Following a week in which most of the major currencies remained at relatively steady rates, the Euro stood out in its appreciation against the Dollar, the Yen and the Pound. Will this continue to be the trend this week as well? In addition, during last week, Crude Oil continued to strengthen, and reached over $72 a barrel. Go ahead and make profits from this week’s major trends as well.
Economic News
USD – Positive U.S Data Weakens the Dollar vs. the EUR
The Dollar saw an extremely volatile session during last week’s trading. The Dollar dropped against the Euro, a drop which sent the EUR/USD pair above the 1.48 level. On the other hand the Dollar also saw a rising trend against the Pound, and the GBP/USD pair dropped below the 1.5815 level.
It seems that the Dollar was largely affected by the positive data which arrived from the U.S economy last week. The Non-Manufacturing Index rose to 50.9 in September, marking the best figure in 16 months. In addition, this was the first time in 12 months that this report delivered a result higher than 50. This means that after 11 months of contracting industry, there are finally signs of expansions. The weekly Unemployment Claims also delivered a relatively positive figure. The report showed that 521,000 individuals filed for unemployment insurance for the first time during the past week, beating expectations for a 543K result. Considering the poor Non-Farm Payrolls figures, an indicator for a stabilizing employment condition in the U.S was much required. However, it appears that the positive data had a negative impact on the Dollar. There are two reasons for that. One, many investors still see the positive signs from the U.S economy as confirmation that the European economies will recover, as they largely depend on U.S consumption. Two, the improving condition of the U.S economy leads some investors to look for higher-yielding assets than the Dollar.
As for the week ahead, as usual, many interesting publications are expected from the U.S economy. Traders are advised to pay attention to the Retails Sales reports on Wednesday, the Consumer Price Indices (CPI) and the Unemployment Claims on Thursday, and the Long-Term Purchases report on Friday. Special attention should be given to the Core CPI report, as a higher-than-expected figure is likely to have a notable impact on the market, with the USD included.
EUR – Euro Rises Against the Majors
The Euro rose against most of the major currencies during last week’s trading session. The Euro saw rising trends against the Dollar, the Yen and the Pound. The most remarkable rise was against the Pound, as the pair rose to a six month high, reaching the 0.9290 level.
The Euro rose due to some positive data from the Euro-Zone. The European Retails Sales beat expectations for 0.4% drop, and dropped merely by 0.2% during August. The German Factory Orders rose by 1.4% on August. Rising purchase orders signal that manufacturers will increase activity as they work to fill orders, and thus this report shows that the German economy is indeed recovering. This has a significant affect over the Euro, as Germany holds the largest economy in the Euro-Zone. Also last week, the French Industrial Production rose by 1.8%, showing that the French economy is recovering as well. The improvement in the condition of the main economies in the Euro-Zone is very likely to have a positive impact on the Euro. As long as the good news will continue coming from the German and the French economies, the Euro will probably continue to rise.
Looking ahead to this week, the most impacting data seems to be the German ZEW Economic Sentiment, which is expected on Tuesday. It is a survey of about 500 German institutional investors and analysts who are asked to rate the next 6-minth economic outlook for Germany. As such, this report has an immense impact on the Euro, and traders should follow it, as a result above 60.0 is likely to push the Euro further upward against the major currencies.
JPY – Japan’s Interest Rates Announcement Expected on Wednesday
The Yen saw a relatively peaceful trading session during the past week. The JPY usually kept steady rates against the Dollar and the Yen, without too many ups and downs. However the Yen did mark a downtrend against the Euro, as the EUR/JPY pair rose above the 132.30 level.
The Yen’s stabile session might be the result of the mixed data from the Japanese economy. On one hand, the Japanese Current Account, which measures the difference in value between imported and exported goods and services for August, rose to 1.23T. This is wonderful news for the Japanese economic leaders who see the export of Japan as the premier parameter in the economic recovery. However, the Core Machinery Orders, which is a leading indicator of economic health failed to reach expectations for a 2.2% rise, and rose merely by 0.5% in August. Following September’s 9.3% drop, this still shows that the Japanese economy is yet to pull out of recession.
As for this week, numerous data is expected from the Japanese economy, yet the most intriguing publication seems to be the Over Night Call Rate. This is in fact the Japanese interest rates announcement. Analysts forecast that the Bank of Japan (BoJ) will leave rates on 0.10%, the lowest in the industrial world. However, if the BoJ will surprise and hike rates, this will have a stunning effect on the Yen. Traders are advised to take this news event under consideration for this week’s trading.
Crude Oil – Crude Oil Strengthens on Weak Dollar
Crude Oil prices continued to rise during the past week. After seeing an extremely volatile session, which included many ups and downs, a barrel of crude oil finally stabilized on $72.
Crude Oil’s rising trend came as a result of two main reasons, the drop of the Dollar against the Euro, and unexpected negative U.S supplies data. The drop of the Dollar had its usual affect on commodities. Because commodities are valued in Dollars, when the Dollar weakens, it tends to support commodities such as Crude Oil. Another good example for this activity last week was gold. Gold rose to an all time record due to the weak Dollar. In addition, the unexpected drop of the U.S Crude Oil Inventories also contributed to the strengthening Oil. The inventories dropped by 1.0M barrels during the past week, and lower supplies created speculations for a higher demand for oil, which eventually elevated crude oil to reach over $72 a barrel.
As for the following week, traders are advised to follow the main economic publications from the U.S and the Euro-Zone, as they tend to have a large effect on Oil’s value. In addition, traders should focus on the U.S Crude Oil Inventories expected on Wednesday, as this report has proven to have a large impact on Crude Oil’s trading.
Technical News
EUR/USD
The typical range trading on the hourly charts continues, with the RSI floating in neutral territory. However, a fresh bullish cross might be forming on the hourly MACD indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.
GBP/USD
A bullish correction appears to be taking place for the pair, which experienced a very long bearish trend this past week. a fresh bullish cross is evident on the hourly and daily MACD as well as the 4 hour Slow Stochastic. Furthermore, the 2 and 4 hour RSI is floating in the oversold territory.
USD/JPY
A bearish day might be expected for the pair as a fresh bearish cross is apparent on the hourly, 2 hour and 4 hour Slow Stochastic as well as the daily MACD and with the hourly, 2 hour and 4 hour RSI floating in the overbought territory. Going short for today might be advised.
USD/CHF
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. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The Wild Card
CHF/JPY
After the pairs recent bullish run a bearish correction might be expected today. A fresh bearish cross is evident on the hourly Slow Stochastic and with a bearish cross forming on the 2 hour and 4 hour charts. Furthermore, the 2 and 4 hour RSI is floating in the overbought territory. Forex traders are advised to go short for the day.
Written by: Forexyard.com