Aug 20 2008
Crude Oil Inventories Might take The USD Up
The greenback experienced a trading session of mixed results yesterday. Soon after the trading day began, the USD reached a 6 month record against the EUR as the pair fell to a rate of 1.4630. However, it was a straight or shall we say “strait” downfall for the USD ever since, as the cross rose to breach the 1.4800 level.
The USD made its record high against the EUR as a result of a much better than expected Producer Price Index figure. The indicator rose by 1.2%, beating expectations for only a 0.6% rise. The surprising surge reflects an increasing inflation pace, that might only be stopped by interest rates hikes, and the market promptly reacted to continue the USD’s rally. However, 3 elements have joined together to provide traders with an excellent opportunity to gain profits on their short USD positions. The first one was the Building Permits indictor which fell beyond expectations to its lowest growing rate since 1991, as only 0.94M new residential building permits were issued during July, showing that the housing market in the U.S is in the midst of a crisis and not over it. The second reason for the falling Dollar was the second day of bearish American stock markets. After a positive month for the equity markets that had largely contributed to the bullish trend the USD had gone through, two consecutive days of falling stocks prices managed to generate some wariness for the investors, and have them partially close their long positions on the USD. The third reason was the recuperation of oil prices, which rose by over $3 a barrel yesterday, to be traded around $115, giving extra support to the weakening USD.
As the sole indicator that will be published from the U.S. economy today is the Crude Oil Inventories, traders are well advised to follow Crude Oil prices, and refer to them as one of the most influencing information that might affect the USD. In case that no dramatic changes will occur, the USD is widely expected to resume its general trend of bullish behavior against its major currency rivals.
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