Economic News
USD
U.S. Bailout Package on Tap
All eyes look to the U.S. House of Representatives as the $700 billion bailout plan, passed in the Senate yesterday, is put forward for a second round of voting. This bill was killed the first time it reached the House since congressmen were not yet in agreement over the various stipulations included in the package. Witnessing an immense single-day drop in stocks following Monday's defeat of this bailout package may have indeed convinced Congress of the dangers in not passing this legislation. The short-term benefit of implementing this rescue plan is obvious; it should stabilize markets and boost investor confidence. However, some analysts expect it to do little more than ease the inevitable recession the U.S. will experience in the near future. The long-term costs and benefits of this package are still unknown.
Yesterday, traders who took advantage of the strengthening USD had the potential to make lucrative sums of money as the dollar reached a price level unseen in over a year. Diving as low as 1.3750 against the EUR and 1.7546 against the GBP, the USD gained some momentum and now sits steadily near 1.3850 in anticipation of today's news. The only currency beating the greenback's bullish trading day was the JPY, ending yesterday's session at 105.11, 70 points below the day's opening.
The bailout package is not the only thing on tap today, either. Also emanating from the U.S. economy are figures on Non-Farm Employment Change, Unemployment Rates, Average Hourly Earnings, and the ISM Manufacturing Index. Starting at 12:30 GMT traders should keep an eye on these figures as any worse-than-forecasted numbers have the potential to create a slight downturn to the USD. Keep in mind, however, that the primary driving force in today's market is the bailout plan. The news surrounding this monumental event will drive the market far more than any other factor.
EUR
Dovish Speech by Trichet Foreshadows a Cut to Interest Rates
As the trading week ends, analysts have observed one of the worst short-period downturns in the history of the EUR. Starting the week from a relatively high position, but on a slight bearish run, the EUR then tapered off throughout the week dropping to a 13-month low versus the USD. Pushed by decreasing economic growth, poor figures from the biggest European economies, and less risk appetite from investors, the EUR is starving for attention.
Following the speech delivered by Jean-Claude Trichet, President of the European Central Bank (ECB), yesterday led to a disastrous trading day for the EUR. Analysts are now forecasting a cut to interest rates in the Euro-Zone as his speech was far less hawkish than anticipated. He spoke of diminished inflation risks, the possibility of easing interest rates in next month's meeting, and the U.S. bailout package, but did little to lessen the fears within the Euro-Zone economy of the coming recession. These worries of a European recession have grown as the 15-nation currency took a major hit following the passage of the U.S. bailout package in the Senate yesterday, and from bank failures across Europe. Sagging below 1.3800 versus the USD and hitting as low as 0.7813 against the GBP, the recent outlook for the EUR is not good as it hit a record one-week drop against its primary currency rivals.
As for today, traders have little to look for in terms of economic data from Europe. With German banks on holiday and the only significant figure being European Retail Sales, the actor standing in the spot light today will be the bailout package being voted on by the House of Representatives in the U.S.
JPY
Japanese Yen the only Currency to Beat USD's Bullish Run
The JPY underwent a bullish trading session yesterday as it appreciated against all of its major currency rivals as well as being the only currency to beat the USD's bullish run. The JPY closed yesterday's trading session at 105.11 versus the USD. Moreover, the traumatic trading day experienced by the EUR led the JPY to reach a 2-year high of 144.55 against the 15-nation currency.
Japan was absent from the economic calendar yesterday as no indicators were published. However, the export-based Japanese economy took advantage of the drop in the price of Crude Oil which helped to lower the transportation costs of Japanese goods exported to the global economy.
Today is also expected to be a quiet news day from Japan. The JPY's trends will be affected by the rallies of its primary currency pairs. It seems as if both the USD and EUR are expected to undergo a volatile trading session today and their crosses with the JPY will likely be affected. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially the U.S. bailout plan currently being looked over by the U.S. House of Representatives.
Oil
Crude Declines amid Worsening Demand Outlook
The price of Crude Oil continues to fall, dropping 4.6% to $93.97 a barrel so far this week. This weekly drop is the biggest since the December of 2004. The price of Oil most likely will not stay at current levels near $100 if the global economy skids into recession and economic activity slows, dragging down demand for Crude Oil. With the ongoing financial crisis, demand for energy in the world's largest energy consuming nation, the U.S., has reduced. If indeed the U.S. falls into a deep, sustained recession, the price of Oil will likely go even lower, potentially reaching as low as $50 a barrel!
Today's chapter will be about whether or not the U.S. House of Representatives approves the government's $700 billion bank-bailout plan. After the House rejected the first version on Monday, the legislative body will now consider the Senate's revised bill again today. However, the market remains pessimistic about this legislation; even if the financial bailout plan is passed it is highly unlikely that it will slow down the onset of the coming recession.
The downward pressure on the price of Crude Oil is likely to persist, and it depends now on whether or not the Organization of the Petroleum Exporting Countries (OPEC) can maintain production discipline and restrict supplies. If OPEC can control its Oil exports, it may be able to keep the price of Crude Oil near its recent highs; if not, prices will continue to deteriorate.
Technical News
EUR/USD
It seems that the pair has reached it bottom after breaching the 1.3750 level. Currently, a bullish cross on the 4 hour chart's Slow Stochastic suggests that a bullish correction is impending. Going long with tight stops looks to be the right strategy today.
GBP/USD
After breaching through the 1.7560 level, the cable seems to be on its way to initiate a bullish reversal. A bullish cross on the 4 hour chart's Slow Stochastic implies that the move is quite imminent. Going long might be preferable today.
USD/JPY
The pair continues to provide mixed results, and is now traded around the 105.25 level. It seems that a moderate bullish movement might take place as all oscillators on the 4 hour chart are pointing up. Buying on lows appears to be the right choice.
USD/CHF
There is a very distinct bullish channel forming on the daily chart, however as the Bollinger Bands on the hourlies are tightening, suggesting that a sharp movement is forthcoming, and as the RSI has crossed the 40 line, the pair seems to be facing a mild downtrend.
The Wild Card
Gold
There is a very accurate bearish channel forming on the daily chart, as gold prices had consecutively dropped since reaching the $926 an ounce price. Currently, as the RSI on the daily chart is floating near the 50 line and the Slow Stochastic is pointing down, gold might extend its bearish trend. This might be a great opportunity for forex traders to join a very popular trend.
Friday 3 October 2008
Wednesday 24 September 2008
Daily Forex Analysis
Economic News
USD
Rescue Package Generates Confidence in the USD
The USD surprisingly underwent a bullish trading session yesterday as it appreciated against all of its major currency rivals. Earlier in the day, the greenback reached session highs against the EUR after negative Euro-Zone manufacturing data focused attention on weakness in the Euro-Zone. At the end of yesterday's session the USD closed at 1.4644 versus the EUR. The USD also saw steady gains against the Pound Sterling and Swiss Franc.
The most influential economic data coming from the U.S. yesterday were the testimonies of Fed Chairman Bernanke and Treasury Secretary Paulson to the Senate Committee on Banking, Housing, and Urban Affairs. Investors were encouraged by a slight decrease in oil prices as they awaited details of the U.S. government's bailout package. The initial euphoria about the plan to buy damaged mortgage debt has turned to anxiety about how the government will fund the $700 billion deal without burdening the U.S. taxpayer. Analysts say that this has limited the USD's gains. Liquidity was thin in the market, with investors uncertain about the future movement of the stock market. They were staying on the sidelines until turmoil in financial markets subsided. In other news, the Bernanke and Paulson testimonies were in support of their proposal to give the government the authority to buy up illiquid assets, something Congress seems skeptical about unless there are mechanisms built into the law that would protect U.S. taxpayers from any downside losses. The proposal has had a huge affect on the greenback so far this week.
Looking ahead to today, the most important financial indicator scheduled to come from the U.S. economy is the Existing Home Sales. Analysts forecast that the Existing Home Sales will slightly drop to 4.93M from 5.00M. If data returns inline with expectations we should see the dollar's resurrection continue as traders will look to infuse bullish USD positions. Traders should also keep tabs on today's testimonies by the Bernanke and Paulson as they are scheduled to testify to financial committees in Congress again today regarding their economic rescue package.
EUR
Negative Manufacturing Data Creates Bearish Reversal for EUR
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15-nation currency saw high volatility, especially against the USD, eventually closing at 1.4644 levels. The EUR also depreciated yesterday versus the GBP and JPY, but finished strong against the Swiss Franc.
The most influential economic indicator coming from the Euro-Zone was the Flash Manufacturing PMI. Euro-Zone services and manufacturing activity decreased for a fourth consecutive month in September, pointing to an economy in stagnation despite economic figures beating expectations. Euro-Zone manufacturing activity fell to a near seven-year low of 45.3 from August's 47.6, considerably below the 47.2 forecast. When this indicator is above 50.0 it signifies growth in the manufacturing industry, and just the opposite when it is below this figure. Another important indicator was French Consumer Spending. French shoppers cut back on spending in August, and manufacturing output saw its sharpest contraction in over six-and-a-half years in September, pointing to weak economic growth in the Third Quarter. These indicators point out the already well-known fact that the European economy has significantly weakened the EUR.
Looking ahead to today, the most important financial indicator scheduled from the Euro-Zone is the German Ifo Business Climate, which is an economic measure based on a survey of about 7,000 business managers and has historically been an excellent indicator of general economic health. Traders are advised to pay close attention to this announcement as a stronger-than-expected result may launch a bullish correction to the EUR's weakness which started yesterday.
JPY
Yen Gains Stability from Calming Markets
Yesterday, the JPY underwent a relatively flat session against most of its major currency rivals. Floating between 105 and 106 against the USD and closing at 105.64 yesterday. The JPY was predominantly influenced by the other major currencies' behavior, which experienced more volatile sessions due to the rapidly changing markets in today's economy.
The only economic indicator coming from Japan yesterday was the BSI Manufacturing Index, a general measure of market conditions and business health. Large manufacturing corporations saw their business conditions index bump up to -10.0 from -15.1 in the Second Quarter, while the Non-Manufacturing index also increased to -10.2 against a prior -15.3. Small corporations saw a minor increase in business conditions, but still have the largest number of negative figures. Sentiment in all industries increased from -36.5 to -34.3 in the Third Quarter, helping the JPY's stability overall.
Today's late release of the Japanese Trade Balance and CSPI should provide little fluctuation in the market as well. Traders should keep a close watch on the news coming from the U.S. and Euro-Zone as both will continue to be the deciding factors in the Yen's movement today.
Oil
Price of Oil Comes Down from Suspicious Price Jump
How can the recent spike in the price of Crude Oil be explained? An interesting perspective by analysts has it that a maneuver taken by powerful traders pushed the price to jump during the last hour of trading for October delivery of Light Sweet Crude in an attempt to grab a corner in the market. Investigations have been initiated to look into these allegations. This outlook can be justified by the fact that only about 41,000 trades changed hands, as compared to the usual 200,000+ that change hands on a typical trading day, yet still the market made an historic jump in price, which automatically raised eyebrows among investors.
Dropping from the $110 mark reached Monday and leveling-off near $106 during today's early trading sessions; the price of Crude Oil appears to be coming down from its recent flight. Adding to this downturn is the rally seen by the USD which has investors more confident in the strength of the currency market. For today's trading, the movement of the USD should remain a strong indicator for the price of Crude Oil, especially since Crude Oil Inventories are to be released today from the U.S., and the economic recovery program is still under deliberation, potentially causing higher volatility in the market.
Technical News
EUR/USD
The pair has been going through choppy sessions with no distinct direction for the past 3 trading days. Several attempts to breach through the 1.4500 support level failed, and the pair is consolidating around 1.4650. The daily chart provides mixed signals; however, the 4-hour chart is showing signs of local bearish momentum. The Slow Stochastic is negatively sloped, implying that a bearish correction might continue in the near future.
GBP/USD
The daily chart indicates that the bullish trend has not yet said its last word. The Slow Stochastic is showing a positive slope on the daily chart, and it appears that the bearish trend will continue. Going short with tight stops might be a very wise choice today.
USD/JPY
The momentum which was created after the bearish breach through the flag on the 4-hour chart continues with full steam. The daily chart is still very bearish as the 4-hour chart is starting to show first signals of a moderate bullish momentum. It might be preferable to sell on highs today.
USD/CHF
There is a widening bullish channel forming on the 4-hour chart as the pair now floats at the bottom level of it. A bullish cross on the Slow Stochastic supports the notion that the pair will test the upper level of the channel, probably before the weekend. Going long with tight stops might be a good choice today
USD
Rescue Package Generates Confidence in the USD
The USD surprisingly underwent a bullish trading session yesterday as it appreciated against all of its major currency rivals. Earlier in the day, the greenback reached session highs against the EUR after negative Euro-Zone manufacturing data focused attention on weakness in the Euro-Zone. At the end of yesterday's session the USD closed at 1.4644 versus the EUR. The USD also saw steady gains against the Pound Sterling and Swiss Franc.
The most influential economic data coming from the U.S. yesterday were the testimonies of Fed Chairman Bernanke and Treasury Secretary Paulson to the Senate Committee on Banking, Housing, and Urban Affairs. Investors were encouraged by a slight decrease in oil prices as they awaited details of the U.S. government's bailout package. The initial euphoria about the plan to buy damaged mortgage debt has turned to anxiety about how the government will fund the $700 billion deal without burdening the U.S. taxpayer. Analysts say that this has limited the USD's gains. Liquidity was thin in the market, with investors uncertain about the future movement of the stock market. They were staying on the sidelines until turmoil in financial markets subsided. In other news, the Bernanke and Paulson testimonies were in support of their proposal to give the government the authority to buy up illiquid assets, something Congress seems skeptical about unless there are mechanisms built into the law that would protect U.S. taxpayers from any downside losses. The proposal has had a huge affect on the greenback so far this week.
Looking ahead to today, the most important financial indicator scheduled to come from the U.S. economy is the Existing Home Sales. Analysts forecast that the Existing Home Sales will slightly drop to 4.93M from 5.00M. If data returns inline with expectations we should see the dollar's resurrection continue as traders will look to infuse bullish USD positions. Traders should also keep tabs on today's testimonies by the Bernanke and Paulson as they are scheduled to testify to financial committees in Congress again today regarding their economic rescue package.
EUR
Negative Manufacturing Data Creates Bearish Reversal for EUR
The EUR finished yesterday's trading session with mixed results versus the major currencies. The 15-nation currency saw high volatility, especially against the USD, eventually closing at 1.4644 levels. The EUR also depreciated yesterday versus the GBP and JPY, but finished strong against the Swiss Franc.
The most influential economic indicator coming from the Euro-Zone was the Flash Manufacturing PMI. Euro-Zone services and manufacturing activity decreased for a fourth consecutive month in September, pointing to an economy in stagnation despite economic figures beating expectations. Euro-Zone manufacturing activity fell to a near seven-year low of 45.3 from August's 47.6, considerably below the 47.2 forecast. When this indicator is above 50.0 it signifies growth in the manufacturing industry, and just the opposite when it is below this figure. Another important indicator was French Consumer Spending. French shoppers cut back on spending in August, and manufacturing output saw its sharpest contraction in over six-and-a-half years in September, pointing to weak economic growth in the Third Quarter. These indicators point out the already well-known fact that the European economy has significantly weakened the EUR.
Looking ahead to today, the most important financial indicator scheduled from the Euro-Zone is the German Ifo Business Climate, which is an economic measure based on a survey of about 7,000 business managers and has historically been an excellent indicator of general economic health. Traders are advised to pay close attention to this announcement as a stronger-than-expected result may launch a bullish correction to the EUR's weakness which started yesterday.
JPY
Yen Gains Stability from Calming Markets
Yesterday, the JPY underwent a relatively flat session against most of its major currency rivals. Floating between 105 and 106 against the USD and closing at 105.64 yesterday. The JPY was predominantly influenced by the other major currencies' behavior, which experienced more volatile sessions due to the rapidly changing markets in today's economy.
The only economic indicator coming from Japan yesterday was the BSI Manufacturing Index, a general measure of market conditions and business health. Large manufacturing corporations saw their business conditions index bump up to -10.0 from -15.1 in the Second Quarter, while the Non-Manufacturing index also increased to -10.2 against a prior -15.3. Small corporations saw a minor increase in business conditions, but still have the largest number of negative figures. Sentiment in all industries increased from -36.5 to -34.3 in the Third Quarter, helping the JPY's stability overall.
Today's late release of the Japanese Trade Balance and CSPI should provide little fluctuation in the market as well. Traders should keep a close watch on the news coming from the U.S. and Euro-Zone as both will continue to be the deciding factors in the Yen's movement today.
Oil
Price of Oil Comes Down from Suspicious Price Jump
How can the recent spike in the price of Crude Oil be explained? An interesting perspective by analysts has it that a maneuver taken by powerful traders pushed the price to jump during the last hour of trading for October delivery of Light Sweet Crude in an attempt to grab a corner in the market. Investigations have been initiated to look into these allegations. This outlook can be justified by the fact that only about 41,000 trades changed hands, as compared to the usual 200,000+ that change hands on a typical trading day, yet still the market made an historic jump in price, which automatically raised eyebrows among investors.
Dropping from the $110 mark reached Monday and leveling-off near $106 during today's early trading sessions; the price of Crude Oil appears to be coming down from its recent flight. Adding to this downturn is the rally seen by the USD which has investors more confident in the strength of the currency market. For today's trading, the movement of the USD should remain a strong indicator for the price of Crude Oil, especially since Crude Oil Inventories are to be released today from the U.S., and the economic recovery program is still under deliberation, potentially causing higher volatility in the market.
Technical News
EUR/USD
The pair has been going through choppy sessions with no distinct direction for the past 3 trading days. Several attempts to breach through the 1.4500 support level failed, and the pair is consolidating around 1.4650. The daily chart provides mixed signals; however, the 4-hour chart is showing signs of local bearish momentum. The Slow Stochastic is negatively sloped, implying that a bearish correction might continue in the near future.
GBP/USD
The daily chart indicates that the bullish trend has not yet said its last word. The Slow Stochastic is showing a positive slope on the daily chart, and it appears that the bearish trend will continue. Going short with tight stops might be a very wise choice today.
USD/JPY
The momentum which was created after the bearish breach through the flag on the 4-hour chart continues with full steam. The daily chart is still very bearish as the 4-hour chart is starting to show first signals of a moderate bullish momentum. It might be preferable to sell on highs today.
USD/CHF
There is a widening bullish channel forming on the 4-hour chart as the pair now floats at the bottom level of it. A bullish cross on the Slow Stochastic supports the notion that the pair will test the upper level of the channel, probably before the weekend. Going long with tight stops might be a good choice today
Tuesday 23 September 2008
Daily Forex Analysis
Economic News
USD
Market Uncertainty Lands Heavy Blow against the USD
The USD saw a traumatic day of trading yesterday as it stretched as high as 1.48 versus the EUR, and spiked up to 1.8636 against the GBP. This sharp decline in the value of the USD comes from the ongoing financial crisis and the fact that the recent rescue plan has not yet produced enough confidence in the future of the financial sector. Investor uncertainty lingers over the question of whether or not this plan will do the job, especially when many of its details may not get released until later next week. Until then, the USD will continue to bear the brunt of the recent volatility emerging from this crisis.
Another player in the USD's recent drama is the sharp climb in the price of Crude Oil. As October contracts came to a close, traders dove into the craze over black gold and watched with joy at the record-high one-day jump in the price of Oil, adversely affecting the USD - as Oil is bought and sold in dollars - pushing its already weakened value to a lower mark.
Looking at today's trading, there will be two crucial testimonies given by U.S. Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson. These will represent the initial steps in the deliberation and implementation of their newly proposed economic rescue plan. They are expected to emphasize their latest actions concerning the $700 billion bailout, Fannie Mae and Freddie Mac, the investment bank failures, and other financial problems. Their testimony will take place at 14:00 GMT in front of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Traders should watch these speeches carefully as they will no doubt bring extreme volatility to the market, especially on the direction for the USD over the next few days.
EUR
Will the EUR's Rally be Short-Lived?
The EUR's rally yesterday can be attributed to the rash sell-off in dollars as traders were bailing out of the USD in light of the recent Wall Street blues. No doubt European Central Bank President Trichet's speech about transparency in financial institutions made a positive impact as well. The EUR hit a high mark it hasn't seen in some time as it reached up to the 1.48 level against the USD, as well as spiking versus the JPY up to the 156.8 level. Given all the positive data emerging from yesterday's market it appears as if the EUR is on a rather strong bullish run. However, dark clouds are on the horizon.
The difficulties which the EUR may see are going to begin later today. With many economic indicators being released from France, Germany, Belgium, and the Euro-Zone in general, the European markets may see high volatility. The downside of these indicators comes from the fact that they are all expected to return negative results as compared to the previous release of this data.
On tap today, traders should pay close attention to French Consumer Spending, the French and German Manufacturing PMI, as well as the Euro-Zone's Industrial New Orders figure since all this data together will carry a heavy impact on the EUR. The question is whether or not the negative data coming from the Euro-Zone can out-do the strong downtrend in the USD and create a reversal in the EUR's primary trading pair. If today's indicators come out worse than expected, traders might see a reversal to yesterday's trends.
JPY
Japan Not Behind the Wheel of JPY's Recent Movement
No data emerged from the Japanese economy yesterday as banks on the island country observed Autumnal Equinox Day. As a result, the driving forces behind the JPY yesterday were the other major currencies. The JPY saw mixed results based on recent American and European figures. Against the USD, the Yen rose in value as the dollar took a plunge resulting from the recent financial crisis and market uncertainty. However, against the EUR, the JPY witnessed a sharp devaluing spike as the EUR recorded a long-overdue jump in strength.
As with the USD, the JPY is also influenced by the price of Crude Oil. When Oil prices soar, as traders saw yesterday, the Japanese economy loses steam from an expected increase in the cost of transporting goods, thereby increasing the cost of Japanese exports. Today, traders should watch the Japanese BSI Manufacturing Index indicator as it is forecasted to be lower than the last release. This negative release may drive the JPY further down versus its currency counterparts. However, the USD and EUR are expected to be behind the wheel of today's trading.
Oil
The Price of Crude Oil Soars
Just when investors thought it couldn't get worse, the market drops and creates a record jump in the price of Oil. The price of black gold made history yesterday as it jumped $25 in one day. This price explosion did not go unnoticed by traders. As investors gambled on the direction and future strength of the market, the price of Crude Oil became a stronger currency-hedge for traders. After experiencing a significant drop in price, falling as low as the $91 mark last week, the price of Light Sweet Crude unexpectedly reversed and began an upswing which has done nothing but gain strength.
The uptrend does not appear to be losing momentum; however, if the USD rallies, we may see some leveling-off in the price of Oil. Adding to the upswing in the price of Oil yesterday was the expiration of the contracts for October delivery of Light Sweet Crude. As the contracts for November kick off, traders may see some signs for a reversal. Today, on the other hand, traders should note the direction of the USD during and after the speeches delivered by Bernanke and Paulson as the dollar's movement is typically a strong indicator for the direction of price of Crude Oil.
Technical News
EUR/USD
Yesterday the pair was consolidated around the 1.4780 level, after making a 300 pips rise. Currently, a bearish cross on the 4-hour chart's Slow Stochastic suggests that a bearish correction might take place. Going short with tight stops could be a good strategy today.
GBP/USD
There is a very distinct bullish channel forming on the daily chart, as the cable is now floating in the middle of it. The current price has crossed the Bollinger Band's upper border, signifying that the uptrend should continue. Going long might be the right choice today.
USD/JPY
It appears that the bearish momentum has reached its peak, as the pair failed to breach the 105.00 level. A rise to the 105.70 will validate the bullish reversal, with a target price of 106.60.
USD/CHF
The pair has limited its bearish momentum after testing the 1.0700 level. And now, a bullish cross on the 4-hour chart's Slow Stochastic indicates that a bullish movement is quite imminent. Going long seems to be preferable.
The Wild Card
Gold
After failing to breach the $910 level, gold prices dropped significantly, and are now traded around $889. The Bollinger Bands on the 4-hour charts are tightening, suggesting that the bearish move should extend. This might be a great opportunity for forex traders to join a very promising trend.
USD
Market Uncertainty Lands Heavy Blow against the USD
The USD saw a traumatic day of trading yesterday as it stretched as high as 1.48 versus the EUR, and spiked up to 1.8636 against the GBP. This sharp decline in the value of the USD comes from the ongoing financial crisis and the fact that the recent rescue plan has not yet produced enough confidence in the future of the financial sector. Investor uncertainty lingers over the question of whether or not this plan will do the job, especially when many of its details may not get released until later next week. Until then, the USD will continue to bear the brunt of the recent volatility emerging from this crisis.
Another player in the USD's recent drama is the sharp climb in the price of Crude Oil. As October contracts came to a close, traders dove into the craze over black gold and watched with joy at the record-high one-day jump in the price of Oil, adversely affecting the USD - as Oil is bought and sold in dollars - pushing its already weakened value to a lower mark.
Looking at today's trading, there will be two crucial testimonies given by U.S. Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson. These will represent the initial steps in the deliberation and implementation of their newly proposed economic rescue plan. They are expected to emphasize their latest actions concerning the $700 billion bailout, Fannie Mae and Freddie Mac, the investment bank failures, and other financial problems. Their testimony will take place at 14:00 GMT in front of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Traders should watch these speeches carefully as they will no doubt bring extreme volatility to the market, especially on the direction for the USD over the next few days.
EUR
Will the EUR's Rally be Short-Lived?
The EUR's rally yesterday can be attributed to the rash sell-off in dollars as traders were bailing out of the USD in light of the recent Wall Street blues. No doubt European Central Bank President Trichet's speech about transparency in financial institutions made a positive impact as well. The EUR hit a high mark it hasn't seen in some time as it reached up to the 1.48 level against the USD, as well as spiking versus the JPY up to the 156.8 level. Given all the positive data emerging from yesterday's market it appears as if the EUR is on a rather strong bullish run. However, dark clouds are on the horizon.
The difficulties which the EUR may see are going to begin later today. With many economic indicators being released from France, Germany, Belgium, and the Euro-Zone in general, the European markets may see high volatility. The downside of these indicators comes from the fact that they are all expected to return negative results as compared to the previous release of this data.
On tap today, traders should pay close attention to French Consumer Spending, the French and German Manufacturing PMI, as well as the Euro-Zone's Industrial New Orders figure since all this data together will carry a heavy impact on the EUR. The question is whether or not the negative data coming from the Euro-Zone can out-do the strong downtrend in the USD and create a reversal in the EUR's primary trading pair. If today's indicators come out worse than expected, traders might see a reversal to yesterday's trends.
JPY
Japan Not Behind the Wheel of JPY's Recent Movement
No data emerged from the Japanese economy yesterday as banks on the island country observed Autumnal Equinox Day. As a result, the driving forces behind the JPY yesterday were the other major currencies. The JPY saw mixed results based on recent American and European figures. Against the USD, the Yen rose in value as the dollar took a plunge resulting from the recent financial crisis and market uncertainty. However, against the EUR, the JPY witnessed a sharp devaluing spike as the EUR recorded a long-overdue jump in strength.
As with the USD, the JPY is also influenced by the price of Crude Oil. When Oil prices soar, as traders saw yesterday, the Japanese economy loses steam from an expected increase in the cost of transporting goods, thereby increasing the cost of Japanese exports. Today, traders should watch the Japanese BSI Manufacturing Index indicator as it is forecasted to be lower than the last release. This negative release may drive the JPY further down versus its currency counterparts. However, the USD and EUR are expected to be behind the wheel of today's trading.
Oil
The Price of Crude Oil Soars
Just when investors thought it couldn't get worse, the market drops and creates a record jump in the price of Oil. The price of black gold made history yesterday as it jumped $25 in one day. This price explosion did not go unnoticed by traders. As investors gambled on the direction and future strength of the market, the price of Crude Oil became a stronger currency-hedge for traders. After experiencing a significant drop in price, falling as low as the $91 mark last week, the price of Light Sweet Crude unexpectedly reversed and began an upswing which has done nothing but gain strength.
The uptrend does not appear to be losing momentum; however, if the USD rallies, we may see some leveling-off in the price of Oil. Adding to the upswing in the price of Oil yesterday was the expiration of the contracts for October delivery of Light Sweet Crude. As the contracts for November kick off, traders may see some signs for a reversal. Today, on the other hand, traders should note the direction of the USD during and after the speeches delivered by Bernanke and Paulson as the dollar's movement is typically a strong indicator for the direction of price of Crude Oil.
Technical News
EUR/USD
Yesterday the pair was consolidated around the 1.4780 level, after making a 300 pips rise. Currently, a bearish cross on the 4-hour chart's Slow Stochastic suggests that a bearish correction might take place. Going short with tight stops could be a good strategy today.
GBP/USD
There is a very distinct bullish channel forming on the daily chart, as the cable is now floating in the middle of it. The current price has crossed the Bollinger Band's upper border, signifying that the uptrend should continue. Going long might be the right choice today.
USD/JPY
It appears that the bearish momentum has reached its peak, as the pair failed to breach the 105.00 level. A rise to the 105.70 will validate the bullish reversal, with a target price of 106.60.
USD/CHF
The pair has limited its bearish momentum after testing the 1.0700 level. And now, a bullish cross on the 4-hour chart's Slow Stochastic indicates that a bullish movement is quite imminent. Going long seems to be preferable.
The Wild Card
Gold
After failing to breach the $910 level, gold prices dropped significantly, and are now traded around $889. The Bollinger Bands on the 4-hour charts are tightening, suggesting that the bearish move should extend. This might be a great opportunity for forex traders to join a very promising trend.
Friday 19 September 2008
Daily Forex Analysis
Economic News
USD
Paulson's Announcement Creates Hope for a USD Rally
The USD saw mixed trends against all of its currency counterparts yesterday during an unusually volatile trading session. Against the JPY, the USD was up 1% at 105.36, while against the EUR the greenback recovered from its initial losses during the early trading sessions. This is mainly because the greenback is still suffering from the meltdown of some major American financial institutions. The USD did obtain some relief, however, after stock markets rallied worldwide. This was in large measure due to the coordinated effort of six of the world's top central banks by pumping $247 billion into circulation to calm stock markets across Europe and the United States.
Also contributing to the USD's rally was the proposal of US Treasury Secretary Henry Paulson to come up with a plan that would help eliminate bad mortgage-related debt. The main idea will be to create a body that will deal with today's financial crisis similar to what was done during the savings and loan crisis of the 1980s with the establishment of Resolution Trust Corp. As a result of Paulson's announcement, stock markets worldwide witnessed one of the largest jumps in recent days and the USD began a strong rally.
In other economic news yesterday, the US Unemployment Claims figure was released and showed an unexpected rise to 455K from 445K in the last week, contrary to market forecasts. Traders should keep an eye on the EUR and JPY as indicators of the strength of the USD today as analysts are expecting a large amount of volatility during today's trading sessions while investors follow closely the development of this recent financial crisis.
EUR
Will the Euro-Zone Consider Cutting Interest Rates?
Yesterday, the EUR saw a very volatile trading session with mixed results against its major currency counterparts. The EUR rallied against the USD during early trading sessions as the European Central Bank (ECB), and other central banks, sold USD to pump liquidity into the global financial system. However, during later trading sessions the EUR lost its early gains after US stock markets landed a strong rebound. The EUR also rose 1.2% against the JPY to finish the day at 151.22.
The expectations of an ECB early cut of Interest Rates continues growing amid fears that global financial crises will seriously dampen economic activity in the Euro-Zone. Economists didn't expect the ECB to cut official rates this year given the recent Euro-Zone inflation, which now sits at a record high of 4% for the last few months. The recent report that economic growth will fall below 1% in the Euro-Zone next year, and the ECB joint liquidity action with other central banks, is making a rate-cut more probable in the Second Quarter of 2009. Traders may expect the ECB to contemplate such a move if this recent financial crisis worsens.
Today will be a very quiet news day for the EUR as only one economic figure will be released. The German PPI, which measures the change in the price of goods sold by manufacturers, is forecasted to be lower than the previous month's. Traders should follow the development of the other currencies, the GBP and JPY primarily, as they will also affect the EUR's volatility today.
JPY
USD-Supplied Money-Market Operations Introduced to Japanese Economy
The JPY underwent a bearish trading session yesterday, as it depreciated against all of its major currency rivals. In early trading, the Asian currency rallied against the USD, backed by unwinding carry trades, as investors abandoned the JPY to purchase higher yielding, yet riskier, assets. After the joint action by the world central banks to inject liquidity into the market, the JPY was no longer considered a safe haven because such a move made the risk of global currencies decrease significantly. The USD rose 1% against the JPY, closing at 105.36, while the EUR rose 1.2% to 151.22.
Another major initiative that was enacted yesterday came from the surprise announcement that for the first time in its history the Bank of Japan will introduce USD-supplied money-market operations in an effort to deal with strong USD demand. In other news, traders saw the release of the Bank of Japan's (BoJ) Monthly Report yesterday, which stated that it has cut its assessment of business investment, citing low corporate profits. The BoJ also reiterated its view about a sluggish economy in part because of high energy costs and weakening export growth.
Today, the JPY will be absent from the economic calendar and traders are advised to follow global developments instead. It would be wise for traders to follow the USD, EUR and GBP today as they are more likely to determine the JPY's movements
Oil
Oil Prices Float in Expectation of Market Direction
Has the upswing in the price of oil met its peak? Those trading on Thursday saw a continuation of the previous day's rally in the price of Crude Oil. Due primarily to a weakened dollar, Oil jumped from $91 Monday, to $98 Thursday, before showing any signs of reversing. Now the market is beginning to see this price float around the $97 mark while traders assess the direction of the USD before the weekend. As a result of yesterday's announcements that various central banks would begin to pump billions of dollars into the market, we may see a reversal to the price of Crude Oil, but it is still too early to tell if this action will have the desired effect.
So long as the direction of the major currencies remains uncertain, commodities like Oil will be bought up by traders looking to stash their money in a safe place. This will continue to drive the price of oil higher and higher. Traders would be wise to keep an eye on the direction of the USD today. If the dollar rallies, we may see a drop in the price of Oil. If not, look for Oil to continue climbing.
Technical News
EUR/USD
The pair has breached the key Fibonacci level of 1.4400, and the break has been validated by a full bar beneath that level on the 4-hour chart. The negative slope on the 4-hour chart's Slow Stochastic strengthens the notion that the momentum is quite bearish. Going short might be wise today.
GBP/USD
The pair is in the middle of a very intensive downtrend that still shows great momentum and on a bigger scale appears to have more room to run. The hourly chart is showing a strong bearish cross, and the 4-hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Being on the sell side appears to be the right choice today.
USD/JPY
The pair is showing local bullish momentum on the hourly level after a violent hike to the 107 level. On the daily chart, the pair has been range trading with high volatility for a while now and it appears that the bullish price movement might be back. The Slow Stochastic and the RSI of the hourly chart are indicating an upcoming test of the 107.80 level. If that level is breached, swinging in the trend would be the best strategy
USD/CHF
The pair has breached through the Fibonacci key level of 1.1100, and all oscillators on the 4-hour chart are indicating further bullish movement. The hourly Bollinger Bands are showing that the price has crossed its upper border, signaling that the current trend will probably continue, as the pair's new target price might be 1.1250.
The Wild Card
CHF/JPY
There has been a strong breach through the upper level of the bearish channel on the 4-hour chart and the momentum on the daily chart is now bullish. There is also a very strong bullish cross forming on the 4-hour chart which indicates the continuation of the bullish channel. The RSI supports that bullish notion and it appears that the next target price might be around 97.00 Going long appears to be preferable strategy for forex traders today
USD
Paulson's Announcement Creates Hope for a USD Rally
The USD saw mixed trends against all of its currency counterparts yesterday during an unusually volatile trading session. Against the JPY, the USD was up 1% at 105.36, while against the EUR the greenback recovered from its initial losses during the early trading sessions. This is mainly because the greenback is still suffering from the meltdown of some major American financial institutions. The USD did obtain some relief, however, after stock markets rallied worldwide. This was in large measure due to the coordinated effort of six of the world's top central banks by pumping $247 billion into circulation to calm stock markets across Europe and the United States.
Also contributing to the USD's rally was the proposal of US Treasury Secretary Henry Paulson to come up with a plan that would help eliminate bad mortgage-related debt. The main idea will be to create a body that will deal with today's financial crisis similar to what was done during the savings and loan crisis of the 1980s with the establishment of Resolution Trust Corp. As a result of Paulson's announcement, stock markets worldwide witnessed one of the largest jumps in recent days and the USD began a strong rally.
In other economic news yesterday, the US Unemployment Claims figure was released and showed an unexpected rise to 455K from 445K in the last week, contrary to market forecasts. Traders should keep an eye on the EUR and JPY as indicators of the strength of the USD today as analysts are expecting a large amount of volatility during today's trading sessions while investors follow closely the development of this recent financial crisis.
EUR
Will the Euro-Zone Consider Cutting Interest Rates?
Yesterday, the EUR saw a very volatile trading session with mixed results against its major currency counterparts. The EUR rallied against the USD during early trading sessions as the European Central Bank (ECB), and other central banks, sold USD to pump liquidity into the global financial system. However, during later trading sessions the EUR lost its early gains after US stock markets landed a strong rebound. The EUR also rose 1.2% against the JPY to finish the day at 151.22.
The expectations of an ECB early cut of Interest Rates continues growing amid fears that global financial crises will seriously dampen economic activity in the Euro-Zone. Economists didn't expect the ECB to cut official rates this year given the recent Euro-Zone inflation, which now sits at a record high of 4% for the last few months. The recent report that economic growth will fall below 1% in the Euro-Zone next year, and the ECB joint liquidity action with other central banks, is making a rate-cut more probable in the Second Quarter of 2009. Traders may expect the ECB to contemplate such a move if this recent financial crisis worsens.
Today will be a very quiet news day for the EUR as only one economic figure will be released. The German PPI, which measures the change in the price of goods sold by manufacturers, is forecasted to be lower than the previous month's. Traders should follow the development of the other currencies, the GBP and JPY primarily, as they will also affect the EUR's volatility today.
JPY
USD-Supplied Money-Market Operations Introduced to Japanese Economy
The JPY underwent a bearish trading session yesterday, as it depreciated against all of its major currency rivals. In early trading, the Asian currency rallied against the USD, backed by unwinding carry trades, as investors abandoned the JPY to purchase higher yielding, yet riskier, assets. After the joint action by the world central banks to inject liquidity into the market, the JPY was no longer considered a safe haven because such a move made the risk of global currencies decrease significantly. The USD rose 1% against the JPY, closing at 105.36, while the EUR rose 1.2% to 151.22.
Another major initiative that was enacted yesterday came from the surprise announcement that for the first time in its history the Bank of Japan will introduce USD-supplied money-market operations in an effort to deal with strong USD demand. In other news, traders saw the release of the Bank of Japan's (BoJ) Monthly Report yesterday, which stated that it has cut its assessment of business investment, citing low corporate profits. The BoJ also reiterated its view about a sluggish economy in part because of high energy costs and weakening export growth.
Today, the JPY will be absent from the economic calendar and traders are advised to follow global developments instead. It would be wise for traders to follow the USD, EUR and GBP today as they are more likely to determine the JPY's movements
Oil
Oil Prices Float in Expectation of Market Direction
Has the upswing in the price of oil met its peak? Those trading on Thursday saw a continuation of the previous day's rally in the price of Crude Oil. Due primarily to a weakened dollar, Oil jumped from $91 Monday, to $98 Thursday, before showing any signs of reversing. Now the market is beginning to see this price float around the $97 mark while traders assess the direction of the USD before the weekend. As a result of yesterday's announcements that various central banks would begin to pump billions of dollars into the market, we may see a reversal to the price of Crude Oil, but it is still too early to tell if this action will have the desired effect.
So long as the direction of the major currencies remains uncertain, commodities like Oil will be bought up by traders looking to stash their money in a safe place. This will continue to drive the price of oil higher and higher. Traders would be wise to keep an eye on the direction of the USD today. If the dollar rallies, we may see a drop in the price of Oil. If not, look for Oil to continue climbing.
Technical News
EUR/USD
The pair has breached the key Fibonacci level of 1.4400, and the break has been validated by a full bar beneath that level on the 4-hour chart. The negative slope on the 4-hour chart's Slow Stochastic strengthens the notion that the momentum is quite bearish. Going short might be wise today.
GBP/USD
The pair is in the middle of a very intensive downtrend that still shows great momentum and on a bigger scale appears to have more room to run. The hourly chart is showing a strong bearish cross, and the 4-hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Being on the sell side appears to be the right choice today.
USD/JPY
The pair is showing local bullish momentum on the hourly level after a violent hike to the 107 level. On the daily chart, the pair has been range trading with high volatility for a while now and it appears that the bullish price movement might be back. The Slow Stochastic and the RSI of the hourly chart are indicating an upcoming test of the 107.80 level. If that level is breached, swinging in the trend would be the best strategy
USD/CHF
The pair has breached through the Fibonacci key level of 1.1100, and all oscillators on the 4-hour chart are indicating further bullish movement. The hourly Bollinger Bands are showing that the price has crossed its upper border, signaling that the current trend will probably continue, as the pair's new target price might be 1.1250.
The Wild Card
CHF/JPY
There has been a strong breach through the upper level of the bearish channel on the 4-hour chart and the momentum on the daily chart is now bullish. There is also a very strong bullish cross forming on the 4-hour chart which indicates the continuation of the bullish channel. The RSI supports that bullish notion and it appears that the next target price might be around 97.00 Going long appears to be preferable strategy for forex traders today
Wednesday 17 September 2008
September 18 Non-dollar currencies analysis
euo/usd : the last trading day, the euro rose sharply, the highest rate at 1.4382. SCL, the euro trend downward, above 1.4950 resistance in the vicinity. Short-term, the upward rebound in the euro, followed in the vicinity of 1.4070. Ultra-short-term, the upward trend of the euro, followed in the vicinity of 1.4240, can do more at the top of the support the euro. Wait and see, or near 1.4260, the euro BUY
GPB/USD: the last trading day, the British pound rose substantially, the highest rate at 1.8242. The center line, the downward trend pounds, above 1.8790 resistance in the vicinity. Short-term, sterling rebounded upwards, followed in the vicinity of 1.7730. Ultra-short-term, the upward trend in sterling, followed in the vicinity of 1.8060, at the top of the support to do more pounds.
Wait and see, or near 1.8100, BUY more pounds
USDCHF: the last trading day, the United States and Switzerland declined substantially, the lowest rate at 1.0991. The center line, the upward trend in the United States and Switzerland, followed in the vicinity of 1.0840. Short-term, the United States and Switzerland downward correction, above 1.1280 resistance in the vicinity. Ultra-short-term, downward trend in the United States and Switzerland, above 1.1100 resistance in the vicinity, to go short in the bottom of the resistance to US-Swiss. Wait and see, or near 1.1070, short-Swiss-US
USDJPY: the last trading day, the United States main acts, the lowest exchange rate at 104.36. The center line, the oscillation upward trend in the United States and Japan, followed in the vicinity of 102.50. Short-term, US-Japan movement oscillation, the top resistance in the vicinity of 110.70, followed in the vicinity of 102.50. Ultra-short-term, the United States and Japan oscillation downward trend, the internal structure more complicated, mainly wait-and-see proposal.
Wait and see
USDCAD: the last trading day, the United States and Canada from top to bottom shocks, exchange rate fluctuations of 1.0614-1.0807. The center line, the upward trend in the United States and Canada, nature is not yet clear, followed in the vicinity of 1.0410. Short-term, the upward trend in the United States and Canada, followed in the vicinity of 1.0540. Ultra-short-term, high oscillation in the United States and Canada, the direction of unknown investors, mainly wait-and-see today. Wait and see
AUD/USD: the last trading day, the Australian dollar down oscillation, currency fluctuations range 0.7799-0.8073. The center line, the downward trend in Australian dollars, above 0.8820 resistance in the vicinity. Short-term, downward trend in Australian dollars, above 0.8350 resistance in the vicinity. Ultra-short-term, low oscillation in the Australian dollar, the direction of unknown investors, today continue to wait and see
GPB/USD: the last trading day, the British pound rose substantially, the highest rate at 1.8242. The center line, the downward trend pounds, above 1.8790 resistance in the vicinity. Short-term, sterling rebounded upwards, followed in the vicinity of 1.7730. Ultra-short-term, the upward trend in sterling, followed in the vicinity of 1.8060, at the top of the support to do more pounds.
Wait and see, or near 1.8100, BUY more pounds
USDCHF: the last trading day, the United States and Switzerland declined substantially, the lowest rate at 1.0991. The center line, the upward trend in the United States and Switzerland, followed in the vicinity of 1.0840. Short-term, the United States and Switzerland downward correction, above 1.1280 resistance in the vicinity. Ultra-short-term, downward trend in the United States and Switzerland, above 1.1100 resistance in the vicinity, to go short in the bottom of the resistance to US-Swiss. Wait and see, or near 1.1070, short-Swiss-US
USDJPY: the last trading day, the United States main acts, the lowest exchange rate at 104.36. The center line, the oscillation upward trend in the United States and Japan, followed in the vicinity of 102.50. Short-term, US-Japan movement oscillation, the top resistance in the vicinity of 110.70, followed in the vicinity of 102.50. Ultra-short-term, the United States and Japan oscillation downward trend, the internal structure more complicated, mainly wait-and-see proposal.
Wait and see
USDCAD: the last trading day, the United States and Canada from top to bottom shocks, exchange rate fluctuations of 1.0614-1.0807. The center line, the upward trend in the United States and Canada, nature is not yet clear, followed in the vicinity of 1.0410. Short-term, the upward trend in the United States and Canada, followed in the vicinity of 1.0540. Ultra-short-term, high oscillation in the United States and Canada, the direction of unknown investors, mainly wait-and-see today. Wait and see
AUD/USD: the last trading day, the Australian dollar down oscillation, currency fluctuations range 0.7799-0.8073. The center line, the downward trend in Australian dollars, above 0.8820 resistance in the vicinity. Short-term, downward trend in Australian dollars, above 0.8350 resistance in the vicinity. Ultra-short-term, low oscillation in the Australian dollar, the direction of unknown investors, today continue to wait and see
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