Forex Market to be Dominated by Crucial U.S. Data Today

The movement in the forex market today is set to be driven by the release of crucial U.S. data. Amongst the most important of these publications are the TIC Long-Term Purchases, Industrial Production and Prelim UoM Consumer Sentiment. Better than forecast data may push-down the USD, and push-up demand for higher-yielding assets, such as the crude Oil Gold and the GBP. In the meantime, you should enter the forex market now to take advantage of the current trends.

Economic News

USD – Dollar Plummets to a Near 4-Week Low vs. the Pound

The Dollar dropped to a near 4-week low vs. the British Pound, but went higher against the Japanese Yen at the end of a volatile trading day Thursday. All of this was after the release of mixed U.S. economic data. The Dollar index traded at 75.470 yesterday, compared to 75.513 Wednesday. This was despite rising to as high as 75.765 at one point on Thursday.

The number of people filing for state unemployment benefits fell by 10,000 to a seasonally adjusted 514,000 the previous week, better than the expected 524,000. The U.S. Consumer Price Index (CPI) rose a seasonally adjusted 0.2% in September, which was also a better than expected result. On the other hand, manufacturing activity in the Philadelphia Federal Manufacturing Index expanded at a weaker than expected pace in October. The index declined to 11.5 this month from 14.1 in September. Overall the data had a slightly negative affect on the Dollar, and the bleak Dollar sentiment remains with the EUR/USD pair currently trading around $1.4925.

Looking ahead to today, the release of the TIC Long Term Purchases at 13:00 GMT, the Industrial Production report at 13:15 GMT and the Prelim UoM Consumer Sentiment at 13:55 GMT will likely provide great volatility to the USD, possibly pushing the EUR/USD beyond the $1.5000 level.

EUR – Pound Soars versus the USD and EUR

The British Pound climbed 1.8% versus the Dollar on Thursday, as the cross jumped to $1.6398 from $1.5975 late Wednesday. The Pound also jumped versus the EUR, sending the shared currency down 1.8% by yesterday’s close.

The Pound experienced its first weekly gain in a month versus the USD on optimism that the Bank of England (BOE) will suspend the asset purchases program, after Paul Fisher, an official with the Bank of England, signaled satisfaction with the impact of the central bank’s money creating quantitative easing program. Since this program is essentially flooding the market with Pound Sterling by printing currency, the program has weighed on the GBP. The anticipated ceasing of the program in the coming months is likely to boost demand for the Pound.

The EUR dipped against the Dollar on Thursday, despite speculations that the European Central Bank (ECB) officials will signal today that the bank may begin withdrawing unconventional policy measures, which will boost demand for higher-yielding assets. With Trade Balance data being the only release expected from the Euro-Zone today at 09:00 GMT, the EUR’s movements will likely be affected by the data releases coming from the U.S.

JPY – Yen Continues its Decline against the Majors

The Yen continued its decline against the EUR and GBP, on speculation Asian stocks will extend a global rally and before a U.S. report forecast to show industrial production expanded for a third month, boosting demand for higher-yielding assets. The Japanese currency also depreciated against the USD. The Yen touched 136.03 per EUR, its lowest level since August 24, and is currently trading at 135.54 per EUR, from 135.35 in New York yesterday.

The currency slid to as low as 90.99 per USD, the weakest since September 25, and is currently at 90.90 from 89.46 yesterday. With no economic data expected from Japan today, the Yen’s strength will likely be determined by movements in global equities. Therefore, it is highly recommended that you open JPY positions as soon as possible.

OIL – Crude Jumps above $78 a barrel

Crude Oil rose for a fourth day to $78 a barrel after jumping more than 3% yesterday on an unexpected drop in U.S. gasoline and distillate stocks. This helped Oil reach its third weekly gain, along with increasing optimism from the leading economies. It is right to day that the recent global equity rally and the weak USD have helped Crude Oil benefit greatly.

The second consecutive week of drops in stockpiles yesterday may help push prices to the $80 level, and the rise in Oil prices will likely continue throughout next week as well. Watch out for fluctuations in the USD and the strength of the global economy today, as these factors will directly impact the price of Crude Oil.

Technical News

There is a fresh bearish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the 4-hour chart’s Momentum oscillator also supports this notion. When the downward breach occurs, going short with tight stops appears to be preferable strategy.
The GBP/USD cross has experienced a bullish trend for the past 3 days. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.
According to the 4-hour chart, the pair has shown considerable bullish strength in its attempt to breach the 91.00 resistance level. However, the chart’s Relative Strength Index shows the pair is trading in the overbought zone, indicating the potential for a downward correction. Traders may look for the correction to begin and go short.
The daily chart is showing strong bullish signals. The Slow Stochastic Oscillator displays a bullish cross has formed, indicating the potential for an upward price move. This is supported by the pair’s RSI floating in the oversold region, representing the opportunity for the pair to appreciate. These two indicators may give traders the incentive to be long on this pair today.

The Wild Card

Crude Oil
Oil prices rose significantly in the last two weeks and peaked at 78.36 per barrel. However, 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.

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