Volatile Expected a Mixed Heavy News Day

Yesterday the greenback had a volatile trading session against its major currency rivals. It underwent contrasting trends vs. the EUR and the GBP and was bullish vs. the JPY. The main news from the US economy revolved around the Consumer Price Indices. The Consumer Price Index was released at 0.2%, a little bit lower than last month’s 0.3% mark. The Core Consumer Price Index was also slightly lower than last month’s 0.2% mark as it came in at 0.1% for April. The biggest repercussion from the reports is that the Fed can now cut rates once again if needed, rather than worry about rising inflationary trends. This very understanding might be what reversed the USD bullish trend into a bearish one.

Today, an extremely intensive news day can be expected for the US economy. First off on the day will be the Empire State Business Conditions Index. The index measures the general business conditions of manufacturers in New York State. Although the survey is limited to New York only, it’s highly important as the New York Federal Reserve report serves as a precursor for national manufacturing numbers. Later on, the Treasury International Capital (TIC) Net Long-Term Transactions will be published. Analysts forecast it to release at 63.6B, well below last month’s 72.5B mark. Such a descent should have negative effect on the USD. At 13:30 (GMT) Fed Chairman Bernanke will deliver a speech in Chicago on Risk Management in Banking Organizations. As always, Bernanke’s speeches are very intriguing, as clues regarding interest rate changes might be scattered throughout. Considering that analysts predict an interest rate cut to be imminent, this particular speech could be vital. At 14:00 (GMT) The Philadelphia Fed Manufacturing Index will be published. Just like the New York Index, its importance derives from the fact that it’s released weeks before other major reports on manufacturing.

Today will be a fascinating day for traders, yet it obligates them to stay fully alert. For today, trading the USD could create significant profits as high volatility is expected throughout most of the day.

Yesterday the EUR saw volatile trends within its major pairs. The EUR\USD began the day with a falling trend as it hit a daily low of 1.5413, yet it promptly rose up to 1.5473. The only significant gain for the EUR came against the JPY. European news from yesterday included the French Consumer Price Index. This Index which measures the rate of inflation came out at 0.3%, lower than last month’s 0.8% figure. Later on in the day, the European Industrial Production report was published, and released at -0.2%, better than the expected -0.3% mark, yet lower than last month’s 0.3%. Also yesterday, the Council of Economics and Finances Ministers held a meeting, where all of the Euro-Zone financial chiefs expressed concerns over the growing levels of inflation, yet they admitted their appreciation to the European Central Bank (ECB) reactions to the rising commodities prices, and stated they have full confidence that it will continue to act this way.

As for today, a bundle of data is expected for the EUR. The German, French and European Gross Domestic Product (GDP) reports are scheduled. These reports measure the total value of all goods and services produced by an economy. Analysts forecast positive results in all three reports, and rising trends are likely in light of these forecasts, as GDP is the primary gauge of an economy’s health. Later on, the ECB President Jean Claude Trichet will deliver a speech. Trichet has avoided manipulating the European interest rate for the last month, despite rising commodities prices. Investors will follow his speech very closely, in the event that he gives any clues regarding a rate change, as it should instantly affect the EUR.

Traders should remain very keen today, as high volatility is expected. Lots of data coming from the Euro zone and the U.S should create fluctuation in the market. Traders should use this opportunity to create short-term profits.

Yesterday was an extremely bearish day for the JPY as it saw falling trends against most of its major counterparts. It has continued it’s freefall since the beginning of the week vs. the USD, the EUR and the GBP. The only news regarding the JPY that came out yesterday was Core Machinery Orders, which reflected an 8.3% fall in March, making the value of orders in March the smallest since May 2005. It is the second straight monthly fall following a 12.3% decline in February, and for now it seems that the JPY is continuing to nurture its deterioration. On tap for today, the Japanese Gross Domestic Product is scheduled. This survey measures the total value of all goods and services produced by the economy. Analysts forecast it to come in lower than last month, and such unfavorable results will probably continue to contribute to the JPY downfall.

Traders should bear in mind that the Gross Domestic Product results will be published only at 23:50 (GMT). Hence until then the JPY will be mostly influenced by global economic developments, especially from the U.S. This day is promising to be a very volatile day for the Forex market, and the JPY shouldn’t be any different.

Technical News

The pair’s bullish move is approaching the testing point of 1.5500 which is a key Fibonacci level of the entire bearish corrective move. The momentum is quite bullish and if a breach through the key level occurs, we might see the pair generate fresh momentum with a target price of 1.5580.
There is a very distinct flag forming on the 4 hour chart, as the cable now approaches the upper level close to the tip of the flag. The local momentum within the flag is moderately bullish yet a very strong cross is imminent on the daily chart, which indicates that the bearish move might return shortly with strong steam.
The pair is in the midst of the fifth consecutive day of appreciation and according to the daily chart there is still much more room to run. The hourlies are supporting the bullish notion, and it appears that going long might be the preferable strategy today.
The pair has been ranging for a while now after the strong bullish move, and it appears that today the local momentum might be moderately bearish. Although the signal is not strong the pair might have a local target at 1.0450, which might make it feasible for forex traders to go short with very tight stops.

The Wild Card

The flag formation on the daily chart still remains intact, as gold now floats in the middle of it with moderate bullish momentum. The upcoming cross on the daily Slow Stochastic is showing that the bearish trend will probably resume quite shortly. This could be a great opportunity for forex forex traders the take a position before the technical signal is fully unraveled.

Written by Forexyard.com