After gathering some positive momentum at the end of last week from US employment data, the US Dollar now faces a new ordeal. As the US Supreme Court attempts to block the sale of Chrysler to Fiat, recently gained confidence in the US economy has begun to show signs of wear. Forex traders may see added volatility to a market that was forecast yesterday to be flat. News events such as this tend to push markets in a way which traders can greatly benefit. Today is a great day to trade the USD!
USD - Chrysler Sale Delay Weighs in on Dollar
The Dollar moved on a number of factors in yesterday's trading. One of the most important of these was the sale of Chrysler being blocked by U.S. Supreme Court. President Obama fears that this could kill the deal if the issue is not resolved in the nearest time. If this did happen, the effects on the U.S. economy may be disastrous. In turn, the Dollar may plummet as people could lose confidence in the American economy. In the meantime, forex traders are also trading on other issues, such as Obama's plan for economic recovery.
The Dollar rose against most of its major currency pairs yesterday, as Obama unveiled his plan to create new jobs, and tackle rising unemployment. The EUR/USD finished Monday's trading lower by nearly 100 pips at the 1.3886 level. The USD also rose about 80 pips against the CHF to close at the 1.0934 level. However, the USD lost ground against the British Pound, as optimism returned to Britain, after the opposition Conservative party faired well in the European elections. The GBP/USD cross finished higher at 1.6024.
Today, U.S. Treasury Secretary Timothy Geithner is set to be asked about the TARP (Troubled Asset Relief Program) repayments and forecasts for U.S. economic recovery in a Senate hearing at around 14:30 GMT. It would be a wise move for forex traders to open up their USD positions both prior to and after this major news event, as the market is set to be very volatile throughout today's trading.
EUR - German Industrial Orders Data Pushes Down EUR
Optimism spread through the Euro-Zone following the release of the German Industrial Orders Data. Even though the results were in line with forecasts, this showed the first major sign of stabilization in the Euro-Zone economy. Additionally, March's figures were revised from 3.3% to a significantly improved 3.7%. However, this led to investors to go short on the EUR in some cases, as traders decided to take risks. Furthermore, many of these traders returned to other currencies, such as the USD and GBP.
Other factors also helped push down the EUR against the major currencies yesterday. These include optimism returning to the British Pound, as the British Conservative Party fared well in the European parliamentary elections and recent reports showed British housing market stabilization. This sparked hope that PM Gordon Brown's unpopular government will soon collapse.
The EUR/GBP rate tumbled by 85 pips to close at the 0.8660 rate. This alone was owed to great optimism from Germany's economy. The EUR/USD pair finished Monday's trading lower by nearly 100 pips at the 1.3886 level. The EUR/JPY finished lower by 120 pips at 136.51, reversing recent gains for this pair.
There are several factors that are likely to dominate EUR trading later today. Firstly, the Euro-Zone's reaction to recent statements by the IMF (International Monetary Fund) to fix the banking system in the 16-nation region. Secondly, the release of the publication of the results of the German Industrial Production indicator at 10:00 GMT. Thirdly, U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT.
JPY - Yen Extends Gains against US Dollar
The Yen extended its gains against the Dollar yesterday, as optimistic results from Japan's M2 Money Stock and Economy Watchers Sentiment indicators led to a relatively strong JPY against most of its major currency crosses in yesterday's trading. The USD/JPY finished lower by 20 pips at 98.27. The EUR/JPY cross finished lower by 120 pips at 136.51. However, the JPY lost over 50 pips against the GBP to close at 157.44.
Looking ahead to today, the forex market is set to be very volatile, as the whole developed economies look to U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT. In late trading today, the Yen is also likely to be affected by the release of the Japanese Core Machinery Orders data at 11:50 PM GMT. Forex traders are advised to open their JPY positions now, as the markets are set for a volatile trading day.
Crude Oil - Crude Gains 1% on Krugman Remarks
Yesterday, Crude Oil gained 1% or 56 cents to close at $68.46. This was following remarks made by the Nobel Prize Winning economist Paul Krugman. He stated that the U.S. recession could end later this year. As a result, this signaled higher energy demand. This could be a ripe possibility as developed countries are continuously showing improved economist results each week.
The price of Crude may hit $70 a barrel in trading later today, if signs from the U.S. and global economy are positive. At the forefront of this will be U.S. Treasury Secretary Timothy Geithner's speech at 14:30 GMT. Additionally, traders are advised to follow statements by U.S. and European leaders, as they could add to volatility in the market.
It appears that the bearish trend may have run out of strength as the current price level has dropped the pair into the over-sold territory according to the 4-hour chart's RSI. The pair also currently floats near the lower border of the hourly chart's Slow Stochastic suggesting a bullish correction may be imminent. In that case, going long with tight stops may be the correct strategy
After the recent bearish trend, the Cable has consolidated around the 1.6070 level. However, bullish momentum on the hourly chart's Slow Stochastic suggests that the resumption of general upward mobility is imminent. A bullish cross on the hourly chart's Slow Stochastic also indicates that the upwards move is impending. Going long might be the right choice today.
The sharp bearish move that took place during the past couple of days seems to have more room to run. The RSI on the daily chart is crossed above the 50 line, suggesting that the pair may fall further. The bearish move on the daily's Slow Stochastic also supports this notion. Next target could be 97.75.
The daily chart shows that the pair has been range-trading this week. However, a bearish cross on the 1-hour chart's Slow Stochastic suggests that a bearish move is imminent. Going short with tight stops appears to be preferable.
The Wild Card
The bullish move which was initiated this week seems to be galloping at full speed. As of this morning, all oscillators are indicating the continuation of the bullish momentum. This might be a great opportunity for forex traders to join a very promising corrective trend.