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Thursday, 3 Mar 2011
Will the Euro's Rally Continue?
The euro rose to a near 4-month high against the U.S. dollar on Wednesday on prospects the European Central Bank (ECB) will today emphasize a readiness to raise record-low interest rates amid increasing price pressures.
USD - U.S. Dollar Weakens on all Fronts
The U.S. dollar fell against most of its major counterparts yesterday, reaching the weakest level versus the euro since November as oil rose above $100 a barrel for a second day amid unrest in North Africa and the Middle East. By yesterday's close, the dollar fell 0.6% against the EUR to 1.3863. The greenback was little changed against the JPY at 81.80, after earlier sliding 0.4%.
The greenback slumped versus the euro as Federal Reserve Chairman Ben Bernanke wouldn't rule out another round of asset purchases to spur the economy. Bernanke, in congressional testimony yesterday, signaled he'll keep the Fed on course to finish $600 billion of Treasury purchases through June. Another round of buys “has to be a decision” of the Federal Open Market Committee, and “depends again on our mandate” for stable prices and maximum employment, he said in response to a question. Bernanke said he doesn't want to see the economy to relapse into recession.
Another leading indicator released yesterday was the U.S. ADP Non- Farm Employment Change figure. This number handedly beat last month's result but failed to provide strength to the dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead to today, there are few news releases coming out of the U.S. These include the Unemployment Claims and ISM Non-Manufacturing PMI at 13:30 GMT and 15:00 GMT, respectively. Better-than-expected results may help the dollar recover some of yesterday's losses against a number of its crosses, such as the EUR and GBP. On the other hand, if the results turn out to be lower than forecast, then the dollar may record a fairly bearish session in today's trading. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow these releases.
EUR - EUR Rises on Interest Rate Expectations
The euro rose to a near 4-month high against the U.S. dollar on Wednesday and looked set to extend gains on growing expectations interest rates in the euro zone will rise earlier than those in the United States. By yesterday's close, the EUR rose against the USD, pushing the oft-traded currency pair to 1.3860. The 17-nation currency experience similar behavior against the GBP and closed at 0.8490.
European Central Bank (ECB) policymakers meet on Thursday, and with euro zone inflation well above its target, markets see the central bank sharpening its anti-inflation rhetoric. But gains in the common currency risk a correction as geopolitical turmoil continues to fuel uncertainty and higher energy prices, causing stocks to tumble on Wednesday.
Investors may look for the unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not commonplace and present terrific opportunities to take advantage of the price swings for large profitable gains.
JPY - Yen Lower vs. Major Currency Pairs
The JPY saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell sharply against the EUR, pushing the oft-traded currency pair to 113.45. The Japanese yen experience similar behavior against the GBP and closed at 133.50.
Today, the JPY will be absent from the economic calendar, and traders should follow overseas events in order to determine the JPY's direction for today. Special attention should be given to the U.S. Unemployment Claims that will be published at 13:30 GMT, and will be today's leading publication which will also affect the yen's crosses.
Crude Oil - Crude Oil Prices Continue to Rise
Oil rose to settle at its highest level since August 2008 on Wednesday, a price near $102.60 a barrel, after an airstrike near Libya's oil infrastructure raised more fears the OPEC nation's oil sector could become a target in embattled leader Muammar Gaddafi's efforts to hold power.
News of the strike in Brega, near to Libyan oil terminal, added to two weeks of fears the unrest could spill over into other large oil producers in the region. Oil markets remained focused on the turmoil in the Middle East, which could signal another threat to global oil supplies after the Libyan revolt cut exports.
As for today, traders should first and foremost follow the developments in the Middle East, as this issue will continue to impact oil prices in the near future. Traders are also advised to follow the U.S. Unemployment Claims report, which is scheduled for today at 13:30 GMT, as this report tends to have a direct impact on the market.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the 4-hour chart's Stochastic (slow) signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice today.
The 4-hour chart is showing mixed signals with its RSI fluctuating in the neutral territory. However, the 8- hour chart's RSI is already floating in the over-bought territory indicating that a bearish correction might take place in the nearest future. Going short with tight stops might be the right strategy today.
The price of this pair appears to be floating in the over-sold territory on the daily chart's RSI indicating an upward correction may be imminent. The upward direction on the Stochastic (slow) also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
This pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's RSI signals that a bullish reversal is imminent. An upward trend today is also supported by the 4-hour chart's Stochastic (slow). Going long with tight stops may turn out to pay off today.
The Wild Card
Crude Oil prices rose significantly in the past month and peaked at $102.60 a barrel. However, the daily chart's RSI is floating in the over-bought territory suggesting that the recent upwards trend is losing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|07:00||EUR||German Import Prices||m/m||-0.8%||0.5%||-|
|10:00||EUR||Italian Retail Sales||m/m||-0.2%||0.1%||-|
|12:30||USD||Final GDP Price Index||q/q||0.1%||0.1%||-|
|14:00||USD||Revised UoM Consumer Sentiment||91.2||93.9||-|
|14:00||USD||Revised UoM Inflation Expectations||3.0%||-||-|