GBP Still Gaining Against Majors

Following a report that U.S. based Kraft Foods Inc. may be merging with British incorporated Cadbury, the Pound saw major gains across the market spectrum. The Euro dropped to a four month low against Sterling, while GBP rose to its highest level in more then a month against the greenback.

Economic News

USD – Dollar Slips to 1-Month Low against Sterling

Following rumors of an impending merger between Kraft Foods and Cadbury, the Pound made some serious gains against the Dollar with the pair currently trading around the 1.6405 level. EUR/USD trading was relatively stable on Monday largely due to the Martin Luther King Holiday. Currently the pair is trading around the 1.4385 level.

Today, traders will want to pay attention to the TIC Long-Term Purchases report, due at 14:00 GMT. The report measures the difference in foreign investment in the U.S. and U.S. domestic investment abroad. The report is a key indicator of American economic health, as it is a direct indicator of how foreign investors view the U.S. economy.

Heavy volatility among USD pairs usually follows this report. With a forecasted figure of 30.3B, today’s long-term purchase figures could mark a significant increase over last month’s. If this is indeed the case, the greenback could see some major gains, particularly against the weak Euro. On the other hand, any figure below the predicted outcome would likely see USD take further losses, especially against the strong British Pound.

EUR – Greek Deficit Weighs Heavily on Euro

Worries over the Greek economy caused the Euro to take some heavy losses in trading on Monday. The EUR/GBP pair dropped significantly and is currently trading around 0.8765. Against the Yen, the Euro has fallen some 40 pips over the last few hours and is currently trading around the 130.20 level. All being said, recent comments expressing confidence in Greece by the European Central Bank, helped the Euro keep its losses relatively modest.

Today, traders should carefully watch the German ZEW Economic Sentiment report, set to be released at 10:00 GMT. The report is a key indicator of German economic health and typically creates serious volatility.

Last month, the report caused the Euro to take some heavy losses, especially against the Dollar. With analysts predicting a similar figure this month, it is possible that the currency will continue its downward trajectory in trading today. On the other hand, if the report comes in better then expected, the Euro might be able to recoup some of it recent losses.

JPY – Yen Increases Gains on USD and EUR

A resurgent Yen has made some significant gains on both the U.S. Dollar and Euro in recent trading, largely due to poor economic news from the later currencies. That being said, most analysts do not foresee the Yen remaining strong for much longer. Japan currently exports more then it imports, meaning that a strong Yen generally hurts the export industry. This could play a large role in how the Japanese government shapes its economic policy.

Today, traders should expect the Yen to either gain or loose depending on economic indicators from the Euro-Zone and England. Good economic news for either the Euro or Pound is likely to entice risk taking among investors, which would hurt the Yen. On the other hand, any negative European news could give the Yen’s safe haven status a boost.

Crude Oil – Crude Prices Increase for First Time in 6 Days

With most Oil trading sidelined on Monday due to the Martin Luther King holiday, Crude was able to post modest gains largely due to low liquidity. In addition, European indices helped prop Crude prices in trading yesterday. Crude is currently trading at around 78.60 a barrel.

Traders hoping that Oil prices will continue to increase may be in for a disappointment. Fresh rumors that OPEC is considering upping its output has tempered investor confidence for a dramatic rise in Crude prices. Furthermore, temperatures across the U.S. have increased recently, creating less demand for Oil across the country.

Technical News

The 8 hour RSI is heading into the oversold territory while an impending bullish cross is evident on the 4 hour MACD and a fresh bullish cross is evident on the daily chart’s Slow Stochastic. Going long for the day may be a good choice.
The pair may see a correction to its recent bullish run today as the hourly, 2 hour and 8 hour RSI are floating in the overbought territory and with the daily and 2 hour charts’ Slow Stochastic are exhibiting a bearish cross. Going short for the day may be advised.
Some bullishness may be expected for the pair today as the 8 hour and daily charts’ Slow Stochastic is exhibiting a bullish cross and as the 2 hour and 8 hour RSI are floating near the oversold territory. Going long for the day may be a good option.
The 2 hour RSI is floating in the oversold territory while the 4 hour chart’s Slow Stochastic is exhibiting a fresh bullish cross. Furthermore, there is an impending bullish cross on the hourly MACD. Going long for the day may be advised.

The Wild Card

The pair’s recent bullish run may see some correction today as the hourly and 8 hour RSI are floating in the overbought territory and the daily, 2 hour and hourly charts’ Slow Stochastic are exhibiting bearish crosses. Forex traders may be advised to go short for today.

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