Jun 18 2008
The USD Shows Local Bullish Momentum
The USD saw bearish trends against its crosses yesterday. The bad trading day was highlighted by the EUR/USD pair’s breach above the 1.55 level. The USD was affected the most by the report released by Goldman Sachs (a leading global investment baking group) on the broader banking industry. The report estimated that credit losses from deterioration in the mortgage and lending markets will not peak until early 2009, and that U.S. banks, having already raised about $120 billion in capital, will need to raise an additional $65 billion to cover the losses. This reminded traders of the past banking crisis that was thought to be overcome. The other major negative economic news coming from the U.S. yesterday was the release by the Commerce Department, which stated that U.S. May Housing Starts fell 3.3% to a 975,000 annual rate, the lowest since March 1991. Not only did this impact the USD because of the low rate it was also worse than forecasted.
Many economic results were released yesterday with mixed results. The monthly PPI beat out forecasts by 0.4% and the Building Permits beat out forecasts by 1 million, but were still lower than the previous rate. However, the negative releases seemed to impact the greenback more as the Housing Starts reached a 15 year low at a rate of 975,000 and Industrial Production was released at -0.2% after there were expectations of a 0.1% rate. The bad day didn’t end there, as the Capacity Utilization Rate and Current Account were also worse than expected. Traders saw the USD fall further and further as more negative economic releases were announced during the trading day.
Looking ahead to today, there is only one release expected from the U.S. The Crude Oil Inventories will be announced at 2:35 GMT and traders should pay attention to this figure as Crude Oil has been causing the USD a lot of volatility as of late. On a side note, Iranian President Mahmoud Ahmadinejad said the rising price trend in Crude Oil is “fake and imposed” and traders should watch how volatility in Crude Oil will affect the USD.
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