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Sharp Rise in EUR/USD as Oil Invenotires Drop

August 19, 2009 by

EUR/USD posted a big gain today, following a smaller rise shown yesterday, and is now trading just below Friday’s open level. The growth of euro against the U.S. dollar happened despite the poor fundamentals from Europe and other developed economies. United States aren’t very rich on the important Forex-influencing reports today — only crude oil inventories have got their release, but they managed to shake the market fully. EUR/USD is now trading near 1.4262.

Crude oil inventories went down by 8.4 million barrels, while the total motor gasoline inventories decreased by 2.1 million barrels, which is definitely going to hurt the USD, considering the higher oil prices.

Yesterday some other fundamental reports from U.S. were released. Among them the PPI change for July, which was -0.9%, following 1.8% gain in June. Forecasts were pointing at -0.3% change for July.

Housing starts and building permits report also came out yesterday. Building permits decreased from 570k to 560k in July, while housing starts declined from 587k to 581k annual rate during the same period. Both number were expected to go up slightly.

If you have any comments on recent EUR/USD action, please, reply via the form below.

3 Responses to “Sharp Rise in EUR/USD as Oil Invenotires Drop”

  1. Viktor

    Hi There,
    i’ve just ran into ur blog through google where I was looking for EUR/USD vs Crude Oil correlation. I daytrade crude oil and often use Eur/Usd indicator for prediction in price. HOwever, I have noticed that this correlation also often occurs other way round, where Eur/Usd is moved by the price in Oil. As long as it seems to me your are very comfortable in Forex trading I was wondering if you wouldnt mind to explain to me or clarify to me why is that currency sometimes is strongly influenced by move in commodity. In this case it would this Eur/Usd and Crude Oil. I always thought that currency movement is based on central banks decisions or other crucial reports regarding the state of the economy. But I noticed that there was a big move in Eur/Usd based on Crude oil price due to invetories drop. What does have oil inventories to do with state of the DOllar?? Thank you very much in advance for your time and kind response.


    Andrei Reply:

    It currently works this way:

    Oil (or demand for oil) usually rises when the global risk-aversion is low. And if the risk-aversion is low, investors and traders buy stocks and everything that is associated with high risk and high yield. Dollar is a “safe haven” currency, which is bought when the risk-aversion is high and sold when it’s low. So when the oil goes up it indicates the general mood of the market participants and thus there is no surprise that EUR/USD also rise after that.


  2. Viktor

    Got it! thanks again for your time and clarifying.


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