Market Volatility Expected to Continue Today before Unemployment Claims

The US Weekly Unemployment Claims is the primary publication today and will likely determine the level of the USD when it is released at 12:30 GMT. The other main releases that are set to dominate forex trading, especially for currencies such as the dollar and EUR, is the publication of the European Minimum Bid Rate at 11:45 GMT. Traders may find good opportunities to enter the market following these significant announcements.

Economic News

USD – Dollar Rises on Positive Economic Data

The US dollar rebounded from an eight-month low against the yen on Wednesday and rose against the EUR as encouraging US employment and service sector data prompted traders to unwind bets against the US currency. As a result, the dollar rose 0.6% to 86.25 after falling to around 85.30, it’s lowest since November. The dollar experience similar behavior against the EUR and closed at 1.3150.

A report showing the economy added 42,000 jobs was welcome, but traders said it would take far more good news to reverse the prevailing bias against the greenback, which has shed some 6% against major currencies since July. Job and income growth are needed to encourage Americans to spend and help revive an economy that’s shown signs of slowing. While planned job-cut announcements have posted their third straight month-to-month gain, they’re hovering close to the seven-year low reached in April.

Looking ahead to today, the most important economic indicator scheduled to be released from the US is the Unemployment Claims at 12:30 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may continue to boost the USD in the short-term. Traders are also advised to follow Treasury Sec. Geithner’s speech at around 16:00 GMT. This speech is likely to impact the dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the dollar going into the rest of the week’s trading.

EUR – EUR Drops against the USD and GBP

The EUR fell back against the dollar Wednesday as the latest euro-zone data disappointed growth prospects and lowered inflation expectations for the region. By yesterday’s close, the EUR fell against the USD, pushing the oft-traded currency pair to 1.3150. The 16 nation currency also saw bearishness against the AUD and closed at 1.4352

The pound also fell against the dollar as a report showed the UK Services Purchasing Managers Index fell to a 13-month low and came in well below analyst expectations, with the set of July PMIs suggesting the rate of growth in the UK economy slowed at the start of the third quarter. The services PMI index came in at 53.1, down from June’s 54.4, with new business growth slowing. The July services PMI was the third PMI survey released this week, all of them showing a distinct weakening trend.

Investors may want to look out for unusual price volatility to continue in the EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for large profitable gains.

JPY – Yen Weakens vs. Majors

The Japanese yen saw a bearish trading session yesterday, losing ground against most of its currency crosses. The JPY fell against the USD after several days of recovery, while the GBP/JPY cross also rose to around 137.20.
Some of the respite came against the yen, as talk intensified that the Japanese government might put pressure on the Bank of Japan to loosen monetary stance even further in an effort to stop the yen from rising any more. Japanese Finance Minister Yoshihiko Noda has encouraged such talk by his repeated warnings about the damage that a strong yen can inflict on the Japanese economy while failing to suggest that the authorities will intervene.

As for today, Japan will be absent from the economic calendar. The JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today, especially the US Unemployment Claims and Europe’s Minimum Bid Rate.

Crude Oil – Oil Prices Stable Above $82 a Barrel

Crude Oil prices were little changed on Wednesday, near its highest level in three months, at more than $82 per barrel after a US oil inventories unexpectedly declined and economic reports showed service industries and payrolls rose more than forecast in July.

Inventories of crude oil fell 2.78 million barrels to 358 million, the department said. Supplies were forecast to drop by 1.65 million barrels.

As for today, the US Weekly Unemployment Claims report will likely determine crude’s next move, with any mildly positive elements within them likely to keep the price on its upwards direction.

Technical News

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
For the last two days the Cable has consolidated around the 1.5880 level without making any significant movements. However, a flag formation on the daily chart implies that an uptrend is about to be initiated. Going long with tight stops might be a good strategy today
The recent volatility in the pair sees the USD/JPY trading between the 85.00-86.00 levels. The 4-hour and weekly chart’s oscillators indicate that this volatility is likely to continue. Additionally, the daily chart signals that yesterday’s bullish trend may continue. Going long with tight stops may be a preferable strategy today.
This pair is still in the midst of a steady uptrend which is not yet showing any sign of leveling out. The RSI and Momentum on the daily chart are still positively sloped indicating that there is still plenty of steam left in this bullish move. Once this pair breaches the 1.0595 level it’s likely to make another sharp break upwards.

The Wild Card

On the daily chart the moderate bullish price movement continues within the upwards channel which still has yet to be breached. The hourly chart is also joining that notion with the Slow Stochastic pointing to the continuation of upwards momentum. Next testing point should be around 0.9245. Forex traders have a good opportunity to enter what appears to be the beginning of a steady rising trend

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