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Monday, June 1, 2009

High Volatility might continue this Week

After depreciating consistently over the past few weeks, the USD is now traded over 1.41 against the EUR, and over 1.62 against the GBP. This week on Thursday, at 11.45 GMT, the ECB will deliver its periodical Interest Rates statement. Forecasts show that the number is expected to stay at 1%. Such a decision could create strong volatility for the leading currencies, as many have expected the ECB to force movement in the EUR. Forex traders should prepare for what is shaping up to be a fool of opportunities' trading week.

USD - Dollar Losses Strength at All Fronts

Last week, the Dollar continued its bearish trend against all the major currencies, and the EUR/USD saw a six month high, as the pair was traded at the 1.4150 level.

Last weeks publications from the U.S economy were characterized with contradicting indications. While some showed that the public has retained its faith in the U.S economy, others have shown that it is still early to say that the crisis is behind us. And it appears that until sharp evident will sign the end of the crisis, the Dollar's bullishness could continue.

The main news from the U.S last week were the Consumer Confidence, which delivered a surprising positive result, providing the best figure in 8 months. However, the weekly Unemployment Claims remained above 600K for the 17 consecutive times. This number is simply overwhelming. In addition, the New Home Sales report, which is considered to be one of the most reliable indicators regarding the housing sector, showed a rather disappointing figure, as only 352K new single-family homes were sold during April.

As for the week ahead, a batch of data is expected from the U.S economy, and this could be a fantastic week for traders to enjoy the heavy volatility of the market in order to enlarge their profits. Special attention should be given to the Non-Farm Employment Change expected on Friday, as this indicator tends to have an immense impact on the leading currencies and on top of them the USD. Currently it seems that if the actual result will be similar to forecasts of 520K, a reverse of trends could take place by the weekend.

EUR - EUR Soars on Positive German Data

Last week, traders who went long on the EUR made some significant profits. The EUR saw rising trends against the USD, the GBP and the JPY, as its most impressive uptrend was against the Dollar.

The two main news events from the Euro-Zone last week came from the German economy. Germany holds the largest and strongest economy in the Euro-Zone, and thus the relevant publications from this economy usually have a hefty impact over the EUR.

On Monday, the German Business Climate report was published, and even though it failed to reach expectations, the result was still the best figure in 6 months, showing that businesses around Germany are starting to feel improvement in their current business conditions. Then on Thursday, the German Unemployment Change indicator showed that merely one thousand individuals have lost their jobs during April. This was the best figure in 6 months as well. The combination of the two surveys seems to be 1 of the main reasons that strengthened the EUR against the major currencies.

Looking ahead to this week, the most notable publication from the Euro-Zone will be the Minimum bid Rate, which is of course the European Interest Rates announcement. Currently, analysts suspect that the European Central Bank (ECB) will leave interest rates at 1.00%, however, in case that the ECB will decide to manipulate rates, this will sure have a high impact on the EUR.

JPY - Mixed Signals from the Japanese Economy

During last week's trading session, the Yen saw mixed result against the leading currencies. Whilst the JPY depreciated against the EUR and the Pound, it saw rising trends against the USD.

The leading indicators which were published from the Japanese economy showed mixed signals that could explain the large volatility of the Yen. The Japanese Trade Balance, which measures the difference in value between imported and exported goods during April, delivered an unexpected negative figure, making it the ninth month in a raw on which Japan sees more importing activity than exporting. These figures are devastating for the Japanese economy, which is built on its export. On the other hand, The Preliminary Industrial Production showed an increase of 5.2% in April as opposed to March. This means that the Japanese consumers feel more secure in their economic condition, and this has the potential of pulling the country out of recession.

Ad for this week, traders should pay special attention to the Capital Spending report, scheduled for Wednesday. This report measures the change in the total value of new capital expenditures made by businesses, and is expected to show a 27.1 decrease in the last quarter. If the real result will be similar, a bearish trend for the JPY could take place.

Oil - Crude Oil Breaches the $67 line.

Crude Oil is traded near six month high as a barrel of Crude Oil is currently valued for over $65.

Crude Oil was boosted from the weak Dollar, as many other commodities such as Gold reacted in similar ways to the weakening USD. The one thing that these commodities have in common is that they are all valued in Dollars, and as such, when a dramatic change in the Dollar value itself takes place it usually has an immediate impact on commodities such as Crude Oil as well.

In addition, it seems that the summer is supporting oil's prices as well. As the vacation season begins, more and more air flight companies which were under the risk of filing for bankruptcy, are reporting higher than expected profits, stimulating them to expand their business activity, and therefore dramatically elevate the demand for oil. For as long as demand rises, and the USD depreciated, the prices of Crude Oil could reach higher, maybe even $70 a barrel.

Looking ahead to this week, traders should follow the main news from the U.S economy, as the changes of the Dollar will surely continue to dominant oil's fluctuations. And if the USD will expand its free fall, don't be surprised if a barrel of oil will reach $70.

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