With stocks dropping to record lows, currencies fluctuating in irregular patterns, and the price of Crude Oil continuing its free fall, it seems unlikely that consumer confidence will begin to rise in the near future. With the CB Consumer Confidence Report expected later today, traders should anticipate a negative release and price this in to the value of the USD.
[B]Economic News[/B]
[B]USD - Dollar Rises as Wall Street Tumbles[/B]
The Dollar rose against its main currency pairs in yesterday’s trading while Wall Street recorded some big losses. The Dow Jones dived by a massive 250 points, reaching a 12-year low. This came about after federal authorities released information about the possibility of taking stakes in top U.S. banks. It is important to note that bank shares, such as those of Citigroup and Bank of America, increased as Barack Obama reassured investors that banks will remain in private hands.
The USD made large gains against the EUR as it climbed about 185 points versus the European currency to close at 1.2724. Against the JPY, the USD gained about 200 points to finish trading at 94.96. The USD, however, lost 31 points against the GBP to close at 1.4547.
One reason for the Dollar’s gains was due to investors viewing the currency as a safe-haven. This is likely to continue in the coming months as the recession continues to destabilize the global economy. The JPY and EUR weakness against the Dollar yesterday can be explained by pointing to negative data coming from these 2 regional markets. Also, the JPY is starting to be considered as less of a safe-haven than the USD. Furthermore, European Central Bank (ECB) President Jean-Claude Trichet spoke about the intensification and severity of the recession as it hit all sectors of the Euro-Zone economy in recent weeks.
Looking ahead to today, the 2 main news events coming out of the U.S. are the release of U.S. CB Consumer Confidence figures. This will be important in determining the Dollar’s value later in today’s trading. It is important to take into account, as we have seen of late, even if the news from the U.S. is negative, it may even help lead to Dollar bullishness as investors continue to seek the safe-haven U.S. currency in the current recession.
[B]EUR - European Currency Declines on Deepening Recession[/B]
The EUR declined as fears about an accelerating recession in the Euro-Zone took its toll in Monday’s trading. The EUR recorded losses against most of its currency pairs, which was also compounded by Wall Street’s record drop yesterday. The European currency’s trading in recent weeks has been increasingly volatile, as the economic situation continues to dampen the Euro-Zone economy.
The main factor leading to a bearish EUR yesterday was European Central Bank (ECB) President Jean-Claude Trichet detailing more how hard-hit the Euro-Zone has been since the start of the recession, indicating that the ECB is likely to cut Interest Rates further in March. The EUR fell by a staggering 140 points against the GBP to 0.8739. The EUR/USD pair finished yesterday’s trading down by nearly 185 points at 1.2724. However, against the JPY, the EUR closed up 90 points at 120.85.
Today, there will be a lot of news coming out of the Euro-Zone. The German Ifo Business Climate and Current Account figures are expected to be released at 9:00 GMT. Better-than-expected results may lead to a bullish EUR through the end of today’s trading sessions.
[B]JPY - Yen Declines against Dollar and EUR[/B]
The Yen recorded losses against all of its major currency crosses in yesterdays trading. This came about for several reasons. Primarily among them is that Japan’s economy continues to decline at an alarming rate as the global recession continues to take its toll. The Yen declined by 200 points against the USD to finish Monday’s trading at 94.96. Against the EUR it also lost 90 points to close at 120.85.
A few economic data releases are expected to be released from Japan later today. At 23:50 GMT there is the release of Japanese Trade Balance figures. This is likely to have an impact on the JPY in late trading. However, before this release there is likely to be a lot of action in the currency market. This is likely to be led by political and economic developments coming out of the U.S., Britain, and the Euro-Zone. If things continue in the same pattern for the JPY, then the USD/JPY currency cross may exceed 96.00 in tomorrow’s trading. Additionally, if Japan shows more negative economic data in the coming week, then it is likely to sink to new lows against its major currency pairs.
[B]Oil - Oil Tumbles on Falling Demand[/B]
The price of Crude Oil tumbled $2.31 to $38.01 a barrel in yesterday’s trading, as OPEC foresaw demand falling faster than the cartel’s production cuts. OPEC has cut its oil production by several million barrels a day since September, and is expected to cut further when they meet again in March. One of the main issues that is affecting Oil’s volatility is the U.S. economy. It seems that the only way for Oil to make a mini-recovery is if the U.S. shows that it is resilient when it comes to the recession. However, facts on the ground seem to contradict this.
With over 500,000 Americans losing their jobs each month, the collapsing car industry, and with the closure of factories in the U.S., it seems unlikely that Oil prices will recover at all, at least in the next few weeks. This is increasingly valid as Japan, China, and the Euro-Zone are also increasingly feeling the heat of the global recession. It seems that only daily U.S. stockpile increases or a string of positive economic figures coming out of the U.S. may push-up Oil prices in the short-term. In the long-term, traders should look for a continuance of this steady price depreciation.
[B]Technical News[/B]
[B]EUR/USD[/B]
A bullish cross appears to be imminent on the 4-hour chart’s Slow Stochastic, signaling a bullish correction may take place shortly. However, a bearish cross may be forming on the hourly chart’s Slow Stochastic, indicating the opposite. Weekly momentum appears to be leveling which means the pair may lack direction at the moment. Waiting for a clearer signal might be the right choice today.
[B]GBP/USD[/B]
It appears a bearish cross is imminent on the hourly chart’s Slow Stochastic, indicating a downward correction may occur soon. As the price begins to approach the over-bought territory on the 4-hour chart’s RSI, the downward correction becomes more imminent. Going short with tight stops might be the right choice today.
[B]USD/JPY[/B]
This pair has recently entered a sustained upward trend. With the Slow Stochastic on the 4-hour chart indicating a bearish cross has recently formed, and the hourly chart’s Slow Stochastic signaling that one may be imminent, a downward correction may indeed be occurring in the near future. Going short with tight stops might be the preferable strategy today.
[B]USD/CHF[/B]
After last Friday’s significant drop, the pair now appears to be in a steady uptrend. With the recent bearish cross on the 4-hour chart’s Slow Stochastic, a downward correction may be imminent. However, most other oscillators show a lack of direction. Waiting for the correction to finish its course then buying on lows may be the right strategy today.
[B]The Wild Card[/B]
[B]Oil[/B]
The price of this commodity appears to be floating in the over-sold territory on the hourly chart’s RSI, signaling an upward correction may take place later today. There appears to be a bullish cross forming on the 4-hour chart’s Slow Stochastic as well, which supports this notion. Forex traders should wait for a leveling off in the price of this commodity then anticipate the upward correction to earn large profits during this imminent price movement.
