It was a busy day for currency trading yesterday, as the USD fell to an all-time low against the EUR, however grazed back slightly due to data showing a decline in U.S. consumer prices. The Greenback also fell against the GPB taking it to 2.0173 before declining back to 2.0025.
Yesterday, data coming from the US showed some concerns about the country’s economic outlook data such as: CPI, Housing Starts index, and the Building Permits index; the consumer price index surprisingly decreased and pushed lower by 0.1% from the previous month and new home construction strike a 12-year low. The Home Construction Index decreased by 2.6% last month to its lowest in more than 12 years, while building permit activity, a sign of future construction plans, also dropped to a low which has not been seen since mid-1995, Building permits fell 5.9% to an annual rate of 1.307 million.
As it seems at the moment the housing recession may deepen, causing more damage on an already slowing economy, after borrowing costs rose and lenders shut off access to credit, and of course still dealing with the delicate issue of the mortgage defaults which will probably delay the recovery from the worst homebuilding recession in 16 years. The U.S. Federal Reserve announced on Wednesday that it added $9.75 billion of impermanent reserves to the banking system in the course of overnight repurchase agreements and today, the Federal Open Market Committee (FOMC) cut its fed funds target rate by 50 basis points; the first cut in that rate in four years.
Yesterday’s trading day for the 13 nations currency was defined as a quite dramatic day. The EUR climbed up during the early morning hours in Europe to 1.3987 which was a new time high, before it has strengthen back to 1.3956. The EUR is trading at a very important point against the USD. The historic break through the 1.4000 level today might generate some concerns from the ECB, as it rises it can lower exports, mainly to the United States, where the prices for anything from automobiles to steel to consumer goods are more expensive to American buyers, and the ECB would try to avoid this situation. US Federal Reserve Chairman Ben Bernanke and ECB President Jean Claude Trichet are scheduled to speak today regarding those important issues.
The most considerable “ray of light” regarding yesterday’s Euro-zone economic data was the German PPI which raised to 0.1%, The rest of the economic data which will be release this week are not very market moving since we only have the Philly Fed survey and leading indicators left on the calendar, and most of the moves will be only technical ones.
JPY Yesterday, The USD strengthened against the JPY rising to 116.09 from 115.74 after the BOJ, as expected, kept its benchmark interest rate stable at 0.5% and kept its estimations of the national economy unchanged. As it seems for the near future, the BOJ will cooperate with US and European central banks by holding its benchmark interest rate, as it would find it hard to raise rates at the time when U.S. central bank is cutting them.
Currently traders treat the USD/JPY as a less attractive alternative for future investments especially after the US Fed interest rate cut, however tending to the GBP or to other commodities currencies (AUS,NZD) as a substitute may also be considered as a riskier move since those pairs are characterized as extremely volatile compared to the USD/JPY.
The pair breached through the 1.4000 level and is now trading at all time high levels near 1.4040. The hourly studies are showing strong bullish momentum after the physiological barrier, and will probably continue to go up intraday. The daily charts are showing a bearish cross forming, which indicates that on the longer run a correction might be in place.
The cable is trading in a very unstable and choppy manner in the past few days. The daily studies show a slight bullish momentum and the hourlies show mixed signals with a moderate bearish tendency. It would be preferable to stay out of the cable trading until the smoke clears.
The pair is in the midst of a very accurate upwards channel, and is now testing the bottom barrier. The oscillators show that a negative breach is quite unlikely, and the daily chart is showing bullish momentum. A preferable strategy might be to go long on dips.
A very strong breach through the 1.1800 has occurred, and the pair is now trading around 1.1770. The breach indicates that the bearish move has been validated and that the next target price is 1.1740. On the daily chart a bullish cross is starting to form which might indicate that a correction up could be imminent if the cross will validate.
[B]The Wild Card
Crude Oil [/B]
The upward channel is showing that the move is nowhere near the end, and is showing a very accurate technical behavior. The Oil is floating at the lower barrier of the channel which provides Forex traders with a great opportunity to establish a great entry point and continue the bullish ride.