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Wednesday, 8 Jun 2011

Bernanke Comments May Shift Focus to Europe as Japan Posts Bullish Data

Market news out of Japan this morning was largely positive for the island economy, with the country's Current Account growing to 0.55T and its M2 money supply maintaining its present rate of growth. The yen may seem poised to make gains today, but investors appear likely to shift towards riskier assets following Bernanke's comments on Tuesday.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupnodowndownnoup
Weekly Trendupupdowndownupno
Resistance1.49151.670980.830.84871.08750.9003
1.47821.656180.480.84231.07950.8965
1.47361.650280.280.83911.07570.8947
Support1.46031.635379.920.83271.06760.8909
1.45171.626479.770.82941.06330.8888
1.43841.611679.420.82291.05520.8850

Economic News

USD - Bernanke Comments Drop-Kick USD's Recent Gains

The US dollar experienced strongly bearish results yesterday as traders began to shift away from the greenback following comments by Federal Reserve Board Chairman Ben Bernanke. Speaking at the International Monetary conference in Atlanta, GA, yesterday, the Fed chief hinted at holding US interest rates at all time lows for even longer than was originally thought.

With Friday's Non-Farm Payroll (NFP) figure revealing surprise stagnation in the US employment sector, traders appeared more reluctant to go into the greenback in order to stave off further losses in their portfolios. Bernanke's comments, coming on the coattails of Friday's report, resulted in a sharp kick to USD values gained since mid-Monday, however.

As for today, dollar traders will be licking their wounds while the American economy stays largely absent from the economic calendar. The euro zone is set to release several figures and the Pacific economies of Australia, New Zealand and Japan are in line for one of their most significant news days in weeks. With increased USD aversion since last Friday, traders appear to be anticipating a continuation of the USD's recent bearishness throughout this week.

EUR - EUR Bullish as Investors Run from USD on Bernanke Statements

The euro rose versus the US dollar this morning, with the pair's price reaching a one-month high near 1.4670. Soft data out of the American economy last week forced a reevaluation by many investors who went long on the USD following the European Central Bank's (ECB) cloudy rate statement from a month back, and several grumblings about Greece's debt woes.

What little data was published out of the euro zone yesterday highlighted better growth than was expected. The difference in fundamental data from the US and Europe has generated a heightened intrigue in the comparative interest rates as risk sentiment gets shifted. Fed Chairman Bernanke's statements yesterday have many investors turning to the higher yielding economies of Europe in expectation of record low interest rates in the US for longer than was initially forecast.

As for today, the euro zone will be publishing several minor data sets concerning the region's trade and government budgets. Most investors are turning their attention on the American economy after yesterday's comments and Friday's dismal NFP reading, and there appears to be a good chance that dollar bears will continue to push the EUR higher as the day wears on.

JPY - Japan Market Fundamentals Positive, Yen Mixed

The Japanese yen (JPY) has been trading with largely positive results since Friday as investors turn their focus towards news out of the United States. Fed Chairman Ben Bernanke's remarks yesterday about US interest rates has many traders buying back into the yen as a more beneficial safe-haven in times of risk.

The JPY was seen trading somewhat mixed this morning, however, holding steady gains versus the USD, but faltering mildly against the EUR and GBP. Market news out of Japan this morning was largely positive for the island economy, with the country's Current Account growing to 0.55T and its M2 money supply maintaining its present rate of growth. The yen may seem poised to make gains today, but investors appear likely to shift towards riskier assets following Bernanke's comments on Tuesday.

Oil - Oil Prices Find Support at $98

The price of Crude Oil ended Tuesday mildly positive after finding support just below the $98 price mark. The result has been a steady price movement in oil prices these past several days with lows near $98 and highs of $100 a barrel.

Recent events have made speculating about oil prices more difficult. The plummeting value of the US dollar since Friday should have helped lift oil prices, but the commodity fell for the third consecutive day as of this morning. Rising stockpiles in the United States, reported Thursday, may have helped fuel the shift away from oil as rising inventory tends to suppress price hikes. As for the rest of today, oil prices also appear flat, with technical support targets near $98.50 a barrel possibly coming into view, and a target near $100 on the upside if the black gold is able to find buyers.

Technical News

EUR/USD

The current rally has helped the pair climb above the 61.8% Fibonacci retracement level from the May downtrend at 1.4570. While monthly stochastics are beginning to roll over, both the weekly and the daily stochastics are moving sharply higher. The pair could continue to rise where it may encounter resistance off of the previous trend line from the January to May rally which comes in at 1.4750. This level has further significance as it coincides with the late April/early May lows. Further strength would test the May high at 1.4940 while any pullback could find support at 1.4450 from Friday's low, followed by 1.4310.

GBP/USD

Sterling is showing a few signs of weakness versus the dollar as daily stochastics are declining and a failed attempt to close the week above the 1.6515 resistance level. A move higher would then test the April high at 1.6745 followed by the 2009 high at 1.0755. To the downside the 20-day moving average may prove to be supportive at 1.6305 as well as the trend line rising from the May 2010 low which comes in at 1.6150. A breach here would expose the May 2011 low at 1.6055.

USD/JPY

Yen strength has reemerged and the pair looks to test its post-intervention lows from early May at 79.56. A break of this level exposes the pre-intervention low at 76.11 as the charts are absent of any significant support levels. To the upside, 81.75 should see some resistance followed by the May high at 82.15.

USD/CHF

A new week and a new high for the Swiss franc as the USD/CHF traded as low as 0.8326. Falling stochastics on the weekly chart point to further potential declines in the pair. Traders may find opportunities to enter into the downtrend on a pullback in the pair. Support is located at the May low of 0.8550 followed by the falling trend line off of the February high at 0.8750.

The Wild Card

Oil

Spot crude oil prices have been consolidating in a triangle chart pattern for the past month and are currently testing the lower leg of the pattern at $97.25. A breach here and the commodity perhaps would find support at $96.30 followed by the early May low at $94.70. Beyond this level the next support is located at the January highs near $93.00. Forex traders will want to wait for confirmation of a move below the lower leg of the triangle before initiating a potential short position.

Current Time: 10/30 11:27 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/30
13:30USD+ Advance GDPq/q4.6%3.1%-5
13:30USD+ Unemployment Claims 283K277K-5
13:30USD+ Advance GDP Price Index q/q2.1%2.0%-3
14:00USD+ Fed Chair Yellen Speaks---5
15:30USD+ Natural Gas Storage 94B--1
22:45NZD+ Building Consents m/m0.0%--3
10/31
00:00JPY+ Monetary Policy Statement---5
00:00JPY+ BoJ Press Conference---5
00:30JPY+ Household Spendingy/y-4.7%-4.0%-3
00:30JPY+ Tokyo Core CPI y/y2.6%2.5%-3
00:30JPY+ National Core CPI y/y3.1%3.0%-1
00:30JPY+ Unemployment Rate3.5%3.6%-1
01:05GBP+ GfK Consumer Confidence-10-1
01:30AUD+ PPI q/q-0.1%--5
01:30AUD+ Private Sector Credit m/m0.4%0.4%-1
06:00JPY+ Housing Startsy/y-12.5%-17.1%-1
07:00JPY+ BoJ Outlook Report---3
08:00EUR+ German Retail Salesm/m2.5%-0.8%-3
08:45EUR+ French Consumer Spending m/m0.7%-0.3%-3
10:00EUR+ Italian Monthly Unemployment Rate12.3%12.4%-1
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