Friday, November 14, 2008
| by: Forexyard Technical News EUR/USD A significant breach was made yesterday as the pair crossed the 1.2800 level. However, a bearish cross on the 4 hour chart's Slow Stochastic implies that a bearish reversal is impending. Going short with tight stops seems to be the right choice today. GBP/USD There is a very distinct bearish channel forming on the daily chart as the cable is now floating in the middle of it. A double doji formation on the daily chart is suggesting that another sharp movement is forthcoming. Traders should wait for the breach and swing. USD/JPY After a strong bullish session, the pair has resumed to the 97.00 levels. However, a double doji formation on the 4-hour chart and a bearish cross on the Slow Stochastic are indicating that the bullish correction might be erased today. Going short appears to be a good strategy today. USD/CHF The pair is experiencing heavy volatility lately, with many options to gain profits from both the bullish moves and the bearish ones. Nonetheless, a flag formation on the 1-hour chart suggests that a bullish session is more likely today. Going long seems to be the preferable choice. Economic News USD Dollar Tumbles versus the EUR The Dollar experienced an afternoon session of extreme volatility, trading in a wide range. The market fluctuations were conditioned by a rise in global equity markets and a series of economic indicators that highlighted a difficult economic situation for the States. The greenback saw heavy losses against the EUR, dropping to a 3 day session low, and experienced large gains against the JPY, closing at a 2 day high. The cause of the large moves for the greenback was a rise in equity markets and disappointing economic data. The Dow Jones Industrial Average rose an astonishing 6.7% yesterday, following a sharp drop in equity values two days ago. Riskier currencies have been tracking equity markets for the past weeks. The rise in stocks prompted investors to dump low yielding EUR/USD positions. Economic data released yesterday also helped to drop the USD against the EUR. U.S. Unemployment Claims climbed to 516K, a rise of 32K compared with last month's measure, becoming the highest reading for workers filing new claims for job loss benefits since January 1983. The Dollar lost more ground during the afternoon trading session in New York when the Federal Budget Balance posted its highest deficit ever of -$237.18 billion. The number reported was twice as large as forecasted by economists due to the government's recent steps to stabilize U.S. financial institutions. Today will be another day full of important news events. Among them we have the U.S. Retail Sales Report and the Preliminary Consumer Sentiment Survey. All the data is forecasted to be negative for the USD. Traders should also follow the speech from Federal Reserve Chairman Bernanke about policy coordination among Central Banks at the 5th ECB Central Banking Conference. Traders may see another day of heavy volatility in the USD throughout the day. EUR EUR Make Big Gains on Dollar, GBP The rise in global equity markets benefited the EUR yesterday as traders shrugged off more poor economic data from the Euro-Zone. The EUR/USD rose more then 2% to close at 1.2726, while the EUR/GBP gained 2.6% to close at £0.8581. Traders should take note that the EUR/GBP has appreciated almost 5.6% in this weeks trading. Europe's largest economy demonstrated continuing weakness after the German GDP reading showed a contraction of -0.5%, confirming the worst fears that the German economy is already in recession for the first time in five years. The official data shows the drastic downturn of the European economy that had started 2008 with excellent results, but reached the third quarter with a deplorable economic outlook. Predictions for the fourth quarter are also grim. Many economists don't expect the fall of Oil prices to have much of an impact on domestic consumption to stop the country from falling into a recession. Traders have an important day of trading ahead of them today. Starting around 2.00 GMT and lasting throughout the day, a stream of announcements and economic indicators will be released by the European economy, closing the day with a speech by ECB President Jean Claude Trichet at the 5th ECB Central Banking Conference. Traders are advised to follow his speech as it may provoke wild market volatility. JPY JPY Falls on Greater Risk Taking The JPY was hit with a large loss against the Dollar yesterday of more than 1.7% to close the day down at 97.07. At one point in the day the JPY was down almost 2.8%. A rise in the U.S. stock market of more than 6% helped to move the Yen lower. As equity markets recoup recent losses, investors moved money from the safety of the JPY to riskier and higher yielding assets. On his way to the Group of 20 meeting, the Japanese Prime Minister anticipated a few steps which may help reduce the difficulties of the global financial crisis and to prevent a future economic crunch. Among the measures introduced by Japan are to reform the lending facilities of the IMF along with doubling the amount of money at its disposal. OIL Crude Rises on Equity Gains Crude Oil snapped its three day losing streak yesterday, gaining $2.98 to close the day up at $58.22. The gains can be contributed to the late in the day fall of the Dollar and gains in the equity markets. As the Dollar lost ground and equities rallied, traders closed Dollar positions and went long on stocks and Crude, fueling the gains for the day. The price of Crude may have artificially been boosted earlier in the day due to comments made by OPEC officials. OPEC warned that it may cut future output if the price of Crude continues to decline. However these gains did not hold until the Dollar began to drop. The Wild Card Wild - AUD/USD After a few days of consecutive drops, the pair saw a bullish correction yesterday and gained over 300 pips. However, all oscillators on the 4-hour chart are providing bearish signals, suggesting that the pair might reach the 0.6400 levels very soon. This might be a great opportunity for forex traders to enter the bearish move at a very early stage. Labels: Forex Analysis |
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