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Wednesday, 31 Aug 2011
ADP Non-Farm Employment Change on Tap Today
The US economy will be publishing several reports today, most importantly is ADP's publication of Non-Farm Employment Change for the private sector at 13:15 GMT. The employment data is a foreshadowing of Friday's Non-Farm Payrolls (NFP) data. The ADP report has a tendency to rapidly change the direction of the USD in trading and given the direction of employment changes this past week there is a chance it will surprise to the upside, helping to push the USD lower as the day progresses.
USD - US Dollar Mixed as Speculators Undecided
The US dollar (USD) was seen trading mildly bearish on Tuesday as traders viewed comments by the Fed as a sign of potentially impending hawkish moves on the policy front. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted following fears of another bank interventions in Japan and a string of reports out of the euro zone today which could reverse much of the markets recently acquired short-term stability.
Data from the American housing market Monday also signaled a downtick in housing demand from the previous month, contradicting yesterday's news that housing prices were decreasing at a slower pace. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets.
As for today, the US economic releases will focus mostly on employment and manufacturing. Today's leading publication of ADP's Non-Farm Employment Change will likely lead the day's volatility. Liquidity will likely be higher in today's mid-day trading as several European events are being published in rapid succession alongside the release of a handful of American events. Look for wide swings in currency values today.
EUR - EUR Bullish as Risk Sentiment Shifts towards Higher Yields
The euro (EUR) has been seen trading with largely bullish results so far this week as traders assess risk appetite across the region. Against the US dollar (USD) the euro was seen trading mildly bullish in late trading as shifts away from the greenback, due to uncertainty about the US employment and housing sectors, caused a stir in the foreign exchange market.
The economic calendar this week has been mostly bearish for the region, however, with housing and manufacturing reports disappointing traders. The manufacturing data across the euro zone and Britain has also shown little change. Italian retail sales contracted this past month, as revealed in yesterday's data releases, and British news turned almost exclusively bearish.
On tap today, traders will witness the release of regional retail sales reports and employment data, though few consider them to be highly impactful given the series of significant releases out of the US economy a bit later in the day. Focus will undoubtedly be on the US employment and manufacturing sector today as both will be publishing highly relevant reports later in the afternoon. Should news produce bearish results there is a chance that traders will move away from the EUR and back into safe-haven assets.
AUD - Housing Dip Pulls Down on Aussie Dollar
The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders into higher yields with solid capital markets. The Aussie has been losing momentum these past few weeks as risk sentiment flutters in the global market. Overriding these concerns, moreover, is a sudden dip in the Australian housing market which saw building permits and new home sales decline.
This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the US dollar (USD) and Japanese yen (JPY). Being tied to commodity prices could help lift the AUD in the near future, however, as oil prices hold above $86 a barrel, but general risk aversion is likely to push the currency lower as traders flee risk. On tap today, forex traders will see the release of Australia's private sector credit figure measuring consumer demand of private loans. If negative news arrives, traders may see a heavier move towards risk aversion in early trading today.
Crude Oil - Crude Prices Steady amid Risk Aversion
Crude Oil prices held steady Tuesday as sentiment appeared to favor a downturn in global stocks ahead of a speculated double-dip recession. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and manufacturing demand.
An expected jump in dollar values due to this week's risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.
Last Friday's candlestick posted an outside day up, a telling bullish signal. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.4520 area. Initial resistance for the pair comes in at 1.4540. A close above 1.4700 would signal an end to the sideways price action and open the door to the May high of 1.4940. To the downside the euro may find willing buyers at 1.4325 where the 20-day moving average is located. Further support is found at 1.4260 off of the rising support line from the July low as well as the long term trend line at 1.3940.
After failing to make a close above the 1.6550 resistance level sterling was sold only to find support at its 55-day moving average near 1.6210. Rising daily stochastics hint at an additional test of the range between 1.6550 and 1.6615. A break here may have scope to the April high of 1.6745. Should the 55-day average fail to contain the pair support is found at 1.6110 where the 200-day moving average is floating. 1.6000 may also prove to be supportive.
The doji candlestick reversal has bought the yen some temporary respite from the selling pressure at the 76 yen level as the pair failed to test the all-time low last week. However, falling stochastics appear on both the weekly and monthly charts and hint at additional declines in the USD/JPY. A lack of support on the charts makes it difficult to find a target to the downside. A move higher could see resistance at last week's high of 77.70 followed by 78.50 and the post intervention high of 80.20.
The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line from the February high at 0.8090 and if broken could turn into support as often occurs with previously broken trend lines. Additional resistance is found at 0.8270 followed by the 100-day moving average at 0.8340.
The Wild Card
Spot gold prices have bounced from their lows near $1,700 after falling from a high of $1,900. The outside day down candlestick on August 23rd is an ominous signal, though the bearish sentiment could be reversed should the price move above the high of $1,911. Forex traders should note that after the $1,700 mark and the next support is located near $1,577 on the weekly chart.
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