Jul 17 2008
Crude Oil Continues To Fall
The USD had a strong trading day against its currency crosses yesterday. The USD’s rally was supported by a batch of better than forecasted economic releases and a hawkish speech by Fed Chairman, Bernake. The USD also took advantage of the falling Crude Oil prices which traded at around $134 a barrel yesterday. After trading at around 1.60 on Tuesday, the EUR/USD fell to the low of 1.58 as the USD gained momentum. The USD/JPY rose from around 104.00 to trade above 105.00 in yesterday’s market following the releases from the U.S.
The USD took advantage of a batch of positive economic data that was released yesterday. Both the Core CPI and general CPI beat forecasts and kept an increasing trend compared to last month’s results. The Capacity Utilization Rate, which measures the percentage of available resources being utilized by manufacturers, mines, and utilities, and the Industrial Production, both beat expectations with their results announced simultaneously. The icing on the cake in terms of economic data was the Crude Oil Inventories, which were measured at 3.0 million, compared to negative value last week, which further dropped the Crude Oil price as well. Around this time, Fed Chariman Bernake gave the semiannual monetary policy testimony before the House Committee on Financial Services, in Washington DC. In his words, Bernake said a “top priority” for the central bank is to bring inflation to an acceptable level. He helped the greenback’s rally by easing traders’ worries as he said that he believes mortgage giants Fannie Mae and Freddie Mac are in “no danger of failing”. There are more significant economic data releases for the USD today, however it seems like this time the momentum might shift to a bearish trend. The impactful Building Permits and Housing Starts are expected to slightly drop as traders are still waiting for a sign of a breakout from Housing Crisis. The Unemployment Claims are expected to significantly increase by 34K this week. It will be up to FOMC Member Kroszner, who is due to speak at the Interagency Minority Depository Institutions National Conference, in Chicago, to save the greenback from a weak trading day ahead. Kroszner’s speech and the Philadelphia Fed Manufacturing Index, which is the only release which is expected to rise, will be the only indicators that might save the USD from a bearish trading day.
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