USD Bearishness Set to Continue Today

Analysts expect the Dollar to fall further against its major currency crosses today, as the U.S. it expected to release some negative economic data, such as Unemployment Claims at 13:30 GMT. In the meantime, forex traders are advised to take advantage of market volatility as this week’s trading session comes to an end.

Economic News

USD – Dollar Moves on Deteriorating Economy

The Dollar finished Thursday’s trading session lower versus most of its major currency pairs, as fears about the viability of General Motors, and the U.S. and European banks sent shock waves through the forex and U.S. stock market. Some better-than-expected economic figures coming out of the U.S. yesterday failed to make up for the losses the Dollar suffered from the tumble on Wall Street. This may be due to Unemployment Claims figures still being over the 600,000 level, indicating that the U.S. still has a long way to go before it recovers from the current economic crisis.

The Dollar finished down about 60 pips vs. the JPY yesterday, pushing the currency pair to the 98.23 level. The Pound also made some gains against the greenback to finish up 21 pips at 1.4176. The USD, however, rose 38 pips against the EUR to finish yesterday’s trading session at 1.2577. The 2 former results are notable, as the Interest Rates cuts in Britain and the economic troubles in Japan failed to push down the GBP and JPY vs. the Dollar yesterday. It is also likely that the Dollar’s bearishness against several of its major currency pairs yesterday was partly owed to investors realizing that the Dollar was slightly over-valued, leading to a reversal in some of the greenback’s recent gains.

Later today, there are several important economic data releases coming out of the U.S. These include the Non-Farm Employment Change, the Unemployment Rate, and the Average Hourly Earnings figures all at 13:30 GMT. All 3 of these are expected to be worse than the previous released figures. Therefore, if the actual results are the same as forecasts, then the Dollar may continue Thursday’s bearish trend. However, better-than-expected results may push the Dollar higher against its major currency rivals, going into the beginning of next week’s trading session.

EUR – EUR Tumbles on Rate Cut Decision

The European currency slid against most of its major currencies crosses during yesterdays trading session after the European Central Bank (ECB) lowered its Interest Rate from 2.0% to 1.5%. Losses were also owed to large falls in European stocks. The rate cut marks a record low for the Euro-Zone, as the Euro-Zone’s economic fortunes have gone from bad to worse in recent months. The EUR fell nearly 40 pips vs. the USD to 1.2577 from the1.2615 level yesterday. Against the Yen, the European currency tumbled by over 150 pips to close at 123.57. Additionally, the EUR dropped 40 pips against the GBP to finish yesterday’s trading session at the 0.8870 level.

Following the rate cuts and recent economic events in the Euro-Zone, Investors now speculate that ECB President Jean-Claude Trichet may make additional rate cuts in the near future, as the economic slump deepens. This view is largely owed to Trichet’s speech following the rate cut decision, in which he warned of a protracted economic slowdown. Moreover, analysts argue that deflation could reduce the possibility of a potential economic recovery in the Euro-Zone in the second half of 2009. Analysts argue that for conditions to improve, the ECB needs to follow the U.S. Federal Reserve’s in tackling the recession. However, the latest ECB cut rate may turn out to be an effective decision that is likely to assist banks in upholding liquidity, and bringing more confidence to the markets.

Today, the Euro-Zone will be absent from the economic calendar. The EUR’s trends are likely to be affected by news developments from Britain and the U.S. Analysts forecast that the EUR and GBP are expected to record a volatile trading session today, as the forex market continues to move on yesterday’s rate cut decisions from both countries. Traders should keep a close eye on the news coming out of the U.S. and Britain as the economic news coming out of these 2 countries are likely to be additional factors in determining the EUR’s movement today. This is the case especially with the release of the U.S. Non-Farm Employment Change and Unemployment Claims data later today.

JPY – Yen Bullishness Set to Continue as Economic Crisis Worsens

The Japanese currency experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The JPY gained about 40 pips versus the USD during yesterday’s trading session, and closed at 98.23. Its gains against the EUR were more dramatic, as it gained over 150 pips to close at 123.57. This came about as the Euro-Zone economic woes continue, and on Thursday’s rate cut decisions. The JPY also made large inroads of over 100 pips vs. the GBP as Britain cut her Interest Rates to finish yesterday’s trading session at 139.30. This result was also owed to the deepening bank crisis in Britain.

The Yen’s strength yesterday was additionally owed to other important factors. Stock market indices all over the world fell by several percent yesterday on persistent worries about the deepening economic downturn, which has driven traders back to the safe-haven Yen. There are no economic data releases expected from Japan today. However, the JPY is likely to move on economic news events coming out of the U.S. and Britain. These releases are likely to determine the JPY’s bullishness going into the middle of next week. Expect JPY bullishness to continue as traders pull their money out of riskier assets, and into more safe-haven ones.

Crude Oil – Crude Oil Plummets 5% as Global Recession Deepens

Crude Oil fell about $1 or 5% during yesterday trading session to close at $43.89. This came about as stock market indices throughout the world plummeted yesterday, raising fresh concerns about Oil demand as fears about a prolonged global recession and falling global demand of Oil return to the forefront. This comes about just a day after Crude Oil soared by 9%. Analysts foresee that if current economic conditions continue, then Crude Oil prices may stand at $40 by the end of next week’s trading session.

It is important to note, however, that recently, the lower demand in Oil has fueled the heavy losses in the black Gold’s value. The losses yesterday on Wall Street was the last thing that Crude prices needed, as investors previously believed that Oil prices may finish this week at as high as $50 a barrel. The release of the U.S. Non-Farm Employment figures at 13:30 GMT is likely to show a poor performance, adding additional downward pressure on Crude prices.

Technical News

The pair is testing the very important key resistance level of 1.2615. The 4 hour chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, the Daily Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long with tight stops appears to be preferable strategy.
The bullish trend is loosing its steam and the pair is consolidating around the 1.4180 level. The 4 hour chart’s RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. Going short with tight stops appears to be preferable strategy.
The typical range trading on the daily chart continues. Both the RSI and Slow Stochastic are floating in neutral territory. The hourlies are also providing mixed signals with no specific direction. Good strategy might be to wait for a clearer signal before entering the market n this pair.
There was a violent breach of the Bollinger Bands’ lower border on the hourly chart, indicating a bullish correction may take place in the near future. In support of this, the pair also floats in the oversold zone on the 4 hour chart’s RSI. Once the reversal takes place, going long with tight stops might be a preferable strategy.

The Wild Card

Gold prices rose significantly in the last week and peaked at $937.80 for an ounce. However, the 4 hour chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

Written by: