Dollar trading today is set to be dominated by key releases from the U.S., such as the CB Consumer Confidence figures at 14:00 GMT. The speech by Treasury Secretary Timothy Geithner at 20:00 GMT is also set to be a market mover when it takes place at 20:00 GMT. It is also recommended that you follow the results from top U.S. companies, as this may help the U.S. Dollar continue to gain on its recent bullish trend.
Economic News
USD – Dollar Soars on Safe-Haven Status
The USD made impressive gains throughout Monday’s trading. This process was sustained, as concerns of investors rose on fears that U.S. lawmakers will make big cutbacks on tax credits for new homebuyers. If this does actually occur, then Bank of America will need to pay back its government debt by selling a large amount of its shares. As the day went by, the USD eventually recovered from the recent 14-month low vs. the EUR, as the leading U.S. equity indices, such as the S&P declined. This led to further demand for the USD on Monday, especially as Gold tumbled significantly yesterday.
The EUR/USD cross declined by a massive 190 pips to the 1.48.50 level. It is important to take into account that this behavior is set to shock the market for the rest of the current month of October. The GBP/USD pair was virtually unchanged, as it closed at the 1.6290 level. This was due in part to the GBP’s great strength throughout yesterday’s trading. The USD also made some very impressive gains vs. the JPY, CHF and Canadian Dollar. All of this remarkable behavior may tilt the top U.S. and global banks into labeling the U.S. Dollar as a safe-haven currency once again.
Looking ahead to today’s trading, there is set to be some very important economic news that is scheduled to be released from the U.S. The most important of these are the S&P/CS Composite-20 HPI at 13:00 GMT, the CB Consumer Confidence figures at 14:00 GMT and the very important speech by U.S. Treasury Secretary Timothy Geithner at 20:00 GMT. The latter of these 2 events is set to be the main driving force behind the USD’s strength today. You should also follow other releases form the leading industrialized economies, as the trading day unfolds.
EUR – GBP Rises on All Fronts
The British Pound rose on all fronts yesterday, as British business confidence rose to an 18 month high. Moreover, consumer prices are forecast to rise faster than any industrialized economy. This is as the inflation rate is expected to be 2.1% this year, far higher than that of the Euro-Zone and the U.S. The GBP continued to rise yesterday, as traders lost faith in the EUR, and realized that the Pound was undervalued. Additionally, investors, continue to realize that the GBP is over 20% undervalued, and some type of bullish correction is looming. This is especially so, as the Bank of England (BoE) may raise Interest Rates sooner than many expect.
The British currency made some massive gains vs. the EUR by nearly 130 pips to reach the 0.9119 level. The GBP/USD cross was unchanged at the 1.6290 level, as both the GBP and USD were the leading bullish currencies in Monday’s trading. The British currency also made significant gains vs. the JPY, as the pair ascended to the 150.55 level. With regards to the EUR, it declined against its major currency pairs. This was exasperated yesterday, as U.S. and European equities slid on Monday. The main benefactors of this seemed to be the GBP and USD.
Today, both the Euro-Zone and Britain are set to be publishing some very important economic indicators. These releases will be key in setting the undertone for both the GBP and EUR throughout today’s trading. From Britain, there will be the ever so important CBI Realized Sales release at 11:00 GMT. From the Euro-Zone, there will be the M3 Money Supply and Private Loans results at 09:00 GMT. Forex traders are recommended to open their positions in the majors, now, as today’s trading is set to offer some very big profits.
JPY – Yen Makes Gains vs. the Pacific Currencies
On one hand, the Japanese currency made losses vs. the USD and GBP. However, these gains weren’t worrisome, as these 2 counter currencies were the big bulls yesterday. With regards to the Pacific currencies, the JPY did make some significant gains vs. the AUD and JPY. This was due to a number of reasons. The most important of these being Japan’s Prime Minister Yukio Hatoyama’s comments on how he’ll revolutionize the Japanese economy in the coming months.
The JPY lost ground against both the Dollar and the Pound. However, it made some gains vs. the EUR. The JPY rose 65 pips vs. the New Zealand Dollar to reach the 66.80 level. At one point yesterday, the JPY was trading higher by nearly 70 pips vs. the AUD, to eventually close at the 84.50 level. The most important release to follow from the Japanese economy today is the Retail Sales figures at 23:50 GMT. In the meantime, open your positions in the JPY’s main crosses now.
OIL – Crude Oil Slides on Rising Dollar
Oil fell significantly on Monday, as the U.S. Dollar made significant gains. Crude dropped nearly a Dollar to close at $78.81. This was originally sparked by fears in the U.S. over the government cutting tax credits for homebuyers. This sent fears through the equities market. Thus the obvious loser of all of this was Crude Oil, as the USD gained as global investors seeked a safe-haven currency in Monday’s trading.
Crude’s losses are notable, as the black gold had been trading as high as $81.58 on Monday. The other factor that also played on the mind of traders yesterday was that demand of U.S. consumers may slide in the coming weeks as the pace of the U.S. economic recovery slows, and U.S. unemployment continues to rise. If the USD continues to rise today, then we may see Crude Oil continue to decline.
Technical News
EUR/USD
A bullish cross may be forming on the hourly chart, indicating a potential price movement towards the upper resistance level of 1.4985. The daily chart’s Bollinger Bands are tightening, indicating that a violent breach may take place in the next few hours, supporting the potential bullish movement
GBP/USD
On the 30 min chart the pair continues to range trade in the upper half of its Bollinger Bands. Both the 1 hour and the 4 hour charts are providing mixed signals with no significant breach. Such a range trading floating nature may provide a good opportunity for traders to safely buy on the lows and sell on the highs while profiting from the relatively predictable range trading.
USD/JPY
The bullish trend is loosing its steam and the pair seems to be consolidating around the 92 level. The 4-hour chart shows a fresh bearish cross that has just formed, indicating a future downward price movement. Supporting this is the RSI on the daily chart which is floating in the overbought territory. Traders may look for the pair to reach a lower support line of 91.55.
USD/CHF
There is a very accurate bearish channel forming on the hourly chart, as the pair has consecutively dropped for the past 2 days. Currently, as the RSI on the daily chart is floating below the 50 line and the Slow Stochastic is pointing down, the pair might extend its bearish trend. Going short might be the right choice today
The Wild Card
Oil
Oil prices are once again dropping, and a barrel of Oil is currently traded at around the 78.80 price level. And now the RSI on the 30 min chart broke above a bearish trend line indicating that oil prices might go up. This might give forex traders a great opportunity to enter a very popular trend.
Written by: Forexyard.com