Today, traders should pay close attention to the release of the U.S. Unemployment Claims report. This indicator always produces extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 13:30 GMT.
USD – USD Down Following FOMC Meeting Minutes
The dollar fell against most of its major currency pairs yesterday after minutes from the U.S. Federal Reserve’s latest policy meeting suggested the possibility of more stimulus measures for the economy. By yesterday’s close, the dollar fell 0.4% against the EUR to 1.4417.
The dollar experienced similar behavior against the GBP and closed at 1.6015.
Over the past month, the dollar had risen on expectations an improving economy would prompt the Fed to hike interest rates sooner rather than later. Analysts said the minutes are likely to dampen speculation the central bank would tighten any time soon. In addition, the fall in the Dollar that has been treated as a lower risk, safe-haven investment, to growing optimism that the worst of the financial crisis has passed. This has caused investors to buy commodity-linked and higher-yielding currencies, which rallied earlier last week.
Looking ahead to today, there are few news releases coming out of the U.S. These include the Unemployment Claims and Natural Gas storage at 13.30 GMT and 15:30 GMT respectively. Better-than-expected results may help the Dollar recover some of yesterday’s losses against some of its crosses such as the EUR and GBP. On the other hand, if the results turn out to be lower than forecast, then the Dollar may record a fairly bearish session in today’s trading. 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 these releases.
EUR – EUR Rallies against Dollar and Yen
The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The 16-nation currency extended gains versus the U.S. dollar on Wednesday, to trade above $1.4417 amid a broad sell off in the greenback. . The EUR experienced similar behavior against the JPY as the pair rose from 132.30 to 13310 by days end.
The EUR was affected by the global stock market rally and the bearish Dollar. The U.S. stock market rally led investors to buy-back into the EUR, as they looked for returns on buying commodity-linked and higher-yielding currencies in Wednesday’s trading.
As the global economy stabilizes, currency traders have started to focus more on fundamentals such as economic growth and short-term interest rates. That shift, just getting underway, could take the shine off the soaring EUR in coming months.
Looking ahead to today, the most important economic indicator scheduled to be released from Euro-Zone is German Factory Orders at 11:00 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today’s announcement as a better than expected result may continue to boost the EUR in today’s trading.
JPY – Yen Free Fall Continues
The yen fell against against most of its major currency pairs yesterday as signs of a global economic rebound eroded demand for the Japanese currency as a haven and Finance Minister Hirohisa Fujii resigned.
The yen came under pressure after news of Japanese Finance Minister Hirohisa Fujii’s resignation. His departure could add to challenges for the Japanese government as it wrestles with deflation, a fragile economy and huge public debt.
Most analysts expect little impact on Japan’s currency policy, which is controlled by the finance ministry. But some say Deputy Prime Minister Naoto Kan, who will succeed Fujii, may be less tolerant of letting the yen rise and putting at risk a fragile export-led recovery.
Crude oil – Crude oil Rises on Weak Dollar
Crude Oil prices experienced another day of appreciation as the oft-traded commodity rose above $83 during yesterday trading session. The data released Wednesday by the U.S. Energy Information Administration showed a reversal in the recent trend of falling oil and fuel inventories. While total oil and refined product stockpiles fell slightly, two of the most closely watched categories bucked the trend.
Oil and other commodities denominated in dollars for global trading tend to rise when the U.S. currency falls as they become cheaper for holders of other currencies. A move away from dollar-based pricing of the world’s leading commodity could further weaken the greenback.
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The bearish trend is losing its steam and the pair seems to consolidate around the 1.4390 level. The 4H chart’s RSI is already floating in the over-sold territory suggesting that the recent downward trend is losing steam and a bullish correction is impending. Going long with tight stops appears to be the preferable strategy.
The bearish formation on the 4H chart remains intact; however the momentum seems to be fading. The hourly chart is also maintaining a slightly bearish configuration yet with no distinct conclusion. Traders are advised to hold for the break and then swing into it.
The daily chart show fresh signs of a bullish move, suggesting that the downtrend has vanished. The hourly chart’s RSI also supports this notion indicating that the upwards momentum has more steam in it. Going long with tight stops might be the right strategy today.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s RSI providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The Wild Card
The violent bullish surge continues with all oscillators showing the continuation of the trend. Fresh all time highs are being breached on a daily basis and Platinum is now floating at 1564.55. The RSI is showing that the bullish momentum is still quite bullish. Forex traders have a great chance of enjoying the additional momentum still left for the commodity.
Written by Forexyard.com