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Thursday, 22 Apr 2010
Air Transportation Fiasco in Europe Leads to EUR Decline
The grounding of air travel in Europe has put strong downward pressure onto the Euro-Zone's common currency. Analysts are putting losses so far around $1.7 billion, and declaring that European regional airlines likely suffered more than the major airlines of the United States. With concerns over Greece's recovery and bailout still vividly on the minds of financial leaders, the volcanic eruption in Iceland appears to have come at the worst possible time for the EUR.
USD - USD Mixed against Most, but Strongly Outpacing the EUR
The US Dollar continued its week-long climb against the EUR, reaching a high of 1.3357 as of this morning's early trading hours. Against other currencies the greenback appears to be showing mixed results. The USD/JPY pair ended the day lower, with a price near 92.75. Versus the Canadian Dollar, the USD has once again fallen beneath parity with its northerly neighbor, currently trading at 0.9997.
Despite optimistic sentiment in Europe, emanating from such figures as Tuesday's positive German ZEW Economic Sentiment reading, the 16-nation single currency persists in a sustained downward movement. This has helped the USD gain steadily despite underperforming against most other currency pairs.
With a series of news events coming out of Europe today, it is likely that we could see a turnaround in the 16-nation single currency's fortunes. This will only be the case should the figures provide a strong enough reason for believing that an economic recovery has fought its way through the latest string of events. Otherwise, the USD could likely continue its bullish run.
EUR - Volcanic Ash Disrupts Transportation, Economy; Depresses EUR Strength
A sad string of events has led the EUR onto a downtrodden path this past week. Suffering losses against every major currency pair, the 16-nation single currency could be looking to make strong gains with today's heavy news day.
The grounding of air travel in Europe has put severe pressure onto the Euro-Zone's common currency. Analysts are putting the losses so far around $1.7 billion, and declaring that regional airlines likely suffered more than the major airlines of the United States. With concerns over Greece's recovery and bailout still vividly on the minds of financial leaders, the volcanic eruption in Iceland appears to have come at the worst possible time.
Many investors in the forex market now appear to be claiming that the EUR may need more than one day of positive news events to turn around its most recent misfortune. Today's manufacturing and service data from the Euro-Zone could be a nice jumping off point for a rebound, but if figures come out below expectations traders should anticipate the continuation of the EUR's recent losses.
JPY - Yen Gaining from Risk Aversion in Europe
The Japanese Yen experienced mixed results yesterday against its primary currency rivals. As of today's early Asian trading hours, the USD/JPY pair has begun a minor descent and currently trades at 92.83, with what appears to be further sell pressure being applied. No doubt the financial troubles currently rocking Europe are leading to a rise in risk aversion which is helping to prop up the safe-haven Dollar and Yen.
In other news, however, the JPY is in fact gaining ground economically with all news emanating from the island economy beating forecasts. With recent declines in Europe, positive data, and a risk averse economic environment, it appears the JPY may be on course to continue gaining throughout the trading day. That is, unless the figures coming out of Britain and the Euro-Zone reverse the fortunes of the region and boost risk appetite.
Crude Oil - Spot Crude Oil Prices Lower from Resurgent Dollar
Economic woes seem to be putting pressure on the price of Crude Oil lately. The transportation fiasco in Europe combined with depressed risk appetite has pushed safe-haven investments such as the US Dollar and Japanese Yen back into a bullish posture. The result is that commodity prices seem to be coming down off their recent highs. The price of spot crude has recently fallen from above $86 a barrel to as low as $83.20 as of this morning.
As with the forex market, should today's manufacturing and service data from the Euro-Zone come in better than expected, we could see a turnaround in the EUR, which will suppress the recent gains made by safe-haven currencies as well as help commodities pare some of their losses. Commodities traders should be on the look out for signals of a EUR recovery, which will likely lead to short term boosts in commodities such as Crude Oil.
The cross has been dropping for the past week now, as it now stands at the 1.3390 level. The Slow Stochastic of the daily chart shows a fresh bullish cross, indicating that an upward correction is imminent. This view is also supported by the RSI of the hourly chart. Going long with tight stops may turn out to be the right choice today.
The price of this pair appears to be floating in the over-bought territory on the 4-hour chart's RSI indicating a downward correction may be imminent. The downward direction on the hourly chart's RSI also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bearish reversal is imminent. . Going short with tight stops might be a wise choice.
The Wild Card
Platinum prices rose significantly in the last week and peaked at $1739.75 for an ounce. However, the 4-hour chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|20:00||USD||Federal Funds Rate||<0.25%||<0.25%||-|
|EUR||German Prelim CPI||m/m||-0.1%||0.2%||-|
|01:50||JPY||Prelim Industrial Production||m/m||-2.1%||0.4%||-|
|09:00||CHF||KOF Economic Barometer||89.7||90.3||-|
|09:00||EUR||Spanish Flash CPI||y/y||0.1%||0.1%||-|
|09:00||EUR||Spanish Flash GDP||q/q||0.9%||1.1%||-|
|09:55||EUR||German Unemployment Change||-1K||-5K||-|
|10:30||EUR||Italian 10-y Bond Auction||2.35|1.4||-||-|
|14:30||USD||Advance GDP Price Index||q/q||0.0%||1.5%||-|
|16:30||USD||Natural Gas Storage||61B||-||-|