Dollar Climbs on U.S. Recovery Optimism

The U.S. dollar rose Thursday after a batch of U.S. data largely came in better-than-expected, reassuring investors that the U.S. economy continues to recover. The greenback was sharply higher against yen with USD/JPY jumping 1.2% to hit 82.95. Elsewhere, the greenback surged against the Swiss franc with USD/CHF soaring 1.4% to hit 0.9685.

Forex Market Trends

Daily Trend down down down up down no
Weekly Trend up up no up down up
Resistance 1.3570 1.6000 83.95 0.9780 0.9965 0.8570
1.3535 1.5965 83.55 0.9735 0.9915 0.8530
1.3500 1.5930 83.25 0.9700 0.9885 0.8500
Support 1.3440 1.5875 82.60 0.9650 0.9825 0.8445
1.3410 1.5840 82.25 0.9615 0.9790 0.8415
1.3375 1.5800 81.95 0.9575 0.9750 0.8375

Economic News

USD – Dollar Gains on Positive Economic Data

The U.S. dollar rose on Thursday as better-than-expected housing and employment data suggested the U.S. economy was improving, though hopes Europe was getting a handle on its debt crisis limited euro selling. By yesterday’s close, the USD rose against the JPY, pushing the oft- traded currency pair to 82.95. The dollar experience similar behavior against the GBP and closed at 1.5890.

High unemployment and a lackluster housing market are the biggest obstacles to the U.S. economy’s recovery, but stronger-than-expected data on jobless claims and existing home sales provided a glimmer of hope.

U.S. Federal Reserve monetary policy largely relies on labor market conditions and the pace of the economic recovery, so signs of improvement increase expectations of higher interest rates, which makes the dollar more appealing to investors.

As for today, the United States is not due to release much data of concern. Canada, on the other hand, is going to release vital data regarding its retail sales levels, which last week caused a stir among the USD and EUR. Growth in Canadian sales may help return the Loonie back to a more bullish posture, but forecasts appear modest at best.

EUR – German Ifo Business Climate on Tap

The euro edged slightly higher against the U.S. dollar late Thursday, after the U.S. currency posted gains earlier in the day following positive U.S. jobless and home sales data. During late trading yesterday, the euro rose slightly to $1.3470 from $1.3430 Wednesday.

The euro has been rising since late last week, hitting a nearly two-month high Wednesday, because investors have been expecting European leaders to take more aggressive steps to counter Europe’s debt crisis. Recent successful bond auctions in Spain and Portugal reassured investors that the region’s indebted governments could still raise money.

Looking ahead to today, the most important economic indicator scheduled to be released from Europe is the German Ifo Business Climate at 9:00 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may boost the EUR in the short-term. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

JPY – Yen Sees Mixed Results vs. Majors

The Japanese yen completed yesterday’s trading session with mixed results versus the other major currencies. The JPY fell against the USD yesterday, pushing the oft-traded currency pair to 82.95. The JPY experienced similar behavior against the EUR as the pair closed at 111.65 by day’s end. The yen did see some bullishness, however, as it gained over 30 points against the CHF and closed at 85.67.

The JPY’s trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.

Crude Oil – Crude Oil Falls 2% on Rising Inventories

Crude Oil prices slumped about 2% to around $89.50 a barrel on Thursday on a sell-off sparked by an unexpected rise in U.S. crude stockpiles and worries that China might tighten monetary policy to fight inflation.

The steep drop in prices came as investors liquidated positions on the front-month U.S. February crude contract, which expired at the close, overshadowing upbeat U.S. economic data on jobs and housing.

Crude oil also came under pressure from a rising dollar after U.S. economic data fueled hope that the country’s economic recovery was on track.

Technical News

This cross has experienced much bullishness in the last 2 weeks, and currently stands at the 1.3520 level. There is much evidence in the chart’s oscillators that indicates a possible bullish correction today; strongly supported by the daily chart’s Slow Stochastic. Going short with tight stops may turn out to bring big profits today.
The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a bearish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going short might be a wise choice.
The USD/JPY went increasingly bullish yesterday, and currently stands at the 82.99 price level. The daily chart’s Slow Stochastic supports this currency cross’s continued rise today. However, the 4-hour chart’s Slow Stochastic signals that a bearish reversal will take place today. Entering the pair when the signs are clearer seems to be a wise choice.
The pair has been range-trading for a while now, with no specific direction. The daily chart’s Slow Stochastic is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy for intra-day traders today.

The Wild Card

Gold prices dropped significantly yesterday and peaked at $1347 an ounce. However, the 4-hour RSI is floating in the over-sold territory suggesting that a bullish correction is impending. This might be a great opportunity for forex traders to enter the swing at a very early stage.

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