Greenback And The Euro

Last Thursday we saw how Initial Jobless Claims supported the decision of Fed chairman Ben Bernanke to scale down the bond buying program later this year. Traders saw this as a confirmation of the statement to scale down the bond buying program by the midterm. This led to selling of the USD. The dollar depreciated against all the other currencies during Thursday's trading session. We also noted that the market saw the positive news of the initial jobless claims as bullish for the USD in the short term and the currency changed direction.

Consumer confidence in the United States increased, indicating that consumers are more optimistic and confident about the economy. This indicated a stronger USD and in the short term, the USD/JPY went up at the announcement of this consumer confidence number. After approximately half an hour the market reacted quickly and changed the direction. Thirty minutes after the news hit, the market changed direction (down) as investors saw the confidence as a support to wind down the USD 85 billion asset purchase program later this year. But the market stabilized later on the same day and the uptrend took gear.

The news about the increased consumer confidence made the prices of crude oil shoot up during the trading day of that session. As a consumer confidence grows/increases, we can state that consumers will spend more money. This is one of the reasons why prices of oil went up. We have also seen this week that there is a strong correlation between the USD/JPY and the Nikkei index. As the Nikkei index moves up, the USD/JPY also moves up. The strong stock market in Japan means that the JPY is weakening. This causes the USD/JPY to move in an up direction. As the Nikkei Japan 225 index performs badly so the USD/JPY change its direction down. This morning the German unemployment change indicated a weaker EUR.

In the short term the EUR/USD was down as the EUR was weakening against the USD. After approximately thirty minutes the market reacted quickly and changed direction (up). Investors saw the weak German data as a support for the ECB to continue its stimulus package in the form of lower interest rate for economic recovery. So the demand for the EUR increased and the market for the EUR/USD went up. My forecast for the long term in this trading session for today is bullish for the EUR/USD since the weak German data support the ECB stimulus package in the future.
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