Forex Trading TV Video Blog

When glancing back at a weekly chart several months from now, one will look at the change in the market last week and consider it a normal one. The greenback ended the trading week last week virtually unchanged against its major rivals from the levels it began the week with. A closer look into last week’s trading however will show a much different picture. The greenback saw record lows against the EUR crossing 1.6035 before regaining nearly 200 pips to close the week. The same was the case for the USD/JPY shooting back up to over 106 after flirting with 103.80, as the GBP also added to the volatile conditions. The market fluctuations seen last week were caused by a host of key events, most notably the sudden drop in Oil prices that occurred mid week. As late as Tuesday afternoon Light Sweet Crude Oil was selling at $146 barrel and the EUR/USD pair had broken record highs above 1.60. By the end of Tuesday, Oil price had dropped by as much as $10/barrel and EUR/USD was back trading near 1.58. Testimony from Federal Reserve Chairman Ben Bernanke in front of the Senate Banking Committee and a simultaneous economic speech by President George W. Bush drove Crude Oil prices down and sent the dollar on a bullish path that carried on until the end of the week. When it was all said and done by Friday’s closing the USD had regained ground from the week before and Crude Oil had shed nearly $20 off of its peak price.

This week should be equally intriguing as investors juggle whether the US is really out of the “recession” it has been suffering lately. As has been the case before, bullish runs by the dollar sometimes extend themselves beyond what fundamental and technical data would allow, mostly on default investor speculation that the dollar will always recover. With news from the housing and credit markets still disappointing it is hard to logically defend the positive movement in the dollar. This week the dollar is absent from any relevant market making news until Thursday and Friday when we can expect the Unemployment Claims, Existing Home Sales, Durable Goods Orders and New Home Sales. These events will almost certainly contribute to volatility in the market as any positive figure should spark even more market wide speculation on the dollar. The dollar will be absent from the news today and won’t appear until tomorrow when we will await the words of Treasury Secretary Henry Paulson and Federal Reserve Bank of Philadelphia President Charles Plosser.

Today, the US will produce a single calendar event, the Leading Index. Expect the markets to be calm today as the soft news day will likely provide little market movement.

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.