Dollar Anticipates Release of U.S. Unemployment Claims

The U.S. Unemployment Claims is the primary publication today that is set to determine the level of the USD when it is released at 13:30 GMT. The other main releases that are set to dominate forex trading, especially for currencies such as the Dollar and EUR is the publication of the Industrial Production from the Euro-Zone at 10:00 GMT and Crude Oil Inventories at 16:00 GMT. Traders may find good opportunities to enter the market following these vital announcements.

Economic News

USD – Unemployment Claims Report on Tap – Will USD Weakness Continue?

The Dollar hit a 15-month low against major currencies on Wednesday on the view that U.S. Interest Rates will remain low well into next year, though it regained some ground after failing to push through key levels. By yesterday’s close, the USD fell slightly against the EUR, pushing the oft-traded currency pair to 1.5015. The Dollar went bullish against the AUD and closed at 0.9355. The USD also experienced similar behavior against the GBP as it jumped around 120 points and closed at 1.6595.

Many worry that the U.S. economy, however, will recovery slowly, and a bevy of Federal Reserve officials have bolstered that view this week, warning the recovery would be erratic and hinting that Interest Rates would remain low for some time. Low Interest Rates make the Dollar less attractive to investors than higher-yielding currencies, stocks and commodities.

As for today, much data is expected from the U.S. economy. Special attention should be given to the Crude Oil Inventories, which is expected to increase from the previous reading. Traders should pay close attention to this figure as it has a strong correlation with the value of the U.S. Dollar. Also today, the Unemployment Claims is scheduled and should also have an impact on the market, because if it delivers unfavorable figures that will validate a problematic U.S. economy, and the USD is likely to weaken as a result.

EUR – EUR Strengthens as GBP Sinks

The EUR strengthened against most of its major counterparts yesterday, continuing to prove that for the time being that this is the solid currency that traders can rely on to provide them with steady profits. The 16 nation currency extended gains versus the Yen on Wednesday, to trade at about 134.70 amid a broad sell-off in the JPY. The EUR experienced similar behavior against the USD and closed at 1.5015.

The Pound also fell broadly against the Dollar and EUR, after Bank of England (BoE) Governor Mervyn King said weakness in the currency would help UK exporters and aid Britain’s recovery from recession. Earlier in the global session, BoE Governor King emphasized the need for the UK economy to rebalance away from imports to exports, and said that a weaker Pound would help achieve this.

Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the Industrial Production at 10:00 GMT. Analysts are forecasting this figure to be decrease from its previous reading. 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 are also advised to follow the European Central Bank (ECB) President Trichet’s speech at 19:00 GMT. This speech is very important as it is very likely to Impact the EUR volatility.

JPY – Yen Declines as Stock Market Rallies

The Japanese Yen saw a bearish trading session yesterday, losing ground against most of its currency crosses, as a rise in most Asian and European stock prices reduced demand for currencies perceived as safe havens. The JPY fell against the EUR and closed at 1.3470, while the USD/JPY cross rose to around 89.80.

In addition, Japan’s Core Machinery Orders, a key indicator that shows capital investment in the industrial sector, increased at a faster pace in September. Data released by the Cabinet Office showed that Core Machinery Orders rose a seasonally adjusted 10.5% in September, much faster than the 0.5% increase in the previous month, but it failed to provide strength to the Yen, as investors may be waiting for key data due to be released today to implement their trading strategies.

Crude Oil – Traders Await Crude Oil Inventories Report

Oil prices rose slightly on Wednesday as Organization of Petroleum Exporting Countries (OPEC) said that the world would consume more Crude Oil in 2010 than previously expected. OPEC revised its previous estimates for global Oil demand growth to 750,000 barrels per day, up 50,000 barrels a day from last month’s estimate.

For the past several months, the weak Dollar has helped keep Oil prices high despite a slump in American consumption. Crude Oil prices tend to rise when the Dollar weakens and makes Oil cheaper for investors holding stronger currencies like the EUR. With regards top today’s trading, traders should pay attention to the Crude Oil Inventories report, as it tends to have a large impact on Crude Oil’s prices, especially in the short-term.

Technical News

The cross now stands at the 1.4995 level, and there is expected to be much volatility for the pair today. The RSI of the weekly chart shows that the pair floats in the overbought territory, and that a bearish correction seems imminent. The MACD of the weekly chart also indicates that a bearish move may be looming. Going short with tight stops may turn out to pay off today.
The pair experienced much bullish behavior yesterday, as it now stands at the 1.6561 mark. The pair is currently sinking lower down the weekly chart’s Bollinger Bands, signaling that further bearishness for the pair is expected today. Similar behavior is occurring on the Bollinger Bands of the 4-hour chart. Going short on the pair seems to be the popular choice for today.
The pair is currently sitting in the oversold territory on the RSI of the weekly chart, indicating that a bullish move for today is imminent. We see that the cross is rapidly rising on the Bollinger Bands of the 1-hour chart, which also supports the bullish move for today. Going long with tight stops may turn out to pay off in today’s trading.
The Slow Stochastic of the daily chart shows that a bullish cross has recently formed, indicating that an upward move for the pair for today is imminent. Also, the pair is currently rising higher through the Bollinger Bands of the weekly chart. It seems that going long on the pair as the trading get underway may turn out to bring big profits in the coming hours.

The Wild Card

Gold has experienced much volatility today, as it now stands at the $1120 mark. The RSI of the daily chart shows that the commodity is floating in the overbought territory, signaling that a bearish move may be underway for Gold today. Additionally, there seems to be a recent bearish cross that occurred on the Slow Stochastic of the daily chart. Going short with tight stops may turn out to pay off for forex traders today.

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