Forex Trading

With a chain of bearish trading sessions, the US Dollar has been bouncing the forex market up and down lately. With increased risk appetite and growing market optimism, market conditions are allowing traders to pull away from the safety of the USD. On the other hand, however, today's housing, manufacturing and employment data from Britain and the United States will provide enough market news to halt current trends and create short-term reversals, or push current trends even further. If we see negative data across the boards, the USD may very well return to a bullish posture as risk aversion returns.



USD - USD Bearish Sentiment Continues Prior to Employment Data

While the aggressive Dollar sell-off which started Monday stalled slightly Tuesday, the USD continues trading near the weakest level against the EUR this year ahead of the release of the Non-Farm Employment Change report, which is predicted to show U.S. companies eliminated fewer jobs in July, reiterating that the recession is coming to an end. The Dollar is trading at 1.4410 per EUR as of this morning, and is at 95.00 Yen, down from the 95.37 Yen seen on Monday.

Investors' risk appetite persists as the flow of better than expected economic data continues. Tuesday's release of the Pending Home Sales report showed an increase of 3.6% in June, which was much better than the 0.7% expected by economists. This shows that the housing market, which was at the center of the turmoil, is stabilizing, signaling an impending economic recovery in the U.S.

Looking ahead to today, the release of the ADP Non-Farm Employment Change report at 12:15 GMT, and the ISM Non-Manufacturing PMI at 14:00 GMT, is expected to have great affect on Dollar sentiment; with better than expected results likely intensifying the current bearish trend for the USD.

EUR - Signs of Global Recovery Continue to Boost the EUR

While the EUR lost tiny amounts of its gains since Monday, it still maintains most of its bullish momentum. Tuesday afternoon, the EUR was at $1.4400 from a 2009 high of $1.4445 seen Monday afternoon. The Pound was at $1.6936 from $1.6928.

The rally continued despite stock markets remaining flat throughout most of the day as investors continued seeing strong enough signs of a global recovery and maintained demand for riskier currencies.

Looking ahead to today Britain will dominate the news releases from Europe with the Halifax HPI due to be released at 6:00 GMT and the Manufacturing Production and Services PMI at 8:30 GMT. Better than expected results might be able to push the Pound above $1.7000.

For the EUR, $1.4500 should be the goal, as breaking this level might spur another rally; with no major news releases from the Euro-Zone, the EUR movements will largely depend on news releases from the U.S., Britain, as well as equity markets.

JPY - Yen's Bearish Sentiment Continues

The Yen received a slight boost Tuesday as a drop in global equities ahead of the New York session spurred demand for the safety of the Japanese currency. However, following a release of better than expected U.S Pending Home Sales data the optimistic mood returned, as did demand for riskier assets.

A late rally in the stock markets further enhanced risk appetite and the sell-off of the JPY. The Yen traded at 137.08 against the EUR and was little changed at 95.22 versus the Dollar.

With the release of several economic indicators today which are expected to show continuous improvement in global economic conditions, the bearish sentiment on the JPY is likely to continue.

Crude Oil - Crude Prices Rise as Stocks Rally for 4th Consecutive Day

Crude Oil for September delivery rose as much as 45 cents, or 0.6%, to $71.87 a barrel following a late rally in U.S stocks after pending sales of existing homes increased more than forecast in June. Oil also benefited from the weak USD as Oil prices tend to have an inverse relationship with Dollar strength.

A drop in the U.S. currency boosts the appeal of commodities as a hedge against inflation. Furthermore, the release of U.S Crude Oil Inventories today at 14:30 GMT is expected to show a decline in Crude stockpiles. Along with this inventories data, oil price movements will continue to depend largely on equity levels since this rally largely depends on equities maintaining their current momentum.

Article Source - USD's Bearishness at an End? Today's News May Tell