03/03/'08 - Greenback Bears Firmly On Top

03/03/'08 - Greenback Bears Firmly On Top

Economic News

USD

The dollar began the new week in similar fashion to the way in which it closed last week; falling against most of it major currency rivals. Investors will now have to get used to the notion that the 1.50 key level for EUR/USD has been broken and will continue to rise. The major currency pair is currently above 1.5150 and looks to be set in its bullish trend, as data from the US continues to disappoint. The latest scare comes on investor worries regarding additional losses from banks that are under pressure from the subprime mortgage market. The housing and credit crisis has not subsided and is pushing investors away from the greenback.

The EUR is not the only currency to see record highs lately versus the dollar. Amongst a basket of common currencies that are seeing gains against the greenback, the JPY is the most notable. Currently floating around 103, the USD/JPY has plummeted to three year lows, and is growing ever closer to the key support level of 100.

This week is jam packed with important economic data from all over the world. The US will have its share of important data as we expect figures from Nonfarm Employment Change, Unemployment Rate, ADP Nonfarm Employment Change, Non Manufacturing ISM, Factory Orders, and Pending Home Sales. These events will be preceded by today's 15:00 GMT release of ISM Manufacturing Prices and Index. Expectations are understandably low, as are most of the forecasts for US data in the coming week. The week's economic data will be coupled with a long list of speeches by important economic policy makers in the US, as the likelihood of more Fed intervention is gaining steam. The contrasting views amongst the economic elite in the US are only contributing to the lack of confidence investors currently have in the dollar. Look toward Tuesday' remarks by Fed Chairman Ben Bernanke to get a good sense of the US monetary outlook. As data in the US does not look positive for the near future, expect the greenback to continue its epic slide.

EUR

The EUR has become the beneficiary of the latest USD woes, as it once again gained significant ground against its American rival last week. In total the Euro gained over 2% on the greenback in February, its biggest gain since September of last year. As the EUR grows against the dollar, investors should begin to take into consideration a Euro interest rate cut. ECB President Jean-Claude Trichet has been adamant in keeping with his hawkish monetary policy, however the growing divide between the EUR and the dollar is taking its toll on the whole of the Euro-zone economy. The already tense European import/export industry is now faced with even more hurdles as it cannot compete globally with such inflated prices due to its currency strength.

The 15 nation currency has seen gains against a majority of its most traded currency rivals, outside of the JPY, whose current strength cannot be rivaled. The Euro-zone has the opportunity within the coming months, assuming that there is a change to monetary policy, to flourish and allow its currency growth to come naturally and not from pure trading momentum or Dollar fears. The importance behind EU economic data moving its own currency is critical in convincing wary dollar investors that the growth is real.

The economic calendar this week from the Euro-zone holds several key events. We expect that Thursday morning's scheduled Interest rate statement will involve a small cut in the interest rate. This will be followed by remarks by Trichet who normally triggers some market fluctuation in and around his speeches. Today we expect the release of German Manufacturing PMI and CPI figures, both of which are forecasted to come back with similar numbers to their last release. Either way, they should not effect market movement, as we expect rises in the EUR sans EUR/JPY to continue.

JPY

The trading week opened today with the JPY gaining against most of the traded currencies. At 7:00 GMT, The JPY obtained a fresh three-year high against the USD as it traded at 102.90 JPY. The JPY also gained 0.55% against the EUR and 0.92% against the GBP. The JPY rally against the USD is mainly a result of the growing worries about the health of the US economy after dismal reports from last week's U.S economic session which showed the sharp impact of the credit crisis.

We are nearing a key support level in the USD/JPY of 100. History has shown us that upon approaching this level the currency pair springs back up to make significant gains. Not since the mid-90's have we seen the support level broken, and even then it was short lived.

Last Thursday there was a surprising increase in the Japanese consumer spending and rising consumer prices. Those positive indicators assisted in the JPY's bullish behavior. The assumption behind most investors is that the Japanese economy is growing at a steady pace and will continue to do so for most of 2008. Today, as a result of those positive figures from last week, The Japanese currency is likely to remain bullish. There is no important economic news expected to be released in Japan, however, today should see active JPY trading in response to key U.S and Euro-zone data releases.


Technical News

EUR/USD

The pair opened this week's trading session with strong bullish momentum, and is now traded at all time high levels around 1.5230. The 1 hour and the 4 hour chart are indicating on additional bullish momentum, and the daily chart is showing that a potential corrective move might not occur before the pair hits 1.5290.

GBP/USD

The pair opened this week's trading session with strong bullish momentum, and is now traded at all time high levels around 1.5230. The 1 hour and the 4 hour chart are indicating on additional bullish momentum, and the daily chart is showing that a potential corrective move might not occur before the pair hits 1.5290.

USD/JPY

The pair is going through a massive bearish trend, as the daily chart shows 6 consecutive sharp falling bars. There is a bullish cross forming on the daily chart, yet it's still in early stages. The 4 hour chart indicates on the continuation of the bearish trend locally, making it preferable for Forex traders to buy on dips.

USD/CHF

The pair has been dropping constantly since the local consolidation around 1.0900, and is showing no signs of a halt. There are now the first signals of a corrective move on the daily chart which shows a strong bullish cross on the slow stochastic. The hourlies are floating in neutral territory, and a preferable strategy might be to keep out of this one until a clear signal will appear on the 4 hour chart.


The Wild Card

Crude Oil

Oil is going through a very strong uptrend within a much defined bullish channel. After a local corrective move, we can now see the bullish momentum growing stronger again. This could be a great opportunity for Forex traders to enjoy a very distinct technical formation, with potential for a bullish break beyond the upper section of the channel.