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Monday, 19 Jul 2010

Dollar Declines to 2010 Low Against Yen

The U.S currency dropped to its weakest level in 2010 against the Japanese Yen as signs the U.S. economic recovery is losing momentum supported speculation that the Federal Reserve will keep borrowing costs low for the rest of the year. The USD also declined versus the EUR for the first time since May as a gauge of U.S. consumer confidence dropped more than economists expected and corporate revenue missed analyst forecasts.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupupdowndown
Weekly Trendnononononono
Resistance1.30101.541587.651.05800.87750.8530
1.29751.538087.301.05450.87400.8495
1.29401.534587.001.05100.87100.8460
Support1.28701.527586.351.04400.86350.8390
1.28401.524086.001.04000.86000.8360
1.28001.520585.701.03700.85700.8325

Economic News

USD - Dollar Weakens on Signs of Economic Slowdown

The U.S Dollar fell the most against the EUR in 14 months and dropped to the lowest level this year versus the Yen as economic reports added to evidence that the U.S. recovery is losing momentum.

The greenback touched a level weaker than $1.30 versus the European currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth.

On Friday, a private survey showed U.S. consumer sentiment weakened in early July to an 11-month low and capped a week which saw U.S. data on the softer side, raising questions about the sustainability of the U.S. recovery.

Investors are closely watching the USD/JPY for the possibility of the greenback dropping to a 15-year low by breaching the November 2009 trough of 84.00 yen. Analysts said with U.S. yields heading lower, the Dollar could break past support around its 7 month low of 86.25 yen in the next few days.

EUR - EUR May Erase Gains on Bank Stress Tests

The European currency rose for a 3rd straight week against the U.S Dollar ahead of partial results of stress tests on the region's banking system, which are due on July 23. The 16 nation currency has surpassed $1.30 on Friday for the first time since May and traded around $1.2950.

The EUR has rallied 8.9% versus the Dollar since reaching a 4 year low of $1.1877 on June 7 as concern eased that Europe's sovereign-debt crisis would undermine the region's economic recovery.

However, the EUR may reverse its recent advances against the U.S Dollar given the slim likelihood of a very positive surprise from European bank stress tests this Friday, analysts said. European regulators will be examining the strength of 91 banks to determine if they can survive potential losses on sovereign bond holdings. The European currency is unlikely to fall past $1.20 unless there is a major negative surprise given that U.S. economic growth shows signs of slowing down.

JPY - Yen Rises Towards Year's High

The Japanese Yen rose toward its strongest level this year against the U.S Dollar as signs the U.S. economy is losing momentum added to speculation that the Federal Reserve will keep interest rates at almost zero this year. The Yen also rose against the Dollar as falling U.S. yields continued to weigh on the U.S. currency, with traders targeting stop-loss orders placed under 87.00 Yen.

Japan's currency gained versus all 16 of its major counterparts and rose toward the strongest level this year. The Japanese currency traded at 87.20 per USD from 87.40 yesterday, after climbing to 87.17, approaching this year's high of 86.97 set on July 1.

Crude Oil - Crude Falls below $76 On Poor U.S. data

Crude Oil prices fell below $76 a barrel in early Asian trading Monday, extending the previous session's decline on concern about the U.S. economic outlook after data showed consumer sentiment fell to a near one-year low.

However, analysts said marginal slide in Oil prices shows that Crude was receiving ample support at above $74 a barrel, thanks to bullish inventory reports that showed large draw downs in U.S. Crude stockpiles over the past three weeks.

Technical News

EUR/USD

Following the prolonged upward movement the pair has experienced recently, it appears a bearish correction may be imminent. The Relative Strength Index on the 8-hour chart is currently in overbought territory, as is the Stochastic Slow on the daily chart. Traders are advised to go short with tight stops today.

GBP/USD

Mixed technical signals indicate that no clear direction for this pair is presenting itself at this time. While the Stochastic Slow on the 4-hour chart indicates the pair may experience upward movement later today, the Relative Strength Index on the 8-hour chart shows the opposite. Traders may want to take a wait and see approach for this pair today.

USD/JPY

Most technical indicators are showing this pair trading in oversold territory, indicating that an upward correction will likely occur today. The Stochastic Slow on the daily chart shows a bearish cross forming, and the Relative Strength Index on the 8-hour chart supports the theory that upward movement is forthcoming. Going long may be the preferred strategy today.

USD/CHF

Practically all technical indicators show the pair currently trading in neutral territory, with no clear direction at this time. These include the Stochastic Slow and Relative Strength Index on the 8-hour and daily charts. Traders are advised to take a wait and see approach for this pair today.

The Wild Card

Hang Seng Index

The Slow Stochastic on the 8-hour chart shows a bearish cross forming, indicating that upward movement could occur in the near future. The Relative Strength Index on the 4-hour chart supports this theory. CFD traders are advised to go long with tight stops today.

Current Time: 09/01 22:54 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/01
00:50JPY+ Monetary Base y/y42.7%43.7%-1
09/02
02:00NZD+ ANZ Commodity Pricesm/m-2.4%*-1
02:30AUD+ Building Approvals m/m-5.0%1.7%-5
02:30AUD+ Current Account-5.7B-13.8B-3
02:30JPY+ Average Cash Earningsy/y1.0%0.9%-3
04:45JPY+ 10-y Bond Auction0.52|4.3*-1
05:30AUD+ Cash Rate2.50%2.50%-5
05:30AUD+ RBA Rate Statement***5
06:45CHF+ GDPq/q0.5%0.5%-1
08:00EUR+ Spanish Unemployment Change-29.8K25.5K-3
09:30GBP+ Construction PMI62.461.5-5
10:00EUR+ PPI m/m0.1%0.0%-1
14:45EUR+ Final Manufacturing PMI58.058.0-1
15:00USD+ ISM Manufacturing PMI57.157.0-5
15:00USD+ Construction Spending m/m-1.8%0.9%-1
15:00USD+ IBD/TIPP Economic Optimism44.546.2-1
15:00USD+ ISM Manufacturing Prices59.557.0-1
00:01GBP+ BRC Shop Price Indexy/y-1.9%--1
00:30AUD+ AIG Services Index49.3--1
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