Traders Anticipate Heavy News Day in Forex

With an abnormal number of news events coming from Britain, the Euro-Zone and the United States today, forex traders have been in a frenzy to place their bets before the trading day gets underway. Trading during these news events, which typically carry a lot of market volatility, is a fast way to double your forex trading balance; the wise trader knows this. Special attention should be paid to the slew of manufacturing data coming from France and Germany between 7:00 and 9:00 GMT, as well as the U.S. Unemployment Claims report at 14:00 GMT. Will you take advantage of the impending volatility, or sit on the sidelines and miss out?

Economic News


USD – Dollar Goes Volatile on U.S. Banking Worries

The Dollar experienced a very volatile day of trading on Wednesday as a number of different factors helped determine the closing rate of the Dollar versus its main currency crosses. The main factor that helped determine the greenback’s strength in yesterday’s trading was the banking worries led by Morgan Stanley and Wells Fargo. This came about despite the Dow Jones rallying earlier in the day. This came to people’s dismay as Morgan Stanley produced positive figures in the previous quarter and the U.S. housing market posted some impressive figures on Wednesday.

The Dollar rose by a massive 160 points versus the British Pound, as investors dropped the GBP and put their money into equities rather than gamble on the Pound Sterling. The pair ended down at the 144.60 level. Against the JPY the USD slid by 50 points to 97.62, as traders responded positively to the recommendation by major banks of the positive Japanese financial sector, and that the worst of the economic decline in Japan may be over. The Dollar fell by 40 points to 1.2992 versus the EUR, as Europe’s financial sector edged higher yesterday. This marks an end to the EUR’s losing streak against the USD.

Looking ahead to today, we may see a strong Dollar as Britain and Europe react negatively to the late negative financial news that came out of the U.S. yesterday, as toxic debt and banking liabilities from the banking sector reach the forefront again. Britain and the Euro-Zone have been very susceptible to negative financial news coming out of the U.S. since the start of the financial crisis. There are a number of economic data releases that may help determine the Dollar’s value later today. The 2 most important of these are U.S. Unemployment Claims at 12:30 GMT and Existing Home Sales at 14:00 GMT. If the economy continues showing bearish figures, the USD may respond in kind.

EUR – Pound Slumps as Financials Climb

The Pound dropped as Britain and European Banks climbed in yesterday’s trading session. The FTSE, DAX and CAC 40’s gains were led by the top financial institutions. The most notable increases were held by the major British and European banks, including HSBC, Barclays, Lloyds, and Deutsche Bank. This was partially owed to helpful words from U.S. Treasury Secretary Timothy Geithner. However, on the negative side for the Pound was the gloomy budget released by Britain’s Chancellor of the Exchequer Alistair Darling. This comes about as he revealed that income taxes will increase, government spending will swell, and Britain’s debt will climb.

As a result of the slump in the British economy, and traders opting to drop the Pound for the equities market, the Pound made terrible losses in Wednesday’s trading. The British currency fell by a massive 230 points versus the Japanese currency to close at 141.26. Against the EUR, the Pound plummeted by 150 points as the EUR/GBP started to move higher again resulting from the Euro-Zone economy showing some positive economic advances. The GBP/USD pair finished lower by over 230 points at 141.21, as traders fear the mounting debt of the British economy and prefer the safe-haven U.S. Dollar.

Today, the Pound is likely to continue to deteriorate as Britain reacts to the banking worries from the U.S. The most significant data release from Britain later today will be the CBI Industrial Order Expectations at 10:00 GMT. The British currency is also likely to react to the other spattering of news events coming out of the Euro-Zone and the U.S. These include various manufacturing data from France and Germany, and U.S. Existing Home Sales later in the afternoon. The Pound’s currency crosses are also likely to be determined by unexpected speeches by U.S. Treasury Secretary Timothy Geithner and British Prime Minister Gordon Brown later today.

JPY – Yen Climbs against Majors

The Yen rose against most of its major currency pairs in yesterday’s trading, as the JPY’s safe-haven status returns to the forefront. The Yen’s gain against the Dollar in late trading is largely owed to fears that the stress tests for U.S. banks from the Obama administration are likely to reveal great losses in the U.S. banking sector. The USD/JPY currency pair finished lower by 50 points at 97.62. The JPY also made some impressive gains against the Pound to close up by over 230 points at 141.21. This comes about before a report showing that the British economy shrank for the 3rd successive quarter. However, the Yen fell by 10 points against the EUR to close at 126.91.

The Yen seems to be trading on unsteady ground as uncertainty in the financial world reappears on center stage. Just as things seemed to be improving, the Obama administration has set new hurdles for U.S. banks, which is likely to reveal further losses. However, this is likely to show pessimism in the second largest economy. When it comes to the forex market, however, the Yen is likely to benefit from its safe-haven status. This will in-turn go against the Japanese government and Bank of Japan (BoJ) as they desire a weak Yen in order to increase exports and recover from the current financial crisis relatively faster.

Crude Oil – Crude Oil Prices Stable near $48.50

The price of Crude Oil slipped slightly as U.S. Crude Oil Inventories rose higher than expected. The price of the black gold slid by 30 points to $48.43 a barrel. Crude Oil didn’t slide as much as people thought it would following the release of this important data, as stock markets across the globe made some gains, thus spurring equities and commodities upwards. Crude Oil seems to have reached its equilibrium as prices have not slipped below the $48 mark in more than 3 weeks.

In order to see a vast improvement in Crude prices in the coming weeks, we will need to see a string of positive economic data releases from the world’s leading economies. Truth be said though, a full-fledged global economic recovery is unlikely to occur before the middle of 2010. However, in the short-medium there is some leeway for the price of oil to hit $60 a barrel, provided demand can support this price.

Technical News


EUR/USD
After breaking out of its latest range-trading pattern, this pair may now be on track to discovering a new range. After yesterday’s volatile upward movement, the pair has now leveled off and all oscillators are indicating neutrality. However, there does appear to be a recent bullish cross on the daily chart, signaling further upward mobility. Going long with tight stops might be a wise choice today.
GBP/USD
There appears to be a bearish cross forming on the Slow Stochastic on the hourly chart, signaling an impending downward movement. However, the daily chart’s Slow Stochastic shows a recent bullish cross, indicating that the longer-term trend may be bullish. Waiting for the downward correction to finish and then going long might be a wise strategy today.
USD/JPY
This pair appears to be range-trading with no clear indication of direction. The RSI on the daily chart shows that this pair was recently over-sold, signaling that there may be more of an upward correction later in the day. Trading within the range may be a wise choice today; buying on lows, selling on highs.
USD/CHF
The Bollinger Bands on the hourly chart appear to be tightening, signaling that a volatile movement may be imminent. However, all oscillators show the price floating in neutral territory, and the daily chart indicates a clear range-trading pattern in a bullish channel. Buying on lows and selling on highs within this channel might be a wise choice today.

The Wild Card


The price of this pair appears to be floating in the over-sold territory on the RSI of the 4-hour chart, signaling upward pressure. The recent bullish cross on the 4-hour chart’s Slow Stochastic supports this notion. Forex traders can take advantage of the impending upward movement by placing early long positions and riding out the wave.

Written by: Forexyard.com