May 26 2008
Low Liquidity Due to Memorial Day.
Last week, rising Crude Oil prices highlighted a series of events that led to the third consecutive week of Dollar bearishness in the Forex market. The greenback spent the backend of April into the first week of May recovering strongly versus a basket of its most rivaled currencies. The most notable turnaround was a 4% gain against the EUR. These gains were made in large part by positive US economic data which revived investor confidence in the U.S. currency. Unfortunately, the US economy failed to produce the same set of news in the second half of May as most of the ground it made up against the major currencies has disappeared.
With Crude Oil prices catapulting in May, companies like Ford, American Airlines and General Motors have all reported planned cuts in production to try and combat rising Oil prices. Also contributing to the already tenuous US economic outlook was the revival of Housing slump scares. Existing Home Sales numbers for the month of April were down 1%, as Fridays’ report pushed the oft traded EUR/USD pair up by 60 pips. At the end of the trading session last week the EUR/USD pair closed above 1.5750, as the key psychological level of 1.60 once again looms. It will be interesting to see how the Fed responds to rekindled economic concerns and if it will cut Interest Rates yet again in 2008.
This week looks to be equally important for the US economy, as a basket of significant economic data is on tap. The week will cover nearly all of the relevant industries from within the US economy highlighted by New Home Sales, Core Durable Goods Orders, Preliminary GDP, and Chicago PMI figures. Also on the docket on Thursday is a speech by Federal Reserve Chairman Ben Bernanke, who will have a week worth of economic data at his disposal when addressing audience at the Risk Transfer Mechanisms and Financial Stability Workshop in Switzerland. Bernanke will likely be dealing with negative data, as forecasts have the USD experiencing another bearish trading week.
Today is Memorial Day in the US as well as Spring Bank Holiday in the UK. With no other relevant news from Europe or Asia on tap, Monday will likely provide little volatility. The USD should range trade in its major pairs and crosses throughout the day.
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