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Thursday, 24 Jul 2008
Will The USD Push The EUR To Key Level Of 1.55?
Yesterday, the greenback saw bullish trends against most of its major counterparts with the help of hawkish rhetoric from U.S. officials and another day of sinking prices for crude oil.
The boost of the USD was supported by comments from U.S. Treasury Secretary Hank Paulson when he said on Tuesday that a strong dollar is "really very important", and as the general rhetoric behind the Fed elite is becoming unison, rising inflation could lead the Fed to start raising interest rates even before labor and financial markets recover giving a big push to the USD.
USD - U.S Existing Home Sales on Tap
Yesterday, the greenback saw bullish trends against most of its major counterparts with the help of hawkish rhetoric from U.S. officials and another day of sinking prices for crude oil. Also helping contribute to another day of gains was the approval by US lawmakers of the bill that will help the Federal Reserve bail out Fannie Mae and Freddie Mac. The USD climbed to a one-month record high against the JPY when it reached the 107.83 levels in yesterday's trading session. The EURUSD was traded at a two-week low of $1.5670, before leveling out at just under 1.57.
The boost of the USD was supported by comments from U.S. Treasury Secretary Hank Paulson when he said on Tuesday that a strong dollar is "really very important", and as the general rhetoric behind the Fed elite is becoming unison, rising inflation could lead the Fed to start raising interest rates even before labor and financial markets recover giving a big push to the USD. The Senate Banking Committee approved yesterday with a majority of 19-2, a massive housing rescue bill which is intended to rescue the housing sector from its worst downturn since the Great Depression. The legislation would authorize the Federal Housing Administration to help troubled loan owners to trade mortgages with rising monthly payments for loans backed by the Goverment with easier and more afforadble setups. The bill is also set to put forth a new, and more strict regulatory body with power to control the finances of mortgage bigs like Fannie Mae and Freddie Mac .The decision of helping mortgage finance companies Fannie Mae and Freddie Mac will likely have a positive effect the USD improving the its status with investors as the US tries to pull the economy out of ‘recession'.
Looking ahead to today, there is a batch of U.S. economic data scheduled to be released. The day will start with the important Unemployment Claims which analysts predict to rise incrementally from last month's 366k up to 379k. Also on tap is the 14:00 GMT release of Existing Home Sales, forecasted to see a slight decrease to 4.93M from 4.99M in the previous month. Later on, Federal Reserve Bank of New York President Timothy Geithner will deliver a speech. Geithner is one of the main individuals responsible for setting the U.S key interest rate, and clues regarding any possible rate cut might be scattered. If analysts' expectations of negative results for U.S data will occur, this could cut the latest USD bullish trend and contribute to another try beyond 1.60 for the EUR/USD.
EUR - High volatility is Expected Throughout Today's Trading Session
The EUR saw bearish trends against its most rivaled counterparts yesterday. Against the USD the 15 nation currency fell to its lowest value in the last two weeks as a combination of poor local Euro-Zone data, hawkish US policy and plummeting oil prices was to much to hold off. The EUR fell against the GBP to as low as 0.7840 thanks to a renewed growth in speculation that rates in the UK could be raised despite the Bank of England's decision to leave interest rates unchanged at 5.0% in its last scheduled statement.
Also yesterday the French household consumption of manufactured goods fell 0.4% in June, compared with a 1.7% rise in May. The figure showed a rise of 1.0% compared with the same month last year but was also down 1.5% from where it was expected to be by now. The Italian adjusted retail sales was up 0.2% in May compared with April, and the Euro zone industrial orders came down 3.5% vs. last month, falling more sharply than expected.
As for today a bundle of crucial data is expected. The day will start with the announcement at 7:00 GMT of the French Manufacturing PMI, expected to drop to 49.0 from 49.2 in the last result, followed by French Services PMI. At 7:30 GMT we await the German Manufacturing PMI, and German Services PMI, both indicators are predicted to be lower than their last measurement affecting the currency in a small but negative way. The most significant news will be published at 8:00 GMT when German Ifo Business Climate Index, and German Ifo Business Expectations Index will be released. The two important EZ events are also expected to decline, which could result in immediate bearishness from the EUR. Analysts predict that Ifo and PMI weakness could further punish the single currency to go as low as $1.5600, as for today. Look for high volatility in the EUR's trade movements in and around the economic events release.
JPY - JPY Continue To Provide Mixed Results
The JPY saw mixed results against most of its currency crosses yesterday. The JPY fell against the USD to its lowest value in a month following the strong news events coming from the US, against the EUR the JPY experimented in a volatile trading session to remain near the opening price.
The only data that came from the JPY yesterday was the Trade Balance showing that Japan trade surplus fell 89% in June. Exports fell 1.7%, while imports surged 16.2% driven by record oil prices over the last month or two. All signs are beginning to point toward the Asian powerhouse entering a much-anticipated recession.
On tap for today, forex traders should maintain their focus mainly on the Tokyo Core CPI. The National Core CPI, and the Corporate Services Price Index, all expected to be released. The Core CPI should rise to 1.6% helping to strengthen the Japanese currency. The National Core CPI is expected to be increased to 1.9%, while the CSPI is expected to remain unchanged at 0.6%. However, as was previously mentioned, these figures are not expected to have a serious impact on the Yen.
Oil - Will Crude Oil Continue Its Freefall?
Oil prices slid once again yesterday after a positive U.S. government inventory reports and a rise in the USD vs. the EUR. Crude oil was down $3.98 a barrel to $124.44 in trading on the New York Mercantile Exchange. That follows a drop of $3.09 on Tuesday.
The price slid after the U.S. government reported that Crude supplies fell less than expected in the week ended July 18, and that there was more gasoline in stockpiles than had been expected. Concern that Hurricane Dolly might damage U.S. production in the Gulf of Mexico dwindled as the storm neared the Texas/Mexico border. None of the computer models used to predict storm tracks indicated it would steer toward the Gulf of Mexico, home to about a quarter of U.S. oil production.
Crude oil also dropped after reports showed demand in the U.S. and Japan, two of the three largest oil consuming countries, fell as high prices crimp fuel consumption. Because oil is priced in US dollars, its price falls as the greenback gains against other currencies.
There is a very accurate bearish channel forming on the 4 hour chart, as the pair is now floating in the middle of it. The Slow Stochastic on the daily chart is showing a bearish cross, indicating that the bearish move shall continue. Going short might be the right choice today.
The 4 hour chart shows that the pair has been range-trading for a while now, as the cable has consolidated around the 2.00 level. However, a bearish cross on the 4 hour chart's Slow Stochastic, suggests that a bearish move is imminent. Going short with tight stops appears to be preferable.
There is a very distinct bullish channel forming on the daily chart, as the pair is now floating on its top barrier. However, all indicators on the 4 hour chart are giving bearish signals, suggesting a reversal might be impending. Going short might be wise today.
The bullish move that took place over the past couple of days seems to be vanished. The hourlies show that the pair has consolidated around the 1.0380 level, and the 4 hour chart is giving mixed signals. Waiting for a clearer signal on the hourlies might be a good strategy today.
The Wild Card
The bearish move which was initiated last week seems to be galloping in full speed. And now, all oscillators are indicating the continuation of the bearish momentum. This might be a great opportunity for forex traders to join a very promising trend.
|23:50||JPY||M2 Money Stock||y/y||4.4%||4.4%||-|
|00:00||JPY||Monetary Policy Statement||*||*||*|
|00:00||JPY||BoJ Press Conference||*||*||*|
|00:00||GBP||10-y Bond Auction||2.73|1.8||*||-|
|00:01||GBP||BRC Retail Sales Monitor||y/y||3.9%||*||-|
|00:30||AUD||NAB Business Confidence||8||*||-|
|06:00||JPY||Prelim Machine Tool Orders||y/y||40.3%||*||-|
|07:00||EUR||German Trade Balance||18.5B||19.3B||-|
|10:00||GBP||Inflation Report Hearings||*||*||*|