USD Resumes Gains Over Fears Of Global Slowdown

CPI Data On Tap.
The USD completed yesterday’s trading session with mixed results versus its major rival currencies. During the first half of the day, the U.S. dollar eased versus the euro and the yen after government reports showed that Retail Sales fell 0.1% in July, below the 0.5% expected by analysts. The greenback retreated from earlier gains after concerns over gasoline supply following a U.S. inventory report showed that crude stockpiles and refined product supplies fell last week, declining to its lowest levels since last 10 years.

Following this report, the Crude Oil prices rocketed more than $4 per barrel hurting the USD against the EUR and increasing worries about the main economy’s growth outlook. However, the USD rebounded in the late trade session and the recovery erased earlier losses and the USD edged lower against the Euro and rose against the Yen. Also yesterday, Import Prices from the U.S. rose 1.00% more than expected, reaching 1.7%. This increase was preceded by sharp gains in energy and food prices leading prices for imported goods to their fastest annual gain on record.

Today will be another big news day for the greenback. The Core CPI is forecasted to decrease by 0.1% from 0.3% in the last month and the CPI is expected to be reduced to 0.4%, which shows that inflation is easing on the U.S. economy. The Unemployment Claims report, one of the most influential USD indicators, is forecasted by analysts to show a decrease of 15k jobless individuals, from 455K last week. Also today, the President of the FED Bank of Minneapolis will deliver a speech about Repercussions from the Financial Shock where we will find out if the FED will maintain its hawkish inflationary rhetoric. Traders should follow the Unemployment Claims report and CPI results which will determinate USD trends.

EUR May Slide On GDP Data.
Yesterday the EUR saw mixed results against its major currency counterparts. It saw mixed trends against the USD and rose vs. the JPY. The EUR started the trading day by rising less than 0.1% against the USD, but eased after increasing expectations that economic growth in Europe may slow more sharply than in the United States. During the late trading session in New York, the 15 Nation currencies was traded 0.2 percent higher at 1.4935, and against the JPY, the EUR was up 0.5%.

Yesterday was a slow news day for the Euro-Zone. The only economic data that was released from the Euromarkets yesterday was the Industrial Production which was unchanged against May and 0.5% lower than last year’s result. 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 as the GDP is the primary gauge of an economy’s health, however in both cases the GDP is expected to decrease. Also scheduled today, the ECB will issue a bulletin where they will report an analysis of inflation and current economic conditions. Another one of the important events of the day for Europe will be CPI figures which are forecasted to provide a 4.1% gain this month, which could help recover some ground lost by the EUR over the last few days, and we finally might see some EUR bullishness.

The JPY Weakness Continues On All Fronts.
Yesterday the JPY saw bearish trends versus its major rival currencies. The JPY underwent falling trends against the USD and the EUR after renovated fears of economic growth in the world’s second large economic were sparked by the data that was released and showed that Japan’s economic growth shrank in the second quarter by 0.6%. The hike in Crude Oil prices also contributed to bearishness in the JPY trading after concerns that high energy prices could hurt the Japanese economy even further.

In yesterday’s local news from Japan, the only economic event from the Asian market was Japan’s Tertiary Index, which measures spending in the services sector and fell by 0.8% in June compared to May, the second straight monthly fall. Looking ahead to today, the JPY will be absent from the economic calendar and traders should keep watching news arriving from the U.S and the Euro-zone carefully, as they will be the main factors in the JPY progress today.

Oil Rebounds On Lower US Inventories.
Crude Oil prices rose significantly yesterday, as a barrel of oil was traded around $116.80, an increment of over $3 from the previous day. The main data regarding oil yesterday were the U.S Crude Oil Inventories, which dropped by 0.4M barrels, 0.3M more than expected, supporting the rise in Crude Oil prices. It seems that yesterday’s bullish behavior came also as a result of the sharp declines oil experienced during the previous days, and yesterday’s bullishness had corrected some of this drop.

In the meantime, the war in Georgia continues to contribute to the oil price movement, as the pipeline from Azerbaijan through Georgia to the black sea that is responsible for transportation of 1 million barrels-a-day remained closed for the second straight day. As for now, the war between Georgia and Russia seems to ease down, and traders are well advised to follow developments from that region. As gasoline demands are increasingly falling, it seems that Crude Oil may soon resume its bearish trend. However, as any global event appears to dramatically toy with oil prices, staying alert and following world news should remain investors’ main strategy.

Technical News

The pair has consolidated around the 1.4900 level for the past few days without making any significant breach. However, the Bollinger Bands on the 4 hour chart are tightening, indicating that a sharp price movement is imminent. Waiting for the breach and swing might be a good strategy today.
The pair is continuing its bearish momentum with full steam, as the cable breached through the 1.8650 level. The daily chart shows that the pair has descended beneath the Bollinger Bands border, suggesting that the falling trend might extend. Going short might be preferable.
There is a very accurate bullish channel forming on the daily chart, as the pair is now floating in the middle of it. All oscillators on the 4 hour chart are pointing up, and next price target might be 110.00.
The rising trend seems to be halting in the last couple of days, as the pair consolidated around the 1.0850 level. As the Bollinger Bands on the 4 hour chart are tightening, a strong price move might take place. Should the pair breach through the 1.0910 level, a sharp bullish momentum could be launched.

The Wild Card

The bullish correction Gold is going through seems to have more room to go, as all oscillators on the 4 hour chart are giving bullish signals. This might be a great opportunity for forex traders to enter a very popular trend.

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