Forex Trading

The greenback continues its correction as better unemployment numbers and rising import prices helped to strengthen the Dollar yesterday. Liquidity may be thin during today's trading due many European firms closed for holiday. However, this may only increase price volatility, creating the potential for traders to take advantage of other's missed opportunities.



USD - The Greenback Heads for Its Weekly Gains

The U.S Dollar advanced against the EUR and the Yen on Thursday as better than expected U.S. weekly jobless claims helped spark a rally in the market, rekindling appetite for riskier assets. A batch of economic data including a dip in jobless claims and a rise in import prices, have improved sentiment for the greenback. In afternoon trading, the USD was 0.8% higher versus the yen at 100.46, while against the EUR the U.S currency rose to 2-week high to $1.3110.

The Dollar also surged after Wells Fargo & Co., the second-biggest U.S. home lender, reported a first quarter profit that beat the most optimistic Wall Street estimates, which point to an easing in the financial crisis. The greenback has risen 2.8% against the European currency this week, the most since the period ended Jan. 9. The improved trade deficit dynamic was Dollar positive, as the U.S. trade deficit in February unexpectedly narrowed to the lowest level in 9 years analysts have said. The narrowing U.S. trade deficit may further support the Dollar as the U.S. spends fewer greenbacks in international markets to buy foreign products.

Currency movements may be volatile in Asian and European trading today as the Easter holiday in the region reduces liquidity amid thin trading volume, exaggerating market moves. This can give volatility traders good reason to enter the market today as the Dollar could extend its positive momentum into the holiday weekend. The EUR/USD could trade as low as the 1.0350 support level today.

EUR - EUR Falls on Speculation the ECB Will Lower Its Benchmark

The European currency lost 0.4% versus the USD, down to $1.3112 and eased 0.1% to 131.94 Yen yesterday, on concerns the Euro-Zone economy would skid more deeply into recession in the coming months. The market has been watching for signs the European Central Bank (ECB) will take unconventional steps to improve credit availability after similar moves by the Federal Reserve and other major central banks.

European Central Bank President Jean-Claude Trichet said the central bank still had some leeway to cut its main Interest Rate from its record low of 1.25% and that benchmark rate below 1% is still open for debate. The central bank would lay out plans for possible unconventional monetary policy measures at its next meeting on May 7. However, Trichet would not give any further details.

Meanwhile, the British pound had also sunk to $1.4663, compared to $1.4704 late Wednesday. Earlier Thursday, the GBP was little changed against the Dollar after the Bank of England left its key lending Rate unchanged at an all time low Thursday and said it would continue buying government bonds and other assets. Policy makers were widely expected to stay on the sidelines after an aggressive series of Rate cuts slashed the bank's benchmark from 5% to 0.5% since October.

JPY - Yen Drifts on Market's Slow Activity

The Yen drifted against the Dollar on Thursday, holding on to gains made the previous day as currency market remained quiet, unwilling to build positions ahead of earnings reports by major U.S. banks next week. The Yen was flat against the USD at 99.85 yen after rising about 0.8% on Wednesday. The Japanese currency fell as low as 101.45 on Monday to strike a 6-month peak. The Yen was also unchanged against the EUR, settling at 132.50.

Data on Thursday showed Japan's machinery orders, a leading indicator of corporate spending, unexpectedly rose in February, a rare positive sign as the country suffers its worst recession since World War Two. Traders said expectations of the stimulus package helped the Yen's rebound against the Dollar and the EUR but investors may refrain from pushing it higher past the 101 level.

OIL - Oil Breaks $52 a Barrel

Crude Oil prices rose nearly 5.8% on Thursday, fueled by a rally on Wall Street and data showing that the number of workers filing new claims for unemployment benefits fell last week. Adding support to Crude, the UK consultancy Oil Movements said on Thursday that Organization of Petroleum Exporting Countries (OPEC) production will fall 280,000 barrels per day (BPD) in the four weeks ending April 25th. OPEC has agreed to slash 4.2 million BPD of crude output since September to counter falling prices and match slumping world demand.

Oil prices had also climbed Wednesday on weekly Energy Information Administration data showing a smaller-than-expected suppl in U.S. crude inventories and a big slump in distillate stocks. The market reacted violently as optimism in equity markets about the U.S. economy carried over into Crude. The U.S. Economic data that showed crude-oil supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993.

Article Source - Dollar Rises Despite Increased Risk Taking