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Wednesday, 25 Jun 2008
Will the US Interest Rate Shake the Dollar?
The USD lost value against all of its crosses yesterday. The bearish trend occurred after a batch of negative news coming from the U.S., highlighted by the very low Consumer Confidence. The Crude Oil price increase, reaching $138 also hurt the greenback. After breaking under the 1.55 zone on Monday, the EUR/USD was traded just under 1.56 yesterday.
The USD was hurt by the bad economic releases that were announced in the U.S. yesterday. The news started with the National HPI Composite that fell to -15.3%, however that was better than analysts forecasted. An hour later the USD's momentum was officially bearish, as the Consumer Confidence, House Price Index and Richmond Fed Index all were released at worse than expected values. The biggest disappointment was the Consumer Confidence, which was already expected to fall to 56.4, but it was released at a value 4 points lower than the forecasts, at 50.4. The rising Crude Oil prices, which reached $138 yesterday, also hurt the USD's trading value.
Looking ahead to today, there is a batch of U.S. economic data scheduled to be released. The day will start with the important Core Durable Goods Orders, which is expected to fall to a negative rate this month. New Home Sales are expected to be around 11K lower than the previous value. Traders should pay attention to the evening release of the FOMC Statement, which will include the Federal Funds Rate. Experts forecast no change of the rate and it seems like it will stay at 2.00% and will be increased later this year. All news coming from the U.S. is expected to be negative and the greenback's bearish trend is expected to continue and cause the USD to lose even more grounds against its currency crosses.
Yesterday, the EUR saw mixed results against most of its major currency rivals. The most notable change was a bullish trend against the USD as the cross nearly reached 1.56 during the middle of the trading day. Against the USD, the EUR took advantage of the bad economic data released coming from the U.S.
The EUR saw mixed economic data results yesterday with the French Consumer Spending beating the forecasts, while the German Consumer Confidence fell sharply lower than expectations. The French Consumer Spending was expected to rise, but analysts didn't expect to rise all the way up to 2.0% after having a negative value last month. Yesterday, European Central Bank Executive Board member Lorenzo Bini Smaghia said that a possible way to ease the pressure from ever increasing commodity prices is to increase productivity, especially in the European services sector. Also, European Central Bank Governing Council member Miguel Angel Fernandez Ordonez reiterated that the ECB is alert to heightened inflation risks and despite weaker economic data, it could raise rates next month. Analysts estimate that the ECB may indeed change the steady 4.00% Interest Rate by increasing it next month.
As for today, look for volatility in the EUR's trade movements after ECB President's Trichet Speech in the morning. The only economic data releases will be the Italian Retail Sales and Industrial New Orders. The Italian Retails Sales should rise after a negative value last month, while the Industrial New Orders are expected to be a negative rate. The EUR's trend today will be determined by Trichet's speech and its pairs' economic data releases.
The JPY saw fairly bullish trends against most of its currency crosses yesterday. Like the EUR, the JPY rose against the USD following the weak data coming from the U.S.
The JPY also enjoyed its own positive economic data as both the Trade Balance and CSPI were released at higher than forecasts figures. As the Crude Oil prices are increasing and hurting the world's biggest economies, the Japan's imports of Crude Oil and condensate in May rose 8.0% on year to 3.76 million barrels a day. As the prices are rising, the purchase of more Crude Oil is harming the Yen.
No economic data is expected to be released from Japan today. As the day is filled with important economic data releases expected from the U.S. and a speech from ECB president Trichet, the JPY's volatility will be determined by its major currency rivals' momentum.
The pair is still trading within its wide range with no specific direction. However, the daily chart shows that after a short bearish correction, the pair appears to resume its bullish trend. The daily chart's Accelerator\Decelerator oscillator is also showing that a rising trend is impending. The next target price may touch the high of 1.5630.
The 4 hours chart is showing that the pair is continuing to greatly fluctuate within its wide range. However, the Relative Strength Index shows that the recent rising trend that took place since the last low of 1.9585 hasn't yet to reach its limit. Going long with tight stops might be a good decision today.
The range trading continues without a distinct direction as the pair floats between the ranges of 108.00 - 109.00. The daily chart's RSI is floating around its upper level for a while now, showing that the current bullish moderate correction has reached its limit. According to the hourly chart's Slow Stochastic, this pair is also overbought, yet there is no solid signal for the future trend. Traders are advised to stay out of that pair today.
The daily chart is showing that the pair has been range trading for a while now. As the RSI suggests, the local bearish momentum on the hourlies might take the pair to the low of 1.0350 level. Traders are advised to wait for clearer bearish signs on the hourlies before entering the market.
The Wild Card
After a long period that sliver was fluctuating on a very consistent basis, all indicators on the hourlies are showing that a bullish trend is forthcoming. Forex traders have a good shot to enter at what appears to be the beginning of a rising trend.
|10:30||GBP||Housing Equity Withdrawal||q/q||-12.1B||-12.5B||-10.9B|
|16:00||USD||IBD/TIPP Economic Optimism||42.0||-||-|
|19:00||EUR||ECB President Draghi Speaks||-||-||-|
|23:30||USD||FOMC Member Williams Speaks||-||-||-|
|00:30||AUD||AIG Construction Index||53.8||-||-|
|01:01||GBP||BRC Shop Price Index||y/y||-1.4%||-||-|
|02:00||AUD||HIA New Home Sales||m/m||-1.8%||-||-|
|02:01||JPY||Monetary Policy Statement||-||-||-|
|08:00||EUR||German Industrial Production||m/m||0.7%||-||-|
|08:01||JPY||BoJ Press Conference||-||-||-|
|08:45||EUR||French Trade Balance||-3.3B||-||-|
|09:00||CHF||Foreign Currency Reserves||540B||-||-|