in over 3 weeks.
Oil continues to rise following positive economic data from the U.S. The number of U.S. individuals who filed for unemployment insurance for the first time during the past week, dropped to 452,000, the lowest level since September 2008. This has increased speculations for global recovery. The optimism tends to boost crude oil prices, as it is believed that an economic improvement should increase demand for energy. Currently it seems that for as long that positive data from the U.S. economy is likely to support oil prices.
As for the week ahead, traders should follow the leading economic news evens from the U.S. economy and the Euro-Zone as they are likely to impact the value of Oil. In addition, traders should also follow the Crude Oil Inventories on Wednesday, as this report proven to have an immediate impact on the market.
A fresh bearish cross is evident on the 8 hour Slow Stochastic with the 4 hour RSI is floating in the overbought territory. Going short on the day with tight stops may be advised
The pair's recent bearish trend may see some reversal today as the daily and 8 hour RSI are floating in the oversold territory and with the daily chart's Slow Stochastic and hourly MACD exhibiting a fresh bullish cross. Going long for the day may be advised.
The daily and 8 hour RSI are floating in the overbought territory, while the daily chart's Slow Stochastic and 8 hour MACD show a fresh bearish cross. Going short for the day may be advised.
The pair seems to be exhibiting mixed signals with the daily MACD exhibiting a fresh bearish cross while the 4 hour RSI is floating in the oversold territory. Waiting for a clearer direction may be advised for the day.
The Wild Card
The pair's bearish trend may experience a correction today as the hourly, 2 hour and 4 hour RSI are floating in the oversold territory. Furthermore, the hourly and 8 hour Slow Stochastic are exhibiting a bullish cross while a breach of the lower Bollinger Band is evident on the 2 hour and 8 hour charts. Forex traders may be advised to go long on the day to benefit the forming trend.
|09:15||EUR||Spanish Manufacturing PMI||53.6||53.9||53.2|
|09:45||EUR||Italian Manufacturing PMI||55.3||56.2||53.8|
|09:55||EUR||German Unemployment Change||9K||-5K||-|
|10:00||EUR||Final Manufacturing PMI||52.4||52.4||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.7%||12.7%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.4%||12.5%||-|
|10:30||GBP||Net Lending to Individuals m/m||m/m||3.8B||3.9B||-|
|10:30||GBP||M4 Money Supply||m/m||-0.5%||0.2%||-|
|15:45||USD||Final Manufacturing PMI||52.9||52.9||-|
|16:00||USD||ISM Manufacturing PMI||52.7||39.7||-|
|16:00||USD||IBD/TIPP Economic Optimism||46.9||- 47.3||-|
|16:00||USD||ISM Manufacturing Prices||44.0||52.6||-|