Monday, December 22, 2008
Dec-22 Daily Forex Analysis
| by: Forexyard Headlines Dollar May Gain Today Despite Low Volatility The Dollar may gain ground today despite the low volatility of the holiday season, as traders prepare for what could be a possible negative economic news coming out of Europe. It is also advisable to pay close attention to the way Europe and Japan react to America's auto bailout. Economic News USD U.S. Auto Bailout a Blessing and a Curse; Will the Dollar Recover? Things are looking down for the U.S. automotive industry as the proclaimed bailout has now been considered a delay for the inevitable rather than disaster prevention. While not certain, of course, the prediction by many analysts that the 3 auto giants (GM, Chrysler, and Ford) may in fact still face significant problems despite receiving bailout funds has helped weaken the strengthening position of the USD over the weekend. Ending last week's trading around the 1.4000 level against the EUR, the USD actually made strong gains after spiking up to the 1.4600 level around Thursday afternoon. After news that the auto bailout had been passed, traders began buying heavily back into the USD; however, as forecasters began claiming that an auto bailout wasn't enough to save these companies, skepticism in the Dollar returned. At the start of today's trading, the greenback began rising slowly back towards the 1.4100 price level, but now it currently sits just under 1.4000 against the EUR, and near the 1.5000 level against the GBP. Oddly enough, many economists believe the Dollar was highly over-sold last week and is currently positioned to regain all it lost and potentially even strengthen more in the coming months. This week, however, traders may expect less volatility in the USD as the Christmas holiday approaches and traders leave the market to be with their loved ones. No economic news will be released today, but important housing data will be released tomorrow and lend some insight into what's happening with the American economy after this weekend's bailout news. Will the Dollar get its second wind? EUR Euro-Zone not Stronger than U.S. after all; EUR Depreciates Last week's EUR feeding frenzy may have been short-lived. With so much negative news building up in the American economy, the EUR appeared to be the safe bet. Investors bailed out of the Dollar en masse and jumped into the Euro-Zone currency as the safe haven of choice after the U.S. Federal Reserve's decision to reduce Interest Rates to almost 0%. The beginning of this week may tell a different story, however. By last Thursday the EUR had gained value against the USD up to the 1.4600 price level; by the end of trading Friday it had lost 600 pips to stand just below 1.4000. It appeared as if traders caught wind of a disastrous economic outlook for the American economy and bailed out. Shortly thereafter it sank in that Europe was no better off than the United States. After one of the largest intra-week trading movements in the history of the EUR/USD pair, the 15-nation currency is now returning to its previous whipping-boy status; taking hits left and right as the Dollar reclaims its strength. The pair currently stands just under 1.4000 and will likely continue downward. This week may end up being one of the quietest news weeks of the year for Europe. Today, traders will be given information on European industry and trade, but the figures are not forecasted to produce any meaningful impact on the EUR. After that, the Euro-Zone and Britain won't be releasing any significant data until after the Christmas holiday is over. Until Wednesday night - Christmas Eve - the U.S. will be in the driver's seat of the global economy. JPY BoJ Weakens JPY to Boost Exports The Bank of Japan's (BoJ) monetary intervention last week has helped slow down the appreciation of the JPY in this week's early trading hours. With Japan's trade gap growing and economy entering a deeper recession, the BoJ needed to take steps to weaken the national currency in order to boost Japanese exports. So far the intervention has worked as the JPY has begun to depreciate against all of its currency counterparts. Whether or not this helps the Japanese economy in time to turn back the recession and return the island country back to growth is another matter. This week will be slightly more important for the JPY than most other currencies. While its biggest news was the near-0% interest rate decision taken last week, this week will witness the Japanese economy releasing more economic data than usual as the rest of the world goes on holiday. Forex traders should pay close attention to the JPY this week as it may begin its steady descent against the other major currencies. Oil OPEC Production Cut More Likely; Oil Prices Moving Up Realizing the lack of trust, many investors have in their ability to follow through with the production decision; the Organization of Petroleum Exporting Countries (OPEC) is now issuing strongly worded statements in which they express determination to stabilize the Crude Oil market. Traders may have begun to believe these claims as falling Oil prices have caused stocks and economic growth to falter in the Persian Gulf states recently. In order to maintain the recent infrastructure projects undertaken since July, the Gulf States will need higher energy prices to boost revenues. As such, the chances have gotten better that the talk of cutting production will be followed with action on OPEC's part next month. Combined with the U.S. stimulus package, to be undertaken when Barack Obama takes office later next month, investors are expecting a decrease in Crude Oil stockpiles. With supply expecting to decrease, market forces have begun to ease the price of Oil into an upward direction. Time will tell if this movement has strong enough support. Technical News EUR/USD After showing a consistent bullish momentum for the past week, the daily chart is showing signals of a falling correction. The bearish breach on the daily chart has created strong downwards momentum that might eventually carry the pair to the next target price of 1.3800. The hourly chart's Slow Stochastic is showing no crosses, which also indicate the continuation of the bearish trend. Going short appears to be preferable today. GBP/USD The hourlies chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4 hour chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long 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. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today. USD/CHF The hourly chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, the daily chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy. The Wild Card Gold The bullish trend is loosing its steam and the price is consolidating around the $843 for an ounce. The daily chart's 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. Labels: Forex Analysis, Forex Trend, Market Analysis, Market Trend, World Market |
posted by Matbank at 9:12 AM
