Wednesday, February 9, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Euro and Crude Oil Recover Following Chinese Interest Rate Increase

Posted: 08 Feb 2011 09:42 AM PST

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Rising expectations for an interest rate hike by the ECB have bolstered the euro in today's trading. Crude oil was also a benefactor after rising off of its daily lows following an increase in Chinese interest rates.

Traders originally sold the euro following disappointing German industrial sales which contracted by 1.5%. Economists had forecasted an increase of 0.2%. However, market participants have since been encouraged by comments from ECB President Trichet that interest rates can be increased prior to the normalization of ECB monetary policy.

The EUR/CHF traded as high as 1.3100 and looks to close above the 100-day moving average at 1.3075.

The headline event of the day was an increase in Chinese interest rates as the PBOC hiked interest rates by 25 bps. The rise in the 1-year interest rate now takes the base lending measure in China to 6.0%. This move did not come as a surprise to the market which has predominantly priced in future tightening measures.

While one might be hesitant to put an exact level for future Chinese interest rate increases, most market participants are expecting further interest rate moves as well as other tightening measures to slow the rate of inflation in China.

Spot crude oil traded stronger after an initial knee-jerk reaction following the Chinese interest rate announcement when the commodity fell as low as $88.87, a price that coincides with the rising trend line from the August lows. The price then recovered and traded as high as 88.10.

Oil Likely to Drop Further Following Tomorrow’s Inventories Report

Posted: 08 Feb 2011 06:50 AM PST

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Since the beginning of the month, the price of crude oil has dropped more than $5.00 based on positive US economic data that has made the dollar stronger and oil less attractive to international buyers.

Tomorrow, the commodity is likely to drop further following the US Crude Oil Inventories figure, set to be released at 15:30 GMT. Typically, a surplus in US stockpiles means that the price of oil will go down, as it means that demand is down in the world’s largest crude oil consuming country.

Analysts are predicting tomorrow’s figure to come in around 2.2M, which if true, would signal a slight drop from last week’s figure of 2.6M. While this might lead some traders to believe that demand is going up in the US, and they should therefore go bullish on oil, 2.2M is still a very positive figure.

Given oil’s bearish trend over the last week, and the USD’s overall renewal in strength, it may be wise for traders to continue to short the commodity. At the same time, should a significantly smaller than expected inventories figure come in tomorrow, and especially if the number turns out to be negative, the price of crude may stage an upward correction for the rest of the week.

USD/DKK Set For Downward Trend

Posted: 08 Feb 2011 06:20 AM PST

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Since the beginning of the week, the USD/DKK has entered a bearish trend that has seen the pair drop around 250 pips. According to technical indicators, the pair, which is currently trading around the 5.4669 level, will likely move further downward in the days ahead. With the next support line around 5.4500, now may be a great time for forex traders to open up sell positions in order to take advantage of this ongoing trend.

We will be looking at the 8-hour chart for USD/DKK, provided by ForexYard. The technical indicators being examined are the Moving Average, Relative Strength Index and MACD.

1. The currency pair is currently trading below its Moving Average, indicating that the pair is likely to move further downward in the near future.

2. The Relative Strength Index is currently around 70, right above what is typically considered to be the overbought region. This is a clear sign that the pair is likely to see further downward pressure in the near future.

3. It looks like an impending bearish cross is forming on the MACD. Should the indicator lines form a cross, it would be a clear sign that bearish movement is likely to continue.
scand 8.2

NOK Lower as Crude Oil Prices Plummet

Posted: 08 Feb 2011 04:43 AM PST

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Amid the mixed results of the US dollar against most of its currency rivals, the Scandinavian kroner have actually given up ground versus their American currency counterpart.

Plummeting Crude Oil prices have gouged the value of the Norwegian krone (NOK) pushing the USD/NOK from 5.68 on Feb. 1st towards 5.80 yesterday before meeting resistance and settling near 5.76 in today's early European trading hours.

Feeding into the NOK's price slump was a depressed reading from the Norwegian manufacturing sector which shrank 1.0% in December. Average forecasts had Norway's manufacturing sector experiencing approximately 0.5% growth. The worse-than-expected data weighed on the krone these last few days.

Sweden's krona (SEK) has fared somewhat better against the US dollar, but its recent appreciation has begun to cut into Swedish corporate profits. TeliaSonera (TLSN), as one example, reported earning losses due to the strengthening SEK, and many analysts have begun to forecast a decline in corporate revenue in 2011 due to the krona's recent record highs.

Overall, the Scandinavian currencies fell weak against the USD these past several trading days, as did most of the other global currencies. Sweden and Denmark were able to begin paring those losses as of yesterday's trading due to the respective power of their economies. Norway, on the other hand, has fared worse due to the falling price of Crude Oil.

The SEK and DKK should continue to pare last week's late losses, but the NOK appears poised to continue losing alongside the movement of oil prices.

GBP/CHF Revealing Impending Weakness for Pound?

Posted: 07 Feb 2011 11:41 PM PST

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The British pound has been reaching significant resistance lines against a number of its primary currency rivals. A chance exists that the pound could see some downward retracement over the next several days as investors test the strength of these levels.

As an example, the GBP/CHF, shown on the chart below, has some revealing indicators regarding this development.

As you can see, the pair touched the long-term trend line at 1.5500 and quickly bounced off.

Now we are beginning to see the technical pressure building against any additional bullishness for this pair, symbolized by the technical oscillators on the lower portion of the chart.

The Stochastic (slow) shows a very fresh bearish cross, suggesting heavy sell pressure and what appears to be an impending downward movement that could be sustained for the next few days, even weeks.

The MACD/OsMA also shows a bearish cross, but the upward movement of the oscillator seems to be giving off mixed signals. The wide divergence on this oscillator, however, does support the downward notion.

If correct, the GBP/CHF could see some bearishness over the next few days, with targets at 1.5200 and 1.4900.

GBP/CHF – Daily Chart
GBPCHF - Daily Chart

Crude Falls to $87.17; German Industrial Production on Tap

Posted: 07 Feb 2011 11:00 PM PST

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Yesterday, while we witnessed rather peaceful trading in the forex frontier, crude oil prices continued to slide, and a barrel of crude fell about 120 pips. Crude oil is currently approaching a one-week low.

There are two main reasons for the decline in crude prices:

1. The ongoing ease in Middle-East tensions. For about a week there were severe concerns that the political turmoil in Egypt will spread, and might affect oil-producing nations in the region. In such a scenario, oil supplies from the region could have been harshly reduced. Naturally this has boosted crude prices. Yet, now that the tension in Egypt seems to have diminished, the market has begun to correct this trend.

2. Analysts have revealed their forecast for this week's U.S. Crude Oil Inventories report. Analysts have estimated that domestic stockpiles rose by 2.5 million barrels last week, completing their fourth consecutive rise. In short, bigger supplies mean lower prices, and that's another leading reason for the falling oil prices.

As for today, reports from Germany, Europe's largest economy, will continue to play a leading role in today's trading, especially as no significant data will be released from the U.S. Here are today's leading news events:

• 11:00 GMT, German Industrial Production – This report measures the change in value of output produced by manufacturers. Considering yesterday's weak German manufacturing data, another negative indication might add further bearish pressure on the euro.

• 13:15 GMT, Canadian Housing Starts – This report measures the number of new residential buildings that began construction during January. Analysts have forecasted that 171,000 buildings began construction last month. If the end result will beat expectations, the CAD might be supported as a result.
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