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Thursday, 21 Aug 2008
Will The USD Finish Its Bullish Voyage Today?
Expectations for the near future look to hold unclear characteristics as the upcoming US calendar doesn't look to have much that can help revive USD bulls once again. Given today's pessimistic fundamental forecasts, the USD may find itself falling deeper into a bear's cave during the day.
USD - Unemployment Claims May Define USD Direction.
Yesterday the EUR/USD pair experienced a highly volatility and finished trading session with mixed results versus its major rivals. The EUR/USD bounced up and down during most of the day, finally closing at 1.4773 level, unchanged from the day prior. Overall, it lost 0.2% vs. the EUR yesterday when it declined to $1.4773 from $1.4747. The greenback may fall to $1.50 per EUR in a few days should it weaken below $1.48.
Expectations for the near future look to hold unclear characteristics as the upcoming US calendar doesn't look to have much that can help revive USD bulls once again. Yesterday's slightly bearish dollar trend was especially concerning due to the lack of market moving economic events both from the US and the Euro-zone. As it seems now the greenback light depreciation comes mainly on the heels of traders fearing the US economy woes are not over.
From the fundamental point of view, the only economic release that deepened USDs' falling trend yesterday was the Crude Oil Inventories. The indicator printed a much higher than expected result of 9.4M. Due to the unexpected figure, Oil prices rose sharply, which helped to further tumble the US currency.
The dollar also weakened on speculation credit- market losses in the U.S. will deepen. Fannie Mae and Freddie Mac shares tumbled in New York trading to the lowest levels since at least 1990 as speculation increased that the U.S. Treasury will have to bail out the mortgage-finance companies.
The U.S. economic outlook darkened in July for a 3rd consecutive month as Philadelphia Fed Manufacturing report today may show another contraction.
The Philadelphia Fed's general economic gauge due at 14:00 (GMT) is projected to come in at -12.6. If the final figure will indeed print such a low result today, we may see the dollar continuing its falling trends vs. the rivals.
The leading index is also due today at 14:00 (GMT) from the New York-based research group. The Conference Board's index of Leading Indicators, a measure of the economy's direction over the next three to six months, is expected to decline by 0.2%, according to the median forecast. The previous measure fell 0.1% in June
Overall, given today's pessimistic fundamental forecasts, the USD may find itself falling deeper into a bear's cave during the day.
EUR - Will The Heavy Fundemantal Day Pull The EUR Up?
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15 nation's currency saw high volatility especially against the USD finally closing at 1.4773 level, unchanged from the day prior. EUR also appreciated yesterday versus the GBP finally closing at 0.7916 price level. The EUR gained yesterday vs. the USD on concerns that futures traders will pare bets on USD gains, which has gained against most of its currency rivals during this month.
Overall, the EUR has lost 7.7% versus the USD since touching an all-time high of 1.6038 on July 15. The European currency depreciated as reports showed the Euro zone economies shrank in the 2nd quarter and Crude Oil fell more than 20% from the record $147.27 a barrel reached July 11.
However, gains in the EUR may be limited as Germany's Economy Ministry yesterday said the economic outlook has worsened even beyond the 2nd quarter, when Gross Domestic Product shrank for the first time in 4 years, as reports reveal. Investors are also uncertain about whether the EUR uptrend can be sustained in the context of a slowing U.S. economy.
Look ahead to today, we have a batch of an important EUR data. Economic events coming from the Euro-Zone are the Flash Manufacturing PMI and Flash Services PMI. These indices are seen as leading indicators of economic health in general. Businesses usually react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.
A lot of attention will be focused on the outcomes of today's reports as they might hint on crucial decisions regarding the inflation revision in the Euro zone and the future of the local currency.
JPY - The JPY Looks To Extend Its Profits?
The JPY underwent a bullish trading session yesterday, as it appreciated against most of its major currency rivals. The JPY saw a 60 pips rise against the USD as the pair went below the 109.60 level. The JPY also saw rising trends against the EUR and the GBP.
Yesterday, the Japanese government bond futures retreated after pulling back from four-month highs as prospects for an interest rate cut from the Bank of Japan were dismissed. Governor Masaaki Shirakawa reiterated the central bank view that the economy would eventually return to moderate growth. That cooled expectations that the BOJ will be forced to cut interest rates by early next year, and acted as a significant support for the JPY.
As for today, the sole event that is scheduled from the Japanese economy is the Monetary Policy Meeting Minutes. This indicator will likely to have little effect on the market as it released at 23:50 GMT. Forex traders invested in JPY related crosses should stay tuned to stock market movement today as this information should determine JPY's direction for today.
Oil - U.S - Russia Tension to Raise Oil Prices
Crude Oil prices continue to rise as Oil made its 3rd consecutive day of bullish behavior. A barrel of Crude is currently traded around $116.50, $3 above yesterday's midday rate.
The U.S Crude Oil Inventories indicator has initially driven Oil prices down to $113 a barrel, as the publication of this indicator showed that prior expectations for a 0.7M increment were sorely moderate as the indicator demonstrated a 9.4M additional barrels as opposed to last week. However, shortly after Oil prices have resumed their uptrend.
In addition, the U.S-Poland agreement that allows the U.S to construct a missile-defense system in Poland has generated a great deal of tension between U.S and Russia. Therefore Oil prices are expected to rise even more.
It seems that the pair is extending its bullish correction, as it entered an uptrend ever since it tested the 1.4630 level. Currently, all oscillators on the 4 hour chart are pointing up, suggesting further bullish behavior for the pair. Going long might be preferable today.
The pair has been range-trading for a while now, as the cable appears to consolidate around the 1.8600 level. The Bollinger Bands on the 4 hour chart are tightening, indicating that a significant breach is forthcoming. Traders should wait for that breach and swing.
After a long period in which the pair has mainly fluctuated, it seems that we are on the verge of a relatively strong move. The pair has crossed the lower border of the 4 hour chart's Bollinger Bands, indicating that it should enter a downtrend. A breach through the 108.60 might validate the bearish move with a price target of 107.80.
The pair has consolidated around the 1.0950 level, without making any major breach for a while now. As all oscillators on the 4 hour chart are giving bearish signals, it appears that going short with tight stops might be the right strategy today.
The Wild Card
The 4 hour chart shows both the tightening of the Bollinger Bands, and also a bullish cross on the Slow Stochastic, suggesting that a strong bullish momentum should take place. This might give forex traders an excellent opportunity to enter a promising trend at a very early stage.
|00:00||EUR||French 10-y Bond Auction||-||-||-|
|00:00||EUR||Spanish 10-y Bond Auction||-||-||-|
|00:00||GBP||MPC Rate Statement||-||-||-|
|02:30||AUD||RBA Deputy Gov Lowe Speaks||-||-||-|
|04:45||JPY||30-y Bond Auction||1.46|2.7||-||-|
|08:00||EUR||German Factory Orders||m/m||4.2%||-0.8%||-|
|13:00||GBP||Official Bank Rate||0.50%||0.50%||-|
|13:00||GBP||Asset Purchase Facility||375B||375B||-|
|13:30||USD||Challenger Job Cuts||y/y||17.6%||-||-|
|13:45||EUR||Minimum Bid Rate||0.05%||0.05%||-|
|14:30||EUR||ECB Press Conference||-||-||-|
|14:30||USD||Revised Nonfarm Productivity||q/q||-1.8%||-2.2%||-|
|14:30||USD||Revised Unit Labor Costs||2.7%||3.1%||-|
|16:00||USD||FOMC Member Williams Speaks||-||-||-|