Source: ForexYard
The US Prelim GDP, to be released at 12:30 GMT, is the primary publication today that is set to determine the level of the US dollar. The other main release that are is to dominate forex trading, especially for currencies, is the publication of the British Revised GDP at 8:30 GMT. Traders are also advised to follow Fed Chairman Bernanke’s speech at 14:00 GMT. This speech is very likely carry a higher than usual impact on Dollar volatility.
Economic News
USD – Dollar Falls on Increased Risk Appetite
The US dollar fell against most of its major currencies on Thursday, as gains in stocks and commodities prompted investors to wade into riskier currency trades. By yesterday’s close, the USD fell against the CHF, pushing the oft-traded currency pair to 1.0240. The dollar experienced similar behavior against the EUR and closed at 1.2720.
In addition, a slide in new US home sales and weak durable goods orders highlighted weakness in the US economy, but analysts said that such data has failed to stoke safe-haven demand for the dollar, as it did earlier in the month.
Another leading indicator released yesterday was US unemployment claims. This number handedly beat last week’s results but failed to provide strength to the dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead to today, the most important economic indicator scheduled to be released from the US is the Prelim GDP at 12:30 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may boost the USD in the short-term. Traders are also advised to follow Fed Chairman Bernanke’s speech at 14:00 GMT. This speech is very likely to impact dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the dollar going into next week’s trading.
EUR – EUR Rises on Gains in European Shares
The EUR rose on Thursday as early gains in European shares, following a climb on Wall Street, indicated improving demand for riskier assets. As a result, the EUR hit a session high against the dollar at around 1.2745 before pulling back to around $1.2720. The 16-nation single currency experienced similar behavior against the GBP and closed at 0.8190.
European shares rose 0.8%, clawing back from a five-week low on forecast-beating results, although gains were capped after US data on Thursday raised concerns the world’s biggest economy risks sliding back into recession. That shift, just getting underway, could take the shine off the soaring EUR in the coming months.
Sentiment in the euro zone’s regional economy has brightened in the past week following better-than-expected news. The EUR is showing signs of resilience even though there was volatility throughout non-euro crosses. It will be crucial for traders to identify how the preceding economic indicators from the US, European and Japanese economies will affect their positions.
JPY – Safe-Haven Yen Climbs vs. Rivals
The Japanese yen has strengthened against most of its major counterparts, continuing to prove that for the time being this is the solid currency that traders can rely on to provide them with steady profits. The yen extended gains versus the dollar on Thursday, to trade above 84.40 amid a broad sell-off in the USD. The JPY also saw bullishness against the EUR and closed at 107.30.
Investors worry about the rise in the JPY as it makes Japanese products less competitive abroad and hurts the value of overseas sales when translated back into the Japanese currency. With steady gains, primarily against the dollar, much of the yen’s bullish movement could be contributed to the repatriation of overseas earnings by Japanese companies into the local economy. This has had a positive effect on major JPY currency pairings, as the rising turmoil in the market is leading to more investment in the Japanese currency.
Crude Oil – Crude Oil Rises above $73 a Barrel
Oil prices extended gains to rise above $73 a barrel Thursday, as regional stock markets advanced and recent sharp losses in crude drew more buyers. Crude has fallen about 11.5% from around $82 a barrel early this month as more evidence of a slowing US economy suggested that demand for oil and gas would remain sluggish.
In addition, a weaker US dollar tends to boost the price of dollar-priced commodities as it lowers the price to holders of other currencies and reduces the value of the oil producers receive.
Technical News
EUR/USD
This pair appears to be providing mixed signals today. The shorter time frames are floating in neutral territory, giving no clear indication. The daily chart shows the price just exiting the over-sold territory on the RSI and Stochastic, while the weekly chart has what appears to be a recent bearish cross on the Stochastic (slow) and is now descending lower. Waiting for a clearer sign of direction may be wise today.
GBP/USD
The price of this pair has recently entered the over-sold territory on the hourly RSI, and seems to be just exiting the over-sold territory on the daily RSI. These notions, combined with a recent bullish cross on the hourly Stochastic (slow), seem to suggest that going long would be a reasonable tactic today.
USD/JPY
This pair continues to float within a distinct, long-term bearish channel. The weekly chart has begun to provide hints that the pair may correct upwards in the near future, however. The weekly RSI has the price sitting just on the border of the over-sold territory. The weekly Stochastic (slow) shows the same thing. This pair may be preparing for an upward movement, but for now the down-trend remains dominant.
USD/CHF
The price on the USD/CHF has recently entered the over-sold region of the daily chart’s RSI and may experience upward pressure in the near future as a result. This pair’s weekly chart also has the pair in the over-sold territory, and shows fresh bullish crosses on the Stochastic (slow), both of which support the notion of an impending upward movement. Going long may not be a bad choice today.
The Wild Card
Gold
After a few weeks of sustained upward movement, the price of Gold now appears to be gearing up for a downward slide. The daily RSI has the price floating in the over-bought region for some time now, suggesting strong downward pressure. The weekly Stochastic (slow) has almost formed a bearish cross, and will likely do so by the beginning of next week. This provides forex traders a great chance to call the reversal point on a precious commodity like Gold and ride out the downward movement for a healthy profit.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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