Traders should look for the release of two key indicators today; the U.S. Trade Balance and U.S. Unemployment Claims. As reported earlier this week, the U.S. economy has seen a record number of new jobless claims. This report should be no exception. Don’t look for any support in the Dollar if the jobless report fails to meet expectations.
Economic News
USD – Auto Agreement Hurts Dollar
The optimism of a tentative agreement being reached to bailout the U.S. auto industry moved the markets yesterday. Reports say that a $15 billion loan package was agreed upon in order to prevent the failure of the Big 3 automakers. News of the bailout plan provided a boost to equity markets and Crude Oil, but hurt the Dollar.
The Dollar hit a two-week low against the EUR yesterday; as greater risk taking has deflated the Dollar and reduced the need for safe haven currencies. Since the beginning of the financial crisis, the Dollar has been a source of strength in an uncertain economic climate with investors bidding up the Dollar. As uncertainty disappears in the market, the Dollar may release some of its recent gains.
Yesterday the Dollar ended the day against the EUR at 1.3046. The past two days have seen light trading, compounding the Dollars’ losses this week.
Traders should look for the release of two key indicators today; the U.S. Trade Balance and U.S. Unemployment Claims. The Trade Balance is expected to show some improvement, which may provide a short term boost for the USD. Following on the report’s heels is the weekly Unemployment Claims. As reported earlier this week, the U.S. economy has seen a record number of new jobless claims. This report should be no exception. Don’t look for any support in the Dollar if the jobless report fails to meet expectations.
EUR – Pound Reaches an all Time Low against the EUR
The Pound hit a new low against the EUR at 0.8822 in yesterdays trading. This follows the recent low of the GBP/USD level last month of 1.4467. On a trade weighted basis, the Pound has lost 25% in the past 18 months.
Analysts have speculated that the size of the UK’s national debt has caused the depreciation of the Pound. The foreign liabilities of the nation are approaching 500% of GDP. This is to say that Britain is operating with too much leverage.
Others say the reason for the drop in the currency is due to the assets held by Britain are more heavily weighted towards equities and bonds. These assets may have suffered a sharp drop in value during the recent financial meltdown. In turn, the Pound has followed the decline in the asset values of Britain. If this is true, then a recovery in the Pound may only be seen if world markets post a significant turnaround.
JPY – BOJ Remarks Do Little to Move the JPY
Yesterday’s trading saw the Yen drop slightly against the Dollar, ending the day at 92.44. The drop can be attributed to greater risk taking as investors dumped their Yen positions for higher yielding currencies.
A statement was made yesterday by Bank of Japan (BoJ) Governor Shirakawa, as he signaled for possible direct intervention by the government in currency markets to influence the value of the JPY. A recent appreciation of the Yen has hurt the export dependant Japanese economy.
However, these statements have been made before, and the currency markets have yet to see the Japanese government take steps to sell Yen on the open market. These words may never come to fruition. Look for the USD/JPY to continue to trade in the 92-93 range for the remainder of the week.
Oil – Crude Receives Support from Saudi Arabia
Saudi Arabia is taking the responsibility to prop up Crude Oil prices on its own. It has been reported that the world’s largest Oil producing nation will cut supplies to customers next month. In addition, it is widely expected that OPEC will cut output when it meets on December 17th in Algeria.
Because of the Saudi supply cuts, the price of Crude Oil rose over 1.5% on large price volatility. Crude ended the day at $44.34. These gains were in spite of U.S. Crude inventories posting larger then expected supplies according to the Energy Information Administration.
The supply cuts may not have such an impact on the price of Crude Oil. The gloom that surrounds the global economy has kept a tight grip on the price of Crude, keeping it below the $50 Dollar price level for the week. We may expect Crude to stay below this mark, and possibly find a floor near the $35 mark.
Technical News
EUR/USD
The pair has entered a very strong bullish move, and is currently testing the 1.3200 level. The pair is currently still above the Bollinger Bands’ upper boarder, signifying that the bullish momentum is still quite strong. A breach through the 1.3200 level will probably verify the extension of the bullish move.
GBP/USD
There is a very distinct bullish channel forming on the 1-hour chart, as the cable is now floating in the middle of it. Currently, as all oscillators on the hourlies are pointing up, it appears that the rising trend has more steam in it. Going long appears to be the right choice today.
USD/JPY
The range trading continues on the 4-hour chart, as the pair is now traded around the 92.00 level. A bearish cross on the 4-hour chart’s Slow Stochastic implies that a bearish trend might take place, and a breach through the 91.50 level will probably validate the bearish move.
USD/CHF
The pair is experiencing a bearish behavior since the beginning of the week, and is currently testing the 1.1900 level. A bearish cross on the daily chart’s Slow Stochastic is indicating that the pair might continue its bearish movement. Going short with tight stops might be the right choice today.
The Wild Card
Gold
Gold prices are riding a bullish ripple, and an ounce of gold is currently valued about $813. And now, as all oscillators on the daily chart are giving bullish signals, it seems that Gold prices might break weekly records. This might be a great opportunity for forex traders to join a very popular trend.
Written by: Forexyard.com