Investors raised their appetite for riskier assets during yesterday’s trading, but still avoided European and British currencies because of debt worries. The big gainers yesterday were the AUD and CAD, both currencies are linked to commodities, in particular crude oil. Crude oil had recently gained in positive momentum, although it closed slightly lower yesterday. The question remains whether the EUR and GBP will attract some of the appetite for riskier assets.
USD – USD Firm against EUR; Declining vs. AUD and CAD
The U.S. Dollar remained strong against the Pound and the Euro yesterday. Credit downgrade warnings by rating agencies regarding some European countries such as Greece, Portugal and the UK continued to worry investors. The EUR/USD traded low for most of the day, as a result. Currently the pair is trading at 1.3600.
The USD did decline against the Australian Dollar and the Canadian Dollar, however. These pairs are currently trading at 0.9154 and 1.0267 respectively.
Wholesale Inventories is expected to be published later today. Although, this is not a significant parameter, investors will look at the result as a sign of the U.S. fiscal health. A lower than expected inventories reading might boost the USD higher against the other major currencies.
The most anticipated data from the U.S. will be published on Friday: Retails Sales, and the University of Michigan (UoM) consumer confidence survey. Traders are advised to build their positions tomorrow and Thursday while trade is still relatively calm.
EUR – Rating Agencies Continue to Add Pressure to EUR
The EUR continued to be influenced by debt worries. The currency is slowly declining against the Yen and the USD. Although during trading it managed to visit the green territory, both Monday and Tuesday it failed to finish higher against the JPY or the greenback.
The EUR/USD is trading in a narrow range around 1.3600. Appetite for risk might benefit the EUR in the coming trading days if data from Europe published today and tomorrow prove that the economy is indeed expanding.
No significant data was published yesterday. Today, better than expected news from the UK and Germany should send the EUR higher against safe haven currencies such as the USD and JPY. Manufacturing Production from the UK is expected to rise 0.3%, German Final CPI is forecasted to rise 0.2% and the regional Trade Balance forecast stands at a potential 16.4B surplus.
JPY – Yen Slides as Risk Appetite Grows
The JPY continued its bullish movement against the EUR and GBP yesterday; although, toward the end of trading both currencies pared some of their losses. Currently the pairs are trading at 122.39 and 134.69 respectively.
The Yen declined significantly against the AUD, which is currently trading at 82.40. It is also declining against the CAD, currently trading at 87.65. Good economic data from china or the U.S., or continued strength in commodities, should support this most recent trend.
Core Machinery data published last night in Japan fell 3.7%. The data is a leading indicator of corporate capital spending. The fall in machinery orders is evidence for a slow economic growth. The publication may lead the Bank of Japan (BOJ) to issue further economic easing programs to increase demand by Japanese consumers, and push the economy higher.
OIL – Crude Oil Prices Declined Yesterday as Investors Closed on Profits
Crude Oil slightly declined during yesterday’s trading, but remained above $80 a barrel. Currently, Crude Oil is trading at $81.57, and it seems to be continuing its bullish trend since mid-February.
The U.S. Energy Information Administration (EIA) published a report yesterday forecasting that the price of oil should climb to $85 a barrel in the near future. They also projected that the price should remain above $80 a barrel this spring.
Later on today, the U.S. EIA is expected to publish Crude Oil Inventories, forecasted to grow by 1.9M barrels. Any lower figure should boost the price even higher. In recent weeks, data came above forecasts, but it failed to influence the price. It seems that the price of oil could remain above $80 a barrel. However, a serious boost in price should be supported by strong fundamental data. Better than expected U.S. Retail Sales to be published on Friday might push the price toward $85.
The 4-hour chart is showing that the pair is still floating within its bearish channel. However, the RSI on the 4H chart is bellow the 30 line, indicating that the market is oversold. The Slow Stochastic is also showing a fresh bullish cross, suggesting that an upward move is imminent. Going long with tight stops appears to be preferable.
The pair is in the middle of a strong downtrend, and is testing fresh lows on a daily basis. The very important key support level of 1.4935 has been breached and the pair is likely to continue is bearish trend. Next target price might be around 1.4800
For the past few days the pair has been floating around 90.00 with no apparent breach. Now, however, new signs for a bearish move are given in the form of a bearish cross on the Slow Stochastic of both the daily and the hourly charts. Traders are advised to wait for the break and swing.
The pair continues to provide exclusive bullish signals, and is now traded around the 1.0750 level. All oscillators on the daily chart are pointing up and further bullishness will probably take place, with potential target price of 1.0825.
The Wild Card
The 4H chart’s Bollinger Bands appear to be tightening on this commodity as prices prepare for a volatile jump. With bearish crosses on the hourly and daily Slow Stochastic, as well as an over-bought indication on the 4-hour RSI, the next major movement may indeed be in a downward direction. Forex traders involved in commodity trading can take advantage of this knowledge by going short on Silver and riding out what appears to be building up to be a sharp movement in price.
Written by Forexyard.com