The Dollar soared yesterday against most of its currency pairs, as
its global reserve currency status returned to the forefront. This was
due to weak U.S. unemployment figures, as Unemployment in the U.S. rose
far higher than analysts had forecast. This spurred demand for
safe-haven currencies, such as the USD and JPY. As a result of the
strong USD, Crude Oil prices also tumbled. Today, investors should
continue trading the USD, EUR, JPY, and Gold, as large profits will be
made on market volatility.
USD - Dollar Gains on U.S. Unemployment Data
The U.S Dollar gained about 1% versus the EUR and Canadian and New
Zealand currencies Thursday after the U.S. government reported more job
losses than expected, renewing concerns about the economy and enhancing
the greenback's safe-haven appeal. U.S. employers cut 467,000 jobs in
June, far more than expected, while the Unemployment Rate rose to 9.5%,
the government said in the report. The Dollar also benefited from a
Chinese Foreign Ministry official's comments, which dampened
speculation about diversification of currency reserves.
It is
important to take into account that yesterday's data raised the risk
aversion of investors, which also helped push the Yen higher vs. the
USD. The Dollar finished trading at 95.95 Yen, from 96.60 Yen on
Thursday. However, this week, the Dollar has advanced over 0.5% against
the Yen.
The greenback faces some risks though. Analysts said
that the weak U.S jobs report reinforced a trend already in place in
the forex market prior to the release that the Dollar was oversold.
Traders are still favoring foreign currencies over the U.S Dollar, and
the sentiment remains to sell the USD in the short-medium term. With a
light U.S. economic calendar today, currency investors may focus
instead on the USD's detriment, such as U.S. fiscal deficit and
inflation.
EUR - EUR Tumbles on Interest Rate Decision
The common European currency weakened against the U.S Dollar and Yen
yesterday after the European Central Bank (ECB) kept its benchmark
Interest Rate unchanged at 1% as expected. The ECB also stuck with the
amount of covered bond purchases in its plan. The EUR declined amid
speculation that ECB policy makers will say today that they don't see a
need for additional measures to revive the Euro-Zone economy.
Analysts
said that demand for the EUR fell after European Central Bank President
Jean-Claude Trichet stated that Euro-Zone activity would likely remain
weak for the rest of the year, and recovery may not start until the
middle of 2010. The EUR traded at $1.3980, from $1.4115 yesterday.
Against the Yen, the EUR declined to 134.15 Yen, from 136.53 Yen. The
Europe's 16-nation currency may drop to the lowest level in more than 2
months against the Dollar in the coming week, as risk aversion
increased after a report showed that U.S. employers cut more jobs than
forecast in June.
JPY - Yen Benefits from Safe-haven Status
The Japanese Yen advanced against all 16 major currencies on
Thursday after a U.S. government report showed employers cut more jobs
last month than economists forecast. This prompted investors to sell
higher- yielding assets. The Yen rose for a second day against the EUR
as Asian stocks fell on concern that the global recession will be
prolonged, spurring demand for the safe-haven JPY.
The Yen
advanced to 134.21 per EUR from 136.33 yesterday in New York. Against
the Dollar the Japanese Yen rose to 95.95 Yen from 96.60 Yen. The
Japanese currency typically strengthens in times of financial turmoil,
as Japan's trade surplus makes the currency attractive due to the
nation not having to rely on overseas lenders. Additionally, the Dollar
is bought as it is the world's main reserve currency.
Crude Oil - Crude Hits 1 Month Low on Rising U.S. Unemployment
Crude Oil prices tumbled about 4% Thursday, reaching its lowest
level in a month. Crude also recorded its 3rd weekly loss in a row, as
a disappointing jobs report rekindled concerns over U.S economic
recovery. Also weighing on Crude prices was the USD's strength against
most of its crosses. Furthermore, the oversupply of Oil in the market
helped weaken Oil prices, and if the situation continues, OPEC is
unlikely to increase output in the group's next meeting on September
9th.
Analysts stated that the disappointing U.S jobs numbers
raised concern about the strength and timing of a U.S. and global
economic recovery. The report confirmed what we saw earlier in the week
with the lower U.S. Consumer Confidence figures. In turn, this
reinforced the outlook for weak Crude Oil demand, and will continue the
downward pressure on Crude prices into next week's trading.
Technical News
EUR/USD
The EUR/USD pair plummeted yesterday to as low as the 1.3927 level.
According to the chart's 4-hour Stochastic Slow, the pair seems to be
oversold, and an upward movement today seems to be imminent However,
the chart's daily Stochastic Slow and 4-hour MACD support the downward
trend to continue today. Going short with tight stops could be the
opportunity to make big profits today.
GBP/USD
The pair has recorded much bearish behavior in the past several
days. However, the technical data indicates that this trend may reverse
anytime soon. For example, the daily chart's Stochastic Slow signals
that a bullish reversal is imminent. An upward trend today is also
supported by the hourly chart's MACD. Going long with tight stops may
turn out to pay off today.
USD/JPY
The USD/JPY has gone increasingly bearish in the past 2 days, and
currently stands at the 95.86 level. The daily chart's oscillators seem
to be misleading when it comes to this pair. If we look further, the
weekly chart's RSI supports this currency cross to fall further today.
However, the chart's 4-hour Stochastic Slow signals that a bullish
reversal will take place today. Entering the pair when the signs are
clearer seems to be the wise choice today.
USD/CHF
This pair has been range trading for the past 3 days between the
1.0700 and the 1.0910 levels. The chart's hourly MACD indicates that
USD/CHF seems to be running out of steam, and that today's trading will
witness a bearish reversal. This is also supported by the chart's
4-hour Stochastic Slow. Going short with tight stops may turn out to be
the wise strategy, as today's trading day gets under way.
The Wild Card
Silver
Silver has seen a dismal week, dropping more than 50 pips, as the
commodity now stands at the 13.45 level. However, the daily chart's
oscillators support an impending bullish reversal today. This is also
supported by the chart's 4-hour and weekly Stochastic Slow. Going long
with tight stops may turn out to be a good strategy today, as forex
traders seek to make some end-of-week profits.
