Set Your Positions Ahead Of a Loaded Fundamental News Week

Low Volatility Expected In Observance of U.S Labor Day.
Last week, the USD went through some choppy waters while showing mixed results against the majors. The greenback gained a respectable 100 pips versus the EUR closing at 1.4670, also making strides against the GBP and CHF. The USD did experience some bearishness against the JPY, due to a strong news week by the Asian powerhouse. Last week’s results were driven largely by strong US economic indicators, as positive data pushed the Greenback. Housing sector figures were surprisingly positive, as both Existing and New Home Sales, pushed the market toward favorable Dollar sentiment. Traders also saw a bullish dollar following an unexpected rise in Core Durable Goods, and what took many by surprise, a 3.3% rise in quarterly GDP.

This week should bring high volatility for the Dollar as many crucial news events will take place. ISM Manufacturing PMI is expected on Tuesday and will look to set a mark before we approach a very important end to the first week of September. Thursday will be a big day with ADP Non-Farm Employment Change and the ISM Non-Manufacturing PMI indicators forecasted for release. It has been the case in recent months that a disparity between ADP’s forecast of Non-Farm payrolls and the actual release a day later from the U.S Labor Department has caused huge swings in the dollar’s movement most notably against the majors. Traders should start the week looking to set up positions for what could be a big week in the Forex market. Also expected on Friday along with Non-Farm Payrolls is the US Unemployment Rate, both of which are forecasted to be bearish and close the week with great volatility. Forecasts show a large portion of the data from the US this week as negative; this, along with the developments of Hurricane Gustav could hurt USD prices this week

Today Labor Day is celebrated in the USA and volatility will likely be low, expect the direction of the USD to be dictated by it counterparts.

EUR Indicators Aim to Dictate Today’s Trading Direction.
The Euro continued its recent bearish trend versus its rivals. The EUR saw some depreciation against the dollar last week, closing 100 points below the beginning of the week. Euro-Zone news did little to help the currency as data was predominantly bearish.. The week was highlighted by German Consumer Confidence, Ifo Business Climate Index and Prelim CPI all showing downtrends in the EZ’s biggest economy. Region wide news did not help much as the CPI Flash Estimate, Consumer Confidence and Unemployment Rate for the whole of the EZ all experienced descending trends

This week, news from the European Economic Zone could surprise investors and cause great volatility, as the indicators are ambiguous for the EUR. German Factory Orders and Industrial Production figures, along with EZ Retail Sales and the Minimum Bid Rate will highlight this week’s European news. With the magnitude of this week’s news from the US, the EUR has the ability to make up some ground if local news can produce positive results.

Today the EUR should dictate its direction as 2 indicators are due to be released. German Retail Sales was released early this morning to show a 1.5% drop, 1.4% lower than expectations but similar to last month’s movement. Also Final Manufacturing PMI is projected at 47.5, equal to its previous reading. Given no news from its American counterpart, the EUR could see some bullishness today and may even reach the 1.4750 level during the day, if new is indeed, perceived as positive.

JPY Looks to Continue Last Week’s Bullishness.
The Yen experienced a bullish trend versus the major currencies during last week’s trading session. The Japanese currency gained over 120 pips against the USD when it closed trading at 108.81 level last Friday. The JPY saw a huge contribution last week from local economic indicators including the CSPI, Tokyo Core CPI, Preliminary Industrial Production, and Retail Sales, all of which affected the Yen positively.

This week should be a relatively calm week for the Yen as only 5 indicators are expected to shed light on the Japanese economy. The Average Cash Earnings, Monetary Base indicator, and Capital Spending are expected to produce mixed results. BOJ Governor Shirakawa is expected to speak twice throughout the week and could cause volatility as he will likely discuss the direction of the Japanese economy following Japan’s new 18 billion dollar economic stimulus package.

Today, a number of indicators are expected to be released from Japan. The Average Cash Earnings is projected to rise 0.3%. Yearly Monetary Base figures are also expected, but should have little effect on the movement of the JPY. Expect a relatively quiet day for the JPY as the US stock market is also closed today in observance of Labor Day.

The Storm Alert Has Drawn Attention World-Wide
The price for Crude Oil continues to remain stable and is traded at $116.44/barrel on the New York Mercantile Exchange, after rising 1% since last Friday. Despite the fact that in the Gulf of Mexico Oil companies are preparing to shut down the production as the Tropical storm Gustav continues to make its way toward the region, the market has taken it rather calmly. According to the National Hurricane Center the storm reached Category 3, after dropping down from Category 4 and its landfall is expected in the next 24 hours. The damages expected are rather minor since the storm will probably not reach its highest level. So far only few oil companies in the Gulf have cancelled their production, evacuating their workers and closing their refineries.

The expectation is that the Oil prices won’t rise dramatically in the next 48 hours, if the storm won’t take an unexpected course. Moreover, the International Energy Agency’s announcement earlier that they will be willing to release reserves if necessary, also contributed to the stability on the Oil prices.

Technical News

The pair continues to fluctuate within a restricted price range, without making any significant breach. Currently, as all oscillators on the 4 hour chart are pointing down, the pair might be ready to enter another downtrend, with a price target of 1.4550.
The pair is reaching new lows on a daily basis, as the cable is now traded around 1.8040. The Bollinger Bands on the 4 hour chart have dropped beneath the current price, suggesting that further bearish movement is likely to take place. Going short might be preferable today.
The pair is attempting to enter a sustained downtrend, as has recently tested the 108.20 level. Should the pair breach through this level, further bearish behavior might occur, with a price target of 107.50.
The pair is continuing to provide mixed results, and is now traded around the 1.1030 level. The one hour chart demonstrates a flat line ever since the beginning of the trading week. Traders are advised to wait for a clearer signal before entering the market on this one.

The Wild Card

The pair is continuing to show bullish behavior and is reaching new record highs. As all oscillators on the 4 hour chart are giving bullish signals, the pair could extend its uptrend. This might be a good opportunity for forex traders to join a very promising trend.

Written by: