Source: ForexYard
Today, traders should pay close attention to the release of the U.S. Non-Farm Employment Change report. This indicator always provides for extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 12:30 GMT.
Economic News
USD – Dollar Slides Against the EUR
The Dollar recorded some mixed results in yesterday’s trading. However, the most notable result was the slide vs. the EUR. The Dollar’s trading was dominated by a number of factors throughout the trading day. Earlier on, Thursday was dictated by poor, but slightly better-than-expected Unemployment Claims data that put downward pressure on the USD. This helped the Dollar tumble against the European currency for much of the day. This currency pair was also affected by the 25 basis points drop in EUR Interest Rates to 1%, which helped increase confidence in the EUR.
The factor that strongly affected the Dollar in late trading was the Stress Test, overseen by U.S. Federal Reserve Chairman Ben Bernanke. The conclusion of the Stress Test was that 10 of the 19 U.S. banks would need to raise $75 billion Dollars in capital. This was in order to help convince investors about the sound financial system. The figure was less than many had expected, and helped the Dollar increase slightly in late trading. The currency market is likely to continue reacting to the finding in end of week trading.
The Dollar ended Thursday’s trading lower by 75 pips vs. the EUR to close at 1.3362. The USD did make some impressive gains against the JPY as it extended its 2 day winning streak against the Japanese currency to finish up 1% or 80 pips at 99.20. The USD also climbed against the British Pound by 120 pips to close at 1.4996, as the British stock market closed slightly higher. This comes as Britain keeps her Interest Rates unchanged at 0.5%. The question is can the Dollar extend its gains vs. the GBP as the weekend kicks in.
Looking ahead to today, there are several important news releases coming out of the U.S. These include the Non-Farm Employment Change and Unemployment Rate at 12.30 GMT. Better-than-expected results may help the Dollar recover some of yesterday’s losses against some of its crosses such as the EUR. On the other hand, if the results turn out to be in line with forecasts, then the Dollar may record a fairly bearish session in Friday’s trading.
EUR – EUR Surges Versus GBP
The EUR made a massive surge against the British Pound, as the Euro-Zone cut its Interest Rates by 25 basis points to 1%. This is the lowest in the Euro-Zone’s history. This is very important as this action put a notable boost into the EUR, as investors feel that the European Central Bank (ECB) under Jean-Claude Trichet is continuing to show flexibility. The European Currency was also boosted by impressive German Factory Orders figures that were released early on Thursday. These 2 factors provided such a boost that the EUR was able to strengthen throughout yesterday’s trading session.
The EUR eventually finished Thursday’s trading up 120 pips against the GBP to close at 0.8908. This was obviously driven by the EUR’s rate cut. Additionally, forex traders continue to fear Britain’s mounting negative finances. The EUR also made gains vs. the Dollar to close up 65 pips or 1.3362. This comes about as the U.S. releases poor economic data and the Bank Stress results. The EUR gained a massive 170 pips against the JPY, as investors confidence continued to pour back into the European currency throughout Thursday’s trading session.
As for today, there are a number of important economic data releases coming out of Britain and the Euro-Zone. These include the German Trade Balance throughout the day and the German Industrial Production figures at 10.00 GMT for the EUR. Britain is expected to release PPI Input and PPI Output figures at 8:30 GMT. The figures from Britain and the Euro-Zone are likely to set the pace for the strength of the Pound and the EUR throughout today’s trading. Expect high volatility as each data release is published.
JPY – JPY Tumbles Against Currency Rivals
The JPY tumbled against its major currency rivals in Thursday’s trading. The most dominant reasons for this were other factors apart from the Japanese economy. These external factors seem to be increasingly affecting JPY trading as of late. Despite major economic data releases on Wednesday, yesterday investors reacted to events coming out of the Atlantic. The reasons for this may also be that JPY investors continue to look for signs of global economic recovery. This is despite the bottoming out of the current economic slump in Japan.
The JPY fell against the USD by 80 pips to 99.20, recording its second day of losses against the U.S. currency. Against the EUR, the JPY slid 170 pips to 132.47 as investors poured into the EUR, as the Euro-Zone made a 25 basis point rate cut to 1%. However, the GBP/JPY rate was down slightly, as Britain’s economy continues to deteriorate. Today, expect some high volatility for the JPY, as Japan is absent from the forex calendar. Therefore, yet again, much of the movement of Japan’s currency will be largely influenced by external economic dynamics.
Crude Oil – Crude Oil Eyes $60
The price of Crude Oil hit as high as $58.55 before ending Thursday’s trading at $57.10. Oil closed up about 1% or 51 cents to close at the $57.12 level. Crude made the early gains due to inflation fears and the thought that the worst of the economic downturn is over. This was also helped by Wednesday’s lower-than-forecasted Crude Oil Inventories and impressive Construction Spending data from earlier in the week.
The price of Oil did however start to drop as the day went by as commodity traders started to fear tomorrow’s employment data figures that are due tomorrow from the U.S. If economic figures continue to show decent results from the developed nations, and investors feel that the global economy is continuing to recover, then expect Crude Oil to reach $65 a barrel by the end of next week’s trading session.
Technical News
EUR/USD
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.3410 level. The pair currently sits near the upper border of the daily chart’s RSI, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
GBP/USD
The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily chart’s RSI is already floating in the over-bought territory, suggesting a downward correction may be imminent. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
USD/JPY
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
USD/CHF
The typical range trading on the hourly chart continues. The 4-hour chart Slow Stochastic is floating in neutral territory. However, the pair currently sits near the bottom border of the daily chart’s RSI, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The Wild Card – Crude Oil
Oil prices rose significantly in the last week and peaked at $57.50 per barrel. However, daily charts’ RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing 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.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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