Not all the news was good for the USD, and yet it kept up its strength. The February USD looks positioned to continue its bull run. The technical indicators look bullish and the economic data is strong. Of course, who knows what's on the political horizon? Or how much strength the Euro, Pound or Yen will gain during the next 20 trading days. A roller coaster ride is likely to be the name of the game for February.

IN PICTURES: 9 Ways To Go Bankrupt

The first week of February is rife with economic news and events. The traders' big event happens on the first Friday of the month. The non-farm payrolls will be released on February 5th. The deficit has hit an all-time high of more than $3 trillion. The Bank of England and the European Central Bank are meeting to make another rate decision. That's just the first week of February.

More economic news is on the way. Any of the expected reports can cause the USD to gain or lose momentum. Ignore the data for a moment and look at the chart below because this picture speaks a thousand words.

Source: FXtrek IntelliChart™

Copyright 2001-2010 FXtrek.com, Inc.

The moving average lines for the EUR/USD currency pair show that the USD is experiencing a long-awaited bullish trend. The 50-day SMA (black) and 10-day SMA (yellow) clearly indicate the USD's strength against the Euro. The 50-day SMA is a very strong and reliable resistance level, and the Euro has moved farther away from it throughout January.

However, the Bollinger Bands® may be the most revealing of the shown indicators. With the volatility rising and falling, the currency pair hits clear areas of support and resistance. Most recently, the currency pair has been walking the lower band, which marks a support level but also indicates the USD's strength.

Before considering, though, that the bulls have complete control of the USD, the Stochastics indicator suggests that the USD is overbought. With that signal established, the bears are well positioned to assert control over the USD as February continues. The Japanese candlesticks also support this conclusion.

Back to the economic data, the USD is likely to move from the release of Nonfarm Payrolls Report. Analysts have theorized that the recession is reaching an end and this report can be one major indication. The January payrolls figure is expected to show a rise from December from losing 85,000 jobs to actually creating 20,000 jobs in January. This information can prove bullish for the USD.

On the European side, the retail sector is expected to show improvement from losing 1.2 percent to gaining nearly half a percentage point in December. This marks a major advance in economic growth and consumer confidence. So, the U.S. and the European data are looking strong. Both currencies could benefit from the strong data. (Learn more in our Economic Indicators Tutorial.)

What can we expect from the USD in February? Traders can expect the USD to make big price movements. However, the Euro is struggling to regain its strength against the USD so the Greenback's upward trend might be difficult. The Euro may receive help from the ECB if the central bank decides to raise rates, though this is not anticipated. The European economy is getting stronger but it is unlikely that a rate hike will happen in February.

The GBP is imitating the Euro but has a longer journey against the USD to regain its position.

The yen is another story. The technical indicators show that the JPY is holding its position against the USD. The JPY has made a strong bullish run against the USD (very similar to the EUR and GBP), but the difference between the Yen and the European currencies is that the JPY is holding onto its gains. That may not bode well for Japanese exports, but it shows that the USD continues to have its challenges even during its wild bull run.

Traders will have different opinions about the overall strength and vitality of the USD. However, traders know that to ignore the data is an exercise in folly and futility. Trends don't last forever, but their impact can be long-lasting.

Source: FXtrek IntelliChart™
Copyright 2001-2010 FXtrek.com, Inc.
Source: http://www.dailyfx.com/calendar/

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Trading Strategies

    The Top Spread-Betting Strategies

    What are the most commonly followed spread-betting strategies (in countries where it's legal)?
  3. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  4. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  5. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Trading Strategies

    How To Buy Penny Stocks (While Avoiding Scammers)

    Penny stocks are risky business. If want to trade in them, here's how to preserve your trading capital and even score the occasional winner.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Derivative

    A security with a price that is dependent upon or derived from ...
  3. Real Estate Investment Trust - ...

    A REIT is a type of security that invests in real estate through ...
  4. Ginnie Mae Pass Through

    A type of investment issued by the Government National Mortgage ...
  5. Agency Swap Program

    A form of securitization whereby single-family residential mortgages ...
  6. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...
RELATED FAQS
  1. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  2. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!