The U.S. Dollar traded weakly in yesterday’s session as it witnessed depreciation against all of its currency rivals. Plunging toward the critical levels of 1.4000 against the EUR and 1.6000 against the GBP, the greenback’s recent weakness doesn’t appear to have an end in sight for today.

With an expectant worry that today’s data releases will put investor focus on
America’s increase in debt issuance, thus resulting in a higher Treasury yield; the
market may continue to go bearish on the USD. As expected, higher yielding assets
and currencies like the EUR and GBP may then gain significantly from these
speculations. Positive economic data in Europe throughout the week has also resulted
in dramatic investment shifts towards a diversified portfolio for many traders who
wish to increase their risk and pull away from safe-haven investments.

Looking forward to today, forex traders will no doubt be marking the multitude of
European data releases as Britain’s HPI housing report may show a sudden return to
market weakness, and the Euro-Zone’s M3 money supply report has the potential of
showing a drop in the level of currency available throughout the European forex
market. In the United States, the Preliminary GDP report is scheduled to be released
at 12:30 GMT and may show the U.S. economy shrinking less than last quarter, a sign
that the economy could be entering a solid recovery. With a focus on America’s debt
issuance, USD weakness is anticipated to continue throughout the end of the week.

* EUR
EUR’s Recent Gains on Unsteady Ground
The EUR has been the beneficiary of the market’s recent increase in risk appetite
considering it has appreciated against almost all of its currency rivals over the
past week. The 16-nation currency climbed towards the psychological barrier of
1.4000 against the USD, temporarily breaching the resistance line before falling
back under the mark. With the recent dash to sell off the JPY, the EUR apparently
received the bulk of investor flight, climbing as high as 135.40 against the island
currency.

With the surge of consumer confidence in some of Europe’s largest economies, there
exists a moderate level of hope in a speedy recovery for the Euro-Zone’s regional
economy. German market data has displayed a wide array of positive results which
have helped convince many weary traders that the worst may indeed be over. In a rush
to diversify trading portfolios for riskier assets, the EUR appears to have been one
of the primary choices for this move. The question remains, however, as to whether
this move towards Europe will continue. Some analysts say it marks the beginning of
a recovery, but will not sustain itself at this pace in the short-term.

As for today, there are two important data releases which forex traders need to keep
an eye on. The first is the Nationwide HPI report in Britain which may show the
housing market declining once more. This report is scheduled to be released at 6:00
GMT. The second is the report on the M3 money supply in circulation throughout the
Euro-Zone. With a direct correlation to interest rates, the money supply is an
important gauge of currency valuation. With negative results, we could see a
temporary reversal to the EUR’s recent trends through the end of today’s trading.

* JPY
JPY-Funded Carry Trades Returning?
The Japanese Yen saw one of its most bearish sessions in months. Dropping back
towards the 97.00 level against the USD, and the 155.00 level against the GBP, the
island currency witnessed a rash sell-off in Thursday’s mid-day trading sessions.
There was a growing concern that Japanese equities were more resilient than
previously forecast which led to an increase in risk appetite for many safe-haven
investors. This generated an investment flight towards Europe in search of higher
yielding assets. Some analysts believe the JPY-funded carry trade may be on the
return, which will eventually push the value of the Yen towards the lows of
2007-2008.

As for today, there aren’t many data releases expected from Japan. However, last
night’s consumer pricing reports indicated a decrease in price for Japanese goods
and services, highlighting a weakened demand for these sectors of Japan’s economy.
This may also have generated a strengthened push to flee from JPY safe-haven
investments. Unless news from the Euro-Zone or U.S. comes out highly negative
throughout the day, the JPY will likely continue getting weaker.

* Crude Oil
Crude Oil Price Meets Little Resistance
After climbing to a record high not seen since November, the price of Crude Oil has
stabilized for the moment. With a sudden flight from safe-haven investments such as
the JPY and USD, commodity prices appeared to gain a strong boost from the weakness
of the Dollar. Crude Oil spiked to the price of $65 a barrel in mid-day trading
yesterday. Only in today’s early trading hours did the price begin to settle just
under this price barrier.

The Organization of Petroleum Exporting Countries (OPEC) agreed not to change
production levels for the time being, with the assumption that doing so may
destabilize weakened economies. A report showing a sharp decline in oil inventories
also supported this move as a boost to demand and consumption is expected in the
coming weeks. With this information in mind, forex traders may understand that
long-term pressure continues to show upward momentum, meaning the price of oil may
continue on up towards $75 a barrel in the coming months.

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