The Dollar is likely to go volatile during and following the ISM Manufacturing PMI release today at 14:00 GMT. Meanwhile, forex traders are advised to take positions on trades, as a string of data releases coming out of Japan and Britain are likely to affect the greenback's main currency crosses.
USD - Greenback Rebounds on U.S. Jobless Claims Data
The U.S. dollar rose against the Japanese yen and other major currencies on Thursday after data showed a decline in jobless claims, suggesting that the worst of the American recession may be over. The USD was last up 0.2% against the EUR at $1.3235 while against the Yen the Dollar was 0.9 percent higher at 99.00 yen.
U.S. weekly jobless claims decreased in the latest period even as continued claims notched a fresh record high, a sign some investors took as stabilization of the labor market. Analysts said that given the latest sustained stabilization of the U.S. economy, the dollar may begin to perform better due to investors' overall demand for the greenback.
The U.S. central bank's stance was consistent with data showing that the U.S. economy remained on track to improve later this year despite a surprisingly steep 6.1% fall in national activity in the first quarter. Market players were watching Chrysler's efforts to avoid bankruptcy ahead of a government imposed restructuring deadline later in the day. The company's bankruptcy may reduce the appeal of the U.S. currency as a refuge. Economists said that if Chrysler LLC will go bankrupt, the dollar may face even stronger selling pressure.
EUR - EUR Is Pressured By High Unemployment Figure
The European currency reversed its early gains against the dollar on Thursday, slipping into negative territory with traders citing profit taking following the single currency's gains earlier in the day. In volatile trading, the EUR fell 0.2% to $1.3224. Earlier, the currency fell to an intraday low of $1.3190.
Unemployment in the Euro-Zone rose to 8.9% in March, slightly higher than in February, the statistics agency Eurostat said. A rise in unemployment data from an upwardly revised 8.7% in February underlined the view that the European economy remains weak. Other data showed that Euro-Zone inflation remained at a record low of 0.6% year-on-year in April. The European Central Bank, which meets on Interest Rates on May 7, wants to keep inflation just below 2% and is expected to cut its refinancing rate to 1.0%.
The British pound remained flat against the dollar at $1.4783. British consumer confidence posted its third monthly rise in April, continuing a slow rebound from an all-time low notched last summer, market research firm GfK NOP reported Thursday.
JPY - The Yen Fall to 2 Week Low on Jobless Rate Numbers
As expected, the Bank of Japan on Thursday left official Interest Rates unchanged and reduced its expectations for economic growth in fiscal year 2009 as exports continued to suffer from the weak global economy. The central bank also said it expects overseas economies to start recovering in the latter half of the fiscal year.
The Japanese currency fell against all of the 16 most actively traded currencies except the New Zealand dollar as a decline in foreign-exchange fluctuation encouraged investors to engage in carry trades, in which they buy higher-yielding assets after borrowing in countries with lower interest rates. The yen declined 0.6% to 130.42 per EUR, from 129.61 yesterday. The JPY also slid 1% to 98.72 against the Dollar.
Data from Japan Friday highlighted economic weakness there, with the March jobless rate coming in at 4.8% while the March core consumer price index fell 0.1% on year, the first negative reading in a year and a half and a sign the nation might have entered a long period of deflation.
Crude Oil - Crude Reverses Losses on Economic Recovery Optimism
Crude Oil prices rose higher on Thursday to $50.92 a barrel as gains in wider global markets offset rising energy inventories and slumping demand. Oil prices had been buffeted earlier this week on speculation that global health concerns about the spread of swine flue would trim demand for fuel.
The number of U.S. workers filing new claims for unemployment aid fell unexpectedly last week, suggesting the pace of layoffs was easing, helping to lift the U.S. stock market ahead of the settlement in oil prices.
Markets were also eyeing the flu outbreak as officials urged increased worldwide precautions against an imminent pandemic and Mexico began shutting down parts of its economy to slow the spread of the new flu strain. Analysts have said the flu could hurt jet fuel demand by curtailing travel.
The price of this pair appears to be floating in the over-bought territory on the hourly chart's RSI indicating downward correction may be imminent. The downward direction on the daily chart's Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bullish cross forming on the hourly chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.
The bullish trend is loosing its steam and the pair seems to consolidate around the 98.80 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. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
Narrow range trading continues as the pair did not make a significant move in either direction, and is currently traded around the 1.1390 level. The 4-hour chart's Slow Stochastic is showing a fresh bearish cross suggesting that downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The Wild Card
Gold prices are once again dropping, and it is currently traded around $885 per ounce. And now, the daily chart's Slow Stochastic is giving bullish signals, indicating that gold prices might go up. This might give forex traders a great opportunity to enter a very popular trend.