Last Friday, the greenback gained against most of its major rivals on
the back of the strong data from all the U.S economic sectors last
week. Despite the lack of data on Friday itself, the USD recovery was
assisted by the better-than-expected Empire State Business Conditions
Index release and a falling trend of the Unemployment Claims figure. As
a result, Friday was the best day for the USD, however short lived it
Later on this week's economic calendar is quite full with events that
could keep the USD bullish momentum. March's Core Durable Goods Orders
report, which is expected to be released on Thursday, is forecasted to
show a higher level of purchase orders. If indeed the final figure
meets the expectations, we could also expect a negative trend in the
next Unemployment Claims report released also on the same day. Friday's
Consumer Sentiment figure is forecasted to reflect an improvement in
the U.S economy for the short term.
On the other hand, USD buyers may be concerned of the building sector
data. This Tuesday's Existing Home Sales and the House Price indices
are both expected to show a fall in the building sector. As a sector
directly affected by the credit crisis, this week's building sector
data could supply us many figures about the success of the FOMC
decisions and how thy will vote on April the 30th .
Although markets have grown more optimistic about the U.S. economy in
recent days, investors do not seem to believe that the present
financial turmoil is coming to an end. Concerns about the U.S. economy
still remain high.
Dollar trading should stay calm today until the release of Existing
Home Sales, where we will likely see volatile behavior. We also
recommend traders to follow other important data releases during this
week in order to get supplied with figures that may show which
direction the greenback is more likely to be dragged on.
Last Friday, the EUR reached all time high of 1.5980 but
later dropped below 1.58. The European currency depreciation came as a
result of the surprisingly weak inflation and manufacturing data from
the European financial markets. However, later on, with March's German
PPI report release, the EUR gained back some of its losses locking the
trading session at the rate of 1.5810 USD for one single EUR. Germany,
which is considered to be the strongest economy in Europe, but
continues to concern the ECB. The economic data from Germany and its
inflation in particular, is playing a role on the European
manufacturing sector. Last Friday's German PPI, the indicator that
measures the rate of inflation, printed a higher-than-expected figure
of 0.7%. The Interest Rate differential between the U.S and Europe has
been continuously widening over the last few months and it is expected
to widen further at the next FOMC meeting, making the EUR the most
favorable currency amongst investors, as it offers a higher yield and
lower risk. Today, all attention will be focused on ECB President
Trichets' speech at 21:30 GMT. Traders expect Trichet to speak widely
about the ECB policy for the short term and to supply traders with more
explanations about the EUR behavior. Overall, the ECB president's
speech may not affect today's trading sharply. We expect the EUR/USD to
move between bulling and bearing, as traders exercise caution ahead of
tomorrow's U.S PPI data.
The JPY depreciated against the greenback in Friday on the
release of strong U.S. inflation and manufacturing data last week. Many
of Friday's JPY losses were caused by carry traders.
The current uncertainty in the global financial markets is causing all
the high yielding currencies to depreciate sharply and we should see
the JPY continue its bullish momentum as risk seeking investors run for
the hills. The Japanese economy is showing moderate growth and it is
finally beginning to experience some positive inflation, so this could
be a good launching pad for a future rate hike from the BoJ. In the
meantime a rate hike remains unlikely due to possible deflationary
pressures and there will need to be sustained expansion before the BoJ
can consider a rate hike.
Yesterday, the only data released from Japan was March's Tertiary
Industry Activity Index, the measures the change in spending for
services. The report printed at -1.7%, showing a weaker spending by
half of the nation's workers, which are employed in the service
There was no important economic news coming out of Japan during the
previous week, and today is also devoid of data. We should see the JPY
continue on its bearish path due to the strengthening trend of the USD.
Forex traders should keep an eye on the economic events around the
world, as today could prove to be another very volatile day for the
After a sharp drop of more than 200 pips on Friday, the pair
is showing fresh bullish momentum, and it is now floating around
1.5830. The Slow Stochastic of the 4 hour chart is showing moderate
bullish momentum, and the RSI confirms that the direction is indeed up.
If the pair breached the 1.5850 level, the trend will be fully
validated and another move is expected. Going long appears to be
The narrowing channel on the daily chart has been breached,
and the cable now rides the bullish momentum created in that move. Both
the Slow Stochastic and the RSI are pointing on the continuation of the
bullish trend, as the hourlies are contradicting with a possibility of
a local bearish correction. Buying on dips might be a good choice today.
There is a very distinct bullish channel forming on the daily
chart, as the pair now floats at the middle of it. All oscillators are
showing bullish momentum, and the Bollinger Bands are getting tighter
which indicate an additional upcoming bullish move. The next target
price of 104.60 appears to be valid.
Friday's attempt to breach through the 1.0300 has failed and
left the pair with no more bullish momentum. The flat channel continues
on the daily chart, as the hourlies are showing fresh bearish momentum,
and a possible corrective move towards 1.0100. Waiting for a clearer
sign before entering the market might be the smart move today.
The Wild Card
There has been a very strong breach through the bottom
barrier of the channel which is forming on the daily chart. The bearish
move has completed a full bar beyond the barrier, and the bearish move
is now accumulating steam. Forex traders have a great chance of swing
into what appears to be a very strong technical pattern. The next
target price might be 910.00.
Written by Forexyard.com