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Wednesday, 18 Jan 2012
Better Than Expected German Data Turns EUR Bullish
Positive Chinese and German economic indicators led to some bullish movement for the euro during mid-day trading yesterday. That being said, the gains were for the most part short-lived, as the common currency once again began moving downward by the evening session. Today, traders will want to pay attention to a batch of British and US indicators that are likely to generate market volatility.
USD - USD Moves Downward Following Increase in Risk Taking
The USD saw bearish movement against many of its main currency rivals yesterday, as a positive Chinese GDP number combined with a better than expected German economic sentiment figure drove investors toward riskier assets. The EUR/USD went as high as 1.2807 before hitting resistance and changing course. That being said, the pair is still far above the 17-month low the pair hit last Friday. Against the Australian dollar, the greenback gave up well over 100 pips throughout the day before staging a correction.
Today, a batch of US economic data is expected to generate market volatility. Both the PPI and TIC Long-Term Purchases figures, set to be released at 13:30 and 14:00 GMT respectively, are forecasted to show positive growth in the US economy. It is possible that any positive US data will generate risk taking among investors which could in turn drive the USD lower. That being said, investors remain cautious about going long with currencies like the euro. Should the USD turn bullish again today, it will likely be a temporary trend.
EUR - German Data Gives EUR a Boost
A positive Chinese GDP report, combined with a better than expected German ZEW Economic Sentiment figure led to some investor risk taking throughout yesterday's trading. The euro received a significant boost against its safe-haven currency rivals as a result of the news. Against the US dollar, the euro rose as high as 1.2807 before retreating during the evening session. Still, the EUR/USD remains well above the 17-month low reached last week at 1.2624. The EUR/JPY, which recently hit an 11-year low, shot up well over 100 pips before hitting resistance during yesterday's afternoon session.
Analysts continue to warn that any gains the euro makes for the foreseeable future are likely to be short lived. The problems surrounding the euro-zone debt crisis are too big to ignore and are likely to grow unless significant action takes place in the near future. At the moment, investors remain concerned that Greece will have to default on its debt, while it is widely expected that the EU will cut interest rates in the near future. While positive global data is likely to boost riskier currencies like the euro in the short-term, they may not be able to help them stage a long-term recovery.
CAD - BOC Leaves Interest Rates Unchanged; CAD Takes Slight Losses
News that the Bank of Canada (BOC) would leave national interest rates at 1% did not come as a shock to many traders as the move was widely expected. Still, the assumption that weak global data and the euro-zone debt crisis would prevent Canada from raising interest rates for at least another year led to some losses for the loonie in trading yesterday.
Today, the BOC Monetary Policy Report and press conference will likely shed some more light on the current state of the Canadian economy. Should the BOC's paint a negative economic outlook for the near future, the CAD may take some significant losses during the evening session.
Crude Oil - Positive Global Data Sends Crude Upward
The price of crude oil rose above $101 a barrel yesterday, as positive global data led to risk taking among investors. The price of oil typically increases along with the euro, as the commodity becomes more attractive to international investors when there is a weak US dollar. That being said, oil was unable to maintain its bullish movement, and began to stage a downward correction by the evening session.
Today, oil prices will likely be determined by news out of the euro-zone. At the moment, fears that Greece will default on its debt have led to a return to safe-haven currencies. Should this trend continue, oil will likely fall as a result. Traders will also want to keep a close watch on the current state of Middle East tensions. Any further escalation in the current situation between Iran and the West may lead to an increase in the price of oil.
Most long term technical indicators place this pair in oversold territory, meaning an upward correction is possible in the near future. The daily chart's Williams Percent Range is around the -95 level, while the weekly chart's Relative Strength Index has drifted below 30. Going long this week may be a wise choice.
Following last week's bearish trend, technical indicators are now showing this pair trading in neutral territory. The daily chart's Relative Strength Index is currently at 40, which typically signifies that no significant movement is expected in the near future. Traders may want to take a wait and see approach for this pair.
Most long term technical indicators are placing this pair in neutral territory, meaning that it may maintain its current trend for the time being. That being said, the Bollinger Bands on the daily chart appear to be tightening. If this continues, a price shift may take place. Traders will want to take a wait and see approach for this pair.
Technical indicators on both the daily and weekly charts are placing this pair in overbought territory, meaning a downward correction may take place. A bearish cross appears to be forming on the weekly chart's Stochastic Slow, while the daily chart's Williams Percent Range has gone above the -20 level. Traders may want to think about going short in their positions.
The Wild Card
Technical indicators are showing that this pair may see some upward movement in the near future. The daily chart's Stochastic Slow has formed a bullish cross, while the Relative Strength Index is hovering around oversold territory. Forex traders may want to go long in their positions today, as an upward correction could take place.
|08:00||CHF||Foreign Currency Reserves||437.7B||*||-5.7B|
|09:30||GBP||Consumer Inflation Expectations||3.6%||*||-|
|11:00||EUR||German Industrial Production||m/m||-0.6%||0.7%||-|
|13:30||USD||Non-Farm Employment Change||113K||151K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.2%||0.2%||-|
|17:00||USD||FOMC Member Dudley Speaks||*||*||*|