Crude Oil Inventories Expected to Take Center Stage Today

The USD Showed That What Goes Up Must Come Down
The greenback experienced a trading session of mixed results yesterday. Soon after the trading day began, the USD reached a 6 month record against the EUR as the pair fell to a rate of 1.4630. However, it was a straight or shall we say “strait” downfall for the USD ever since, as the cross rose to breach the 1.4800 level.

The USD made its record high against the EUR as a result of a much better than expected Producer Price Index figure. The indicator rose by 1.2%, beating expectations for only a 0.6% rise. The surprising surge reflects an increasing inflation pace, that might only be stopped by interest rates hikes, and the market promptly reacted to continue the USD’s rally. However, 3 elements have joined together to provide traders with an excellent opportunity to gain profits on their short USD positions. The first one was the Building Permits indictor which fell beyond expectations to its lowest growing rate since 1991, as only 0.94M new residential building permits were issued during July, showing that the housing market in the U.S is in the midst of a crisis and not over it. The second reason for the falling Dollar was the second day of bearish American stock markets. After a positive month for the equity markets that had largely contributed to the bullish trend the USD had gone through, two consecutive days of falling stocks prices managed to generate some wariness for the investors, and have them partially close their long positions on the USD. The third reason was the recuperation of oil prices, which rose by over $3 a barrel yesterday, to be traded around $115, giving extra support to the weakening USD.

As the sole indicator that will be published from the U.S. economy today is the Crude Oil Inventories, traders are well advised to follow Crude Oil prices, and refer to them as one of the most influencing information that might affect the USD. In case that no dramatic changes will occur, the USD is widely expected to resume its general trend of bullish behavior against its major currency rivals.

The German Economy Leads the Way For the Euro
Yesterday, the EUR has appreciated against all its major currency rivals. Its most notable bullishness was experienced vs. the USD after the pair had breached the 14800 level in the morning. The EUR also sustained rising trend against the GBP and the JPY.

The EUR’s bullish behavior came firstly as a result of exclusively positive data coming from the Euro-Zone yesterday. The German economy, the strongest economy in the Euro-Zone, was the main source of the favorable data. The German Producer Price Index rose by 2.0%, well above expectations for only a 0.7% rise. Even more important was the German ZEW Economic Sentiment that measures the institutional investor sentiment. The indicator came at -55.5, and not at the expected -62.0. The European ZEW economic sentiment was also published, and also delivered better than expected figures as it came in at -55.7, almost 8 points higher than predictions. The EUR was also riding rumors suggesting that an interest rate hike is expected from the Euro-Zone, rumors which were highly enhanced by the German Producer Price Index outcome, as the high inflation rate might compel the European Central Bank chiefs to raise its interest rates. In addition to the EUR’s positive data, the USD has suffered from some disturbing news yesterday, and with the help of the rising oil prices, the EUR’s correcting move against the USD was imminent.

As for today, no significant data is scheduled from the Euro-zone, and so low volume should be expected within EUR crosses. However, following yesterday’s bustle, the market is very likely to continue its wakeful momentum. As opposed to yesterday, the EUR seems to have maximized its positive data, and a downtrend could be seen today, especially against the USD that will look to continue its rally.

BoJ Expecting a Growing Phase For the Japanese Economy Soon
Yesterday, the JPY underwent a session of volatile behavior against most of its major currency counterparts. The JPY rose against the USD as the pair descended beneath the 109.60 rate. However, it mainly saw bearish trends against the EUR and the GBP.

Yesterday, the Bank of Japan (BoJ) has decided to leave its interest rate at its current level of 0.5%, the lowest in the industrial world. The BoJ Governor explained this decision by saying that he believes the falling commodities prices, along with the stabilizing overseas economies has eased inflation concerns in Japan, and that very soon the Japanese economy should enter a growing phase. However, he did say that it is still unclear weather the current downtrend in commodities prices, such as Crude Oil, will remain intact, leaving an open window for any interest rates manipulation that might be needed in the future.

Looking ahead to today, at late-night the Japanese Trade Balance will be published, and is forecasted by analysts to deliver much better figures than the survey from last month, as it’s expected to rise from 0.14T to 0.35T. However, the JPY will be mainly influenced by overseas developments, and traders should pay attention to the USD and EUR in order to determine the JPY’s direction for today.

Oil Prices Jump Up Bullishly
The Crude Oil prices rose bullishly by more than $3 in yesterday’s trading session. A barrel of oil was breached the $115 barrier as the USD weakened against the EUR and a rally in heating oil pulled new buyers into energy markets. There was even more volatility in the markets as September contracts expire today. Although the Tropical Storm Fay seems to be less threatening than many expected, and oil facilities in the Gulf are no longer expected to be in threat.

The American Crude Oil Inventories are expected to be released today at 2:35 GMT and will cause volatility in the Crude Oil trading. After a negative value last week, the expectation is for 0.7M this week, which should lower the Crude Oil prices in this case as it means that supply is rising. As the bad weather worries seem to be almost over and higher Crude Oil Inventories in the forecast, the Crude Oil prices should lower in today’s markets.

Technical News

The pair is currently correcting up on a local level within the bigger bearish trend. The upcoming bearish cross on the 4 hour chart’s Slow Stochastic indicates that the bullish trend’s comeback is at the doorstep. A strong breach through 1.4700 will probably validate the bearish return.
The pair is consolidating around the 1.8650 level and appears to be accumulating momentum ahead of the next break. The 4 hour chart is showing moderate bearish momentum, with the Bollinger Bands tightened indicating that a breach might be quite imminent. In case of a violent bearish move, the pair will probably heading towards the 1.8500 zone.
The pair is still traded within the bullish channel as the direction is currently unclear. No significant breach has been made in either direction, yet there is a bearish hint in the form of a cross on the 4 hour Slow Stochastic. The Bollinger Bands are tightening which indicates that the break is near. Going short with tight stops might be smart today.
There are no distinct patterns on both the daily and the hourly charts. Mixed signals are being given from both, and it appears that the pair’s next move is quite vague. It would be preferable for traders to wait for a clear sign before approaching this pair today.

The Wild Card

Wild – CAD/CHF
There is a very distinct bearish channel forming on the 4 hour chart as the pair now moves down within the channel. The Slow Stochastic is showing quite a strong bearish cross; wile the RSI floats at the overbought territory further supporting the ongoing downtrend. It appears that the pair is heading 1.0100 and going short might be a preferable strategy for forex traders today.

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