Aug 21 2008
The Greenback Might Go Bear Localy.
Yesterday the EUR/USD pair experienced a highly volatility and finished trading session with mixed results versus its major rivals. The EUR/USD bounced up and down during most of the day, finally closing at 1.4773 level, unchanged from the day prior. Overall, it lost 0.2% vs. the EUR yesterday when it declined to $1.4773 from $1.4747. The greenback may fall to $1.50 per EUR in a few days should it weaken below $1.48.
Expectations for the near future look to hold unclear characteristics as the upcoming US calendar doesn’t look to have much that can help revive USD bulls once again. Yesterday’s slightly bearish dollar trend was especially concerning due to the lack of market moving economic events both from the US and the Euro-zone. As it seems now the greenback light depreciation comes mainly on the heels of traders fearing the US economy woes are not over.
From the fundamental point of view, the only economic release that deepened USDs’ falling trend yesterday was the Crude Oil Inventories. The indicator printed a much higher than expected result of 9.4M. Due to the unexpected figure, Oil prices rose sharply, which helped to further tumble the US currency.
The dollar also weakened on speculation credit- market losses in the U.S. will deepen. Fannie Mae and Freddie Mac shares tumbled in New York trading to the lowest levels since at least 1990 as speculation increased that the U.S. Treasury will have to bail out the mortgage-finance companies.
The U.S. economic outlook darkened in July for a 3rd consecutive month as Philadelphia Fed Manufacturing report today may show another contraction.
The Philadelphia Fed’s general economic gauge due at 14:00 (GMT) is projected to come in at -12.6. If the final figure will indeed print such a low result today, we may see the dollar continuing its falling trends vs. the rivals.
The leading index is also due today at 14:00 (GMT) from the New York-based research group. The Conference Board’s index of Leading Indicators, a measure of the economy’s direction over the next three to six months, is expected to decline by 0.2%, according to the median forecast. The previous measure fell 0.1% in June
Overall, given today’s pessimistic fundamental forecasts, the USD may find itself falling deeper into a bear’s cave during the day.
This is really not good news.