Forex Trading

The Dollar is set to continue its volatility today, as the market continues to act on yesterday's critical speech of U.S. Federal Reserve Chairman Ben Bernanke. Additionally, traders will continue intensive Dollar trading, as they take into account that U.S. Interest Rates will stay at 0.25%, lower than most industrialized nations. Furthermore, a bullish stock market today could be an additional factor that may add to the forex market's volatility, and possibly push down the USD.



USD - USD Slides on Poor Unemployment Claims Figures

The U.S Dollar fell against most of its major currencies pairs yesterday. It was dragged lower by an unexpected rise in weekly U.S. jobless claims that dimmed the economic picture in the U.S. The USD was also pushed lower by Federal Reserve Chairman Ben Bernanke's testimony, as he was put on the defensive due to recent controversial U.S. bank acquisitions.

By Thursday's close, the USD fell against the EUR, pushing the oft-traded currency pair to 1.4043. The Dollar experienced similar behavior against the JPY for most of the day. However, the greenback recovered slightly to finish trading higher at 95.70.

Initial claims for state unemployment insurance increased by 15,000, to a higher-than-expected seasonally adjusted 627,000, a reminder that companies will keep cutting staff, even as the U.S. economy stabilizes. However, recent data shows that some areas of the economy, such as housing and manufacturing, are seeing a smaller pace of decline, consistent with the Federal Reserve's projection that the slump is “slowing.” Companies are unlikely to hire until there are sustained gains in demand, meaning a recovery remains dependent on the effectiveness of government stimulus efforts.

Looking ahead to today, there are several news releases coming out of the U.S. These include the Personal Spending and Revised UoM Consumer Sentiment at 12.30 GMT and 13:55 GMT respectively. Better-than-expected results may help the USD recover some of yesterday's losses against the EUR and CHF. On the other hand, if the results turn out to be lower than forecast, then the USD may record a bearish session in today's trading.

EUR - EUR Soars Against the Dollar

The 16 nation currency completed yesterday's trading session higher versus most major currencies. The EUR closed higher versus the JPY yesterday, and the pair closed at around the 134.70 level. The EUR also saw bullishness against the GBP as it jumped around 60 pips and closed at 0.8547.

The major economic event that came out of the Euro-Zone yesterday was the Industrial New Orders data release. Industrial orders in the Euro-Zone were unequivocally weak, plunging more than a third, year on year in April, a record decline led by falling demand for capital and intermediate goods. A slowdown in the decline in orders in March had raised hopes that the downturn was bottoming out, but the sharp fall in April signals that a recovery may take longer to start in earnest. Analysts believe the first quarter of this year was the low point of the Euro-Zone's recession.

Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the German Prelim CPI. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to bolster the EUR in the short-term.

JPY - Yen Experiences Mixed Result against the Major Currencies

The Yen completed yesterday's trading with mixed results versus the major currencies, on bets that the U.S. Federal Reserve and the European Central Banks' (ECB) efforts to stabilize the global economy will spur demand for higher-yielding assets. The JPY closed at 96.08 per USD from 96.20 yesterday.

Japan's consumer prices fell at a record pace in May, adding to signs that a return to deflation may hamper a rebound from the nation's worst recession. Bank of Japan Governor Masaaki Shirakawa said last week that price declines will accelerate through the middle of the fiscal year, as demand slackens and Crude Oil continues to trade lower than last year's record. Retailers are cutting prices to attract customers as falling wages and the worsening job outlook dampens spending.

Crude Oil - Crude Oil Reaches $70 a Barrel

Oil prices rose sharply to above $70 a barrel yesterday on renewed rebel attacks against Oil facilities in Nigeria, and worries that a glitch at the largest U.S. Oil refinery could tighten gasoline stockpiles during this summer's driving season. Crude Oil also got a lift from a rally on Wall Street fueled by optimism that the recession was easing, a prospect that could spell a recovery in ailing world energy demand.

Looking ahead, traders are advised to watch carefully at the leading stock markets and the major economic indicators which will be published from the U.S. and Euro-Zone in order to predict the upcoming movements in Oil prices. Nevertheless, in case the USD continues to weaken as it has lately, Oil at $75 a barrel seems like a very realistic target for next week.

Article Source - Ben Bernanke Speech to Continue Dominating Dollar Volatility Today