FOREXYARD: Forex News Blog | |
- Crude Oil Inventories Report Expectations
- Canada’s Dollar Loses Ground as Central Bank Cuts Growth Forecast
- Currency Tensions ahead of U.K Spending Review
- AUD/USD Moves Closer to Parity
- USD/SEK at 2-Yr Low after Fiery Speech from Riksbank
| Crude Oil Inventories Report Expectations Posted: 20 Oct 2010 06:52 AM PDT
Crude Oil prices have been on a tear this month. Yesterday in New York, Crude Oil fell more than 4%, the biggest one-day percentage decline in seven months. Since then, however, it has already managed to regain at least half of its losses, mainly on signs that U.S. fuel stockpiles are shrinking and speculation that China's economy will continue to drive oil demand. At the moment Crude Oil is trading around $80.75 per barrel. Now, a couple of hours ahead of the U.S. Oil Inventories Report we will focus on two major drivers of instability in Oil prices for the last month, the U.S. and China. The U.S. Energy Department may report today that gasoline stockpiles fell 1.5 million barrels last week. With China, things are, as usual, a bit more complicated. Recently China surprised markets by raising interest rates for the first time in nearly three years, but as time passed by, concern eased that an unexpected rate increase by China's central bank will harm fuel consumption in the world's largest energy user. China has been the main driver of oil demand growth so far this year, although it still uses far less than the top consumer, the United States. It's also expected to raise retail fuel prices effective Thursday. China's demand for oil remains strong and their interest rate hike does not prove to be of a magnitude that would change or harm fuel consumption. On the contrary, analysts even speculate that China's net Crude Oil imports may reach 310 million metric tons just 5 years from now. That is indeed a 'vote of confidence' that can take Oil prices to new highs. The U.S. is also not dragging behind. Fuel demand in the States is also rebounding from last year's slump. U.S. gasoline demand rose 2.7% last week, the largest week-to-week jump since May 28. Oil also gained support from a weak dollar, which dipped against a basket of currencies. A falling dollar makes oil and other dollar-denominated commodities cheaper for holders of other currencies. Therefore, traders may firmly speculate that if indeed today's U.S. Oil Inventories report will meet expectations, there might be quite a sharp jump in Oil prices. Oil Under Sell Pressure but Technicals Suggest Upturn Impending The price of Crude Oil has recently entered a mild bearish channel following its sharp upward spike a few days ago. On the technical side, we can see what appear to be parallel trend lines, with a clear median line between them. With a price just under $81 a barrel, the price of oil is beginning to come under pressure from faltering economies in Europe, as well as a dampening of value from a rapidly appreciating USD. Looking at our chart below, we can see our relevant support and resistance levels (marked as S# and R#, respectively). The way our indicators currently look gives one the impression that there may still be room for the current trend to continue. Our MACD shows a descending pattern that is preparing to enter the over-sold region (below the 0 line marked in red). Our Stochastic (slow) reveals a similar pattern. This suggests that pressure remains downward, but that an upturn may be in the making. Our next major support level (S1) rests at $79.50 a barrel, and signals indicate we could see the price turn towards that mark after touching R1 at $81.50. But it seems to be that a bullish cross will be forming on both of our indicators and will therefore suggest an upturn is impending, with a target near R2 at $83.50 a barrel. Crude Oil – 8-Hour Chart |
| Canada’s Dollar Loses Ground as Central Bank Cuts Growth Forecast Posted: 20 Oct 2010 05:53 AM PDT
The Canadian dollar fell more than 2 U.S. cents to its lowest level in more than 3 weeks yesterday after the Bank of Canada (BOC) reduced its economic growth forecast and kept its benchmark overnight lending rate unchanged at 1%. The loonie recorded its largest decline in more than four months after the BOC said it will not consider any further tightening since the economy will take an extra year to reach its full potential. The Canadian dollar is set to lose more ground, especially as Canadian employment is struggling, and the central bank expects the economic recovery to be more gradual than it had initially projected. The Canadian dollar had already begun its descent before the BOC's move, dragged lower after China’s central bank surprised the market with its first increase in interest rates in nearly three years. The Canadian dollar was under heavy pressure against its U.S. counterpart Wednesday, which analysts attributed to China’s rate increase putting pressure on higher-yielding currencies. Market players will be looking out for the BOC quarterly report at 14:30 GMT for more hints about future rate decisions and an overview of the economy. After the report is released, a press conference by BOC governor Mark Carney will be held, which will also shake the Canadian currency during and immediately after. |
| Currency Tensions ahead of U.K Spending Review Posted: 20 Oct 2010 03:52 AM PDT
Following a tumultuous trading day yesterday, in which both the British pound and euro dropped close to 300 pips against the US dollar, traders can once again anticipate heavy market volatility today. Significant news from both the UK and Canada are likely to shake up the markets, so watch out. Here is a roundup of the day’s main news events. 11:30 GMT: GBP Spending Review The Spending Review lays out the British Government’s spending plan for the next four years. Typically, this gives analysts a very good idea of the direction the economy in the UK is heading, and as such, consistently generates heavy market volatility among GBP pairs. Analysts are predicting that the Bank of England will significantly expand its stimulus package while keeping interest rates at their current level. The plan, if put into action, would highlight just how serious the economic situation in England currently is. Investor confidence in the British economy is likely to be dampened, and sterling may see further losses today as a result. 15:15 GMT: CAD BOC Press Conference The Bank of Canada (BOC) is holding a press conference to discuss the Monetary Policy Report, scheduled to be released 45 minutes earlier. The BOC uses the Monetary Policy Report to convey to the public the current economic situation in Canada as well any future moves regarding inflation and interest rates. The press conference usually leads to heavy trading, particularly with the USD/CAD pair. Yesterday, the CAD took some losses against its US counterpart. Should the BOC release any positive data regarding the future prospects for the Canadian economy, the loonie is likely to regain those losses in afternoon trading. |
| AUD/USD Moves Closer to Parity Posted: 20 Oct 2010 03:02 AM PDT
The AUD/USD made a sharp fall after the Chinese central bank announced a rate hike. Despite the Australian positive data released earlier, the news from China had a negative impact on the pair. Although the pair is now supported in its lower levels, our technical analysis shows it could be just a temporary retracement and AUD/USD parity is sure in sight. After the pair fell from around 0.9900 to around 0.9650 on the Chinese move, it now bounced back above 0.9700. This line, 0.9650, served as a resistance line when the Aussie was climbing higher, and now worked as strong support after other lines collapsed. We will be looking at the daily chart for AUD/USD. The technical indicators being used are the Bollinger Bands, MACD and Relative Strength Index (RSI). - The RSI, while not quite in the oversold region yet, is pointing downward and is approaching the lower support line. Should the indicator move below the 30 level, traders can take this as a sign that the pair may see a bullish correction.
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| USD/SEK at 2-Yr Low after Fiery Speech from Riksbank Posted: 19 Oct 2010 08:57 PM PDT
The Swedish krona has undergone one of its strongest rallies in recent memory these past few days after the Riksbank Deputy Governor Barbro Wickman-Parak delivered a hawkish statement last Thursday. The SEK climbed to a 2-year high against the US dollar following Wickman-Parak's fiery call for interest rate increases in the near future. The USD/SEK fell to 6.5129 last week, but has rallied to as high as 6.8017 at the close of New York trading yesterday. Wickman-Parak's speech highlighted the growing need for Sweden to boost rates before it's too late, but also put the spotlight on the potential reasons behind the decision to hold rates where they are. This has put some downward pressure on the SEK alongside a rising USD. In a similar turn of events, the Norwegian krone (NOK) appears to be falling out of favor with foreign investors specifically because Norges Bank is perceived to be stalling on interest rate hikes as well. The USD/NOK has come off a 6-day high; the pair is climbing towards 5.9425 from as low as 5.7000 seen just two days ago. Technical Analysis If we look at the USD/SEK daily chart we can see some relatively clear indications of what's happening on a technical level. The pair has been trading in a downward trend for some time now, but has only recently pared some of its losses to reach back up towards its predominant, overhead trendline. We can see the price reaching back and just recently touching the 23.6% Fibonacci line. The price could meet some mild resistance there and turn downwards, but the RSI and Stochastic (slow) seem to suggest otherwise; as does the overhead trendline. It appears there could be more bullish room for this pair to run. If the price breaches above 6.8500, then traders may want to anticipate an upward breach which could climb as high as 6.9750 if the Riksbank doesn't step in on the fundamental side. USD/SEK Daily Chart |
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