Online Forex Update: US Dollar Trading Flat Today

Existing home sales figures showed a 3% fall in March to a less than expected annual rate of 4,570,000 units. Pundits who had thought that the housing market has hit a bottom woke to a realization that the situation is growing deeper. The dollar which had been up most of the day retreated after the report was released. As the market looks forward, forex online investors are waiting for the results of the US government stress tests for banks, a release that could shed great light on the actual state of the US economic environment.

At 11:45 GMT, the Dollar was trading flat to the yen at 98.0, down .04% to the British Pound to 147.06, up .07% tothe Canadian Dollar to 1.2235, up .14% to the Australian Dollar to .7135 and up .11% to the Kiwi to .5609

Dollar's Strength Set to Determine Oil Prices Today

Whilst the Dollar declined in yesterday's trading against most of its major currency pairs, Oil prices recorded considerable gains. Thus lately, there has been an inverse relationship between the greenback and the black gold. Therefore it is important to follow economic news releases from the U.S. closely today, as a weak U.S. economy is likely to lead to bearish Oil prices. On the other hand, strong U.S. economic data and a strong Dollar are likely to lead to higher Oil prices later today.



USD - Dollar Foresees a Bearish Trading Session

The U.S currency continued to slip against the EUR yesterday, dropping 1.1% to as low as 1.3150. It also lost ground against many of its other major currency pairs as investors continue to worry about the depth of the U.S. recession. Analysts anticipate the Dollar to slip further and to make a correction against the major currencies in the short-medium term as many forex traders believe that the USD is overvalued.

The release of the U.S. Existing Home Sales Report yesterday added to downward pressure on the USD. The report showed that sales of U.S. existing homes fell by 3% in March to a 4.57 million-unit annual rate. This data confirms that the U.S. housing market is still weak. Another report showed the number of Americans filing first-time claims for unemployment insurance rose by 27,000 last week to 640,000 as forecast, while total benefit rolls reached a record, indicating the continuous deterioration of the U.S. labor market.

Later today, there are several important economic data releases coming out of the U.S. The most important of these publications is the Core Durable Goods Order indicator at 12:30 GMT. The release is expected to be lower than the previous figure, meaning the USD could continue its bearish behavior today. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

EUR - EUR Soars vs. the Dollar

The EUR rallied yesterday against the Dollar as encouraging news about the European economy and banking system sparked hope that the 16-country Euro-Zone may be emerging from the depths of recession. The EUR touched a one-week high versus the Dollar and closed at 1.3150. The European currency finished 100 pips higher against the JPY to finish yesterday's trading session at the 128.00 level.

The Euro-Zone's manufacturing and services sector recorded their best performance in 6 months, while industrial orders fell by less than analysts had anticipated. The survey showed a significant improvement, thereby boosting hopes that the rate of decline in the Euro-Zone economy is now moderating after a particularly torrid 4th quarter of 2008 and 1st quarter of 2009. The reduced contraction in manufacturing activity in April suggests that the sector is starting to benefit from the massive de-stocking that has taken place.

Today, there are many news events coming out of the Euro-Zone and Britain. From the Euro-Zone, investors are advised to follow the French Consumer Spending and German Ifo Business Climate figures that are set to be released at 6:45 and 8:00 GMT respectively. Britain is also set to release Retail Sales figures at 8.30 GMT. The results of these data releases are likely to set the pace for the EUR and Pound in today's trading.

JPY - Yen Declines as the Japanese Economy Plummets

Japan sank deeper into recession in the 1st quarter since Toyota, Honda and Nissan, Japan's three biggest automakers, slashed production last month. Japanese automakers have pared production as the global recession and rising unemployment sap demand for vehicles worldwide. Having reduced inventory, and with governments taking steps to revive demand, some carmakers, including Toyota and Nissan, are now planning to ease cuts.

As a result of negative economic news that came out of Japan yesterday, the JPY finished yesterday's trading session lower against several of its major currency pairs. This was seen against the EUR, pushing the EUR/JPY pair to 128.55. Also, the Yen fell against the GBP, as the pair closed at 0.8960.
Looking to today, the Yen may continue its downward slide against its major currency pairs as Japanese investors seek short-term profits from the Japanese stock market.

OIL - Crude Oil Eyes $50 a Barrel

Crude Oil rose 1.6% yesterday as the Dollar dropped against its major currency pairs, bolstering the appeal of commodities. In addition, Oil's gains came despite swelling U.S. crude inventories, which hit a fresh 19-year high last week. Prices rose around $1 to $49.70 per barrel, but have dropped from last week's high of above $52 a barrel. The Energy Information Administration (EIA) stated that Crude Oil supplies rose by 3.9 million barrels in the week ending April 17, marking the sixth weekly gain in a row.

Over the past four weeks, Americans consumed on average of 18.5 million barrels a day of petroleum products, a decline of 6.5% from the same period a year earlier, despite the dramatic plunge in Oil prices from peaks above $147 a barrel in July 2008. If demand of Crude continues to decline, then this will lead to continuing downward pressure on the price of Crude in the short-medium term.

Article Source - Dollar's Strength Set to Determine Oil Prices Today

British Pound in Play with UK Economy to Shrink Most in 28 Years (Euro Open)

The British Pound may see significant selling pressure in European hours with advanced estimates of first-quarter Gross Domestic Product set to show that the economy shrank -1.6% to bring the annual pace of decline to a whopping -3.8%, the worst result in nearly 28 years. Sterling slipped below 1.47 in overnight trading to shed as much as -0.6% against the US Dollar.

Key Overnight Developments

• US Dollar Looks Past Asian Stock Performance, Eyes G7 Summit
• Daily Telegraph Reports Moody’s May Cut UK’s AAA Credit Rating
• Euro Range-Bound, British Pound Lower in Overnight Trading

Critical Levels



Japan’s All-Industry Activity Index reversed lower to print at -2.0% in February after improving in the preceding month. The Industrial Production component led declines, falling -1.77% as weak overseas demand amid deepening global recession continues to push manufacturers to cut back output. The Corporate Service Price Index fell at a slower pace than economists expected, shrinking -2.1% in the year to March versus forecasts of a -2.6% result.

While still unsubstantiated by the principals, the Daily Telegraph reported that Moody’s may cut the UK’s sovereign credit rating from its current AAA on concerns about the booming government deficit. Standard and Poor’s, another rating agency, has already lowered the ratings of Spain, Ireland, and Greece.

On balance, major currencies kept near familiar levels through the overnight session in anticipation of the upcoming meeting of G7 finance ministers in Washington, DC. Deflation, unemployment and toxic bank assets remain pressing concerns despite recent optimism and the markets will be looking for assurances that policymakers are prepared to offer more stimulus to support economic expansion in the months ahead. The forthcoming event risk seemed to eclipse a down day across major Asian stock exchanges, with the safe-haven US Dollar oscillating in a well-defined 0.3% range.

Euro Session: What to Expect



Germany’s IFO Survey of business confidence is expected to print at 82.3 in April, a reading within a hair the previous month’s record low at 82.1. The forward-looking Expectations component of the survey is seen rising for the fourth consecutive month, hinting at improvement in firms’ 6-month outlook. Still, the reading is expected at 82.6, a print below the 100 “boom-bust” threshold, suggesting conditions are still deteriorating albeit at a gentler pace. Indeed, a survey of economists conducted by Bloomberg forecast the Euro Zone’s largest market will continue to see deep contraction for the remainder of this year, with a return to positive growth delayed until the first quarter of 2010. Most notably, the economic recovery in the US is expected to outpace that of Europe, suggesting Federal Reserve will lead the ECB in raising interest rates, thereby putting downward pressure on the EURUSD exchange rate.

In the UK, advanced estimates of first-quarter Gross Domestic Product are set to show that the economy shrank -1.6% to bring the annual pace of decline to a whopping -3.8%, the worst result in nearly 28 years. NIESR, a think tank, has said the economy could “continue to decline for up to another year” while the International Monetary Fund revised down their UK economic growth projections by -1.3%, calling for the economy to shed -4.1% through 2009. Signs of deepening recession weighed heavily on the British Pound earlier this week as the unemployment rate rose the highest in over a decade, pushing the currency’s average value down -1.5% against major counterparts. If this pattern is to continue, sterling could see heavy selling in the coming session. A separate report is likely to show that Retail Sales grew 1.1% in the year to March, a notable improvement from the previous month’s 0.4% result. Still, the metric has been trending firmly downward since May of last year and the expected upswing will hardly amount to a break from that trajectory. Looking ahead, the aforementioned weakness in the labor market is likely to maintain downward pressure on disposable incomes, discouraging spending.

Written by Ilya Spivak, Currency Analyst
Article Source - British Pound in Play with UK Economy to Shrink Most in 28 Years (Euro Open)