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Tuesday, 25 Oct 2011
CB Consumer Confidence Report on Tap Today
Data on American consumer confidence from Conference Board, Inc., (CB) today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts.
USD - US Dollar Moves Higher ahead of EU Summit
The US dollar (USD) was seen trading mildly bullish early Tuesday morning as investors seemed somewhat more pessimistic about growth in the American economy and weary of major financial moves ahead of the EU Summit this week. Sentiment does not seem to be as stable as many economists would like, though, as investment does seem to be shifting back into safe haven assets like the greenback.
Data on American consumer confidence today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts. The Conference Board's (CB) consumer confidence reading and the S&P/CS Composite 20-HPI in the US are forecast to hold steady this month, which could have the effect of lifting the value of riskier assets, though this will need further data to be confirmed.
As for today, there will be several major US economic releases, with most focused on consumer confidence and housing in America. Liquidity will likely be higher in today's early trading as these data points are published, though the impact of Canada's interest rate report may be enough to force a surge in any direction on USD pairs and crosses. Housing and consumer confidence are in focus this week and traders will want to pay attention to the latter in the case of mounting pessimism and its affect on dollar values.
EUR - EUR Trading Lower as Traders Seek Haven
The euro (EUR) is expected to be seen trading with mildly bearish results this week ahead of a slew of reports on the region's flash manufacturing and service sector. Against the US dollar (USD) the euro has been trending downwards from a recent flight to safety after last week's positive figures.
Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in global stocks at the moment has many investors on edge and looking for safety. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets make longer strides.
Sentiment across the euro zone has turned slightly more positive, with many analysts and economists expecting moves towards higher yielding assets by traders later this week. Great Britain, moreover, appears positioned for a relatively better fourth quarter than its southerly neighbors. With several minor reports expected all week, most expecting bullish figures, the GBP is in a position to continue its recent streak, though the same cannot be said for the EUR.
JPY - JPY Jumps Bullish as Traders Flee Risk
The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven was being evaluated by an air of impending intervention by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.
The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With industrial production data out this week, traders are waiting to see what the BOJ will do in the face of a downturn. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan's current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.
Crude Oil - Crude Holding Steady despite Dollar Gains
Crude Oil prices held steady Monday as sentiment appeared to favor a mild downtick in global stocks following policies of monetary stagnation being executed by several central banks last week. Data releases out of Europe and the US are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.
An expected jump in dollar values due to this week's risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains leveling off this morning, sentiment appears to have the price of crude oil holding steady near $90 a barrel ahead of the impending winter season in the northern hemisphere. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.
The EUR/USD has moved above its consolidation pattern from the previous week and has a technical retracement towards 1.4040, the 50% Fibonacci retracement off of the move stemming from the 1.4940 high in May to the October low of 1.3145. Both daily and weekly stochastics are moving higher and as such further resistance is located near 1.4100 where the 100 and 200-day moving averages rest. To the downside support is seen at last week's low of 1.3650.
Cable has jumped out to new 6-week high to its 50% Fibonacci retracement at 1.6010 from the move lower covering the April high to the October low. A break of this retracement level would put in play the 1.6110 resistance from the August low followed by the 61% retracement level at 1.6180. 1.5850 can be eyed as the first significant support line followed by 1.5630.
Last Friday the sleepy USD/JPY awakened from its slumber and quickly set a new all-time low of 75.78, triggering a plethora of stops before moving back above the 76 yen mark. While the range trading environment may continue, a quick move below the 75 yen level could invite an additional round of intervention from the Ministry of Finance which would likely take out the initial resistance levels at 77.85. The post intervention high of 80.25 may find willing sellers of the pair at more attractive levels.
The one way price move in the USD/CHF has ended with the pair forming what looks to be a falling wedge pattern. The chart pattern typically brings about a breakout to the upside but forex traders should follow the price action. The consolidation pattern has resistance at 0.9025, a level that coincides with the rising trend line from the August low which was broken last week. Additional resistance is located at 0.9340-0.9315. Support is found at 0.8640 and 0.8550.
The Wild Card
Since reaching a low in early October the rebound in the S&P 500 is encroaching on a significant resistance level from the June low of 1,252. A break here will expose resistance at 1,309 and 1,354. Forex traders should be mindful of support at 1,185 as a move below this level would signal bearish technical sentiment.