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Tuesday, 23 Mar 2010
Dollar Down after Touching 10-Month High vs EUR
The U.S. Dollar turned slightly lower versus the EUR as traders positioned for a big European Union (EU) meeting this week amid signs of a deepening divide among policy-makers over aid to Greece.
USD - USD Weakens as Risk Sentiment Improves
The U.S Dollar pulled back from a 3-week high against the EUR yesterday pressured by an improvement in risk appetite following gains in U.S. stocks. U.S. stocks rose on Monday as the passage of a bill overhauling healthcare ended uncertainty about the reform.
However, traders said the rebound will be short-lived because of the failure in a quick resolution over Greece during this week's summit. A Greek fiscal crisis has helped make investors more cautious of risky assets in recent weeks, boosting the greenback against the EUR.
The Dollar also turned lower against the British pound and Japanese yen, pushing down an index of the greenback's performance against a basket of currencies. The USD fell 0.5% to buy 90.11 yen, and 0.4% against the GBP to $1.5066.
The currency market will look ahead this week to U.S. economic data releases including reports on housing due on Tuesday and Wednesday and to a testimony by Federal Reserve Board Chairman Ben Bernanke on Thursday.
EUR - Euro Rises Ahead of EU meeting
The European currency rose from a 3-week low against the U.S Dollar as European leaders tried to allay concerns that they were unprepared to aid Greece, easing pressure on higher-yielding assets. The EUR rose 0.2% to $1.3558 from $1.3530 on March 19. It earlier fell to $1.3464, the weakest level since March 2.
The spotlight this week turns to a summit of European Union (EU) leaders Thursday. The EUR may fall lower if European leaders don't decide quickly on helping Greece in financing the region's biggest budget deficit. Analysts said the EUR may remain vulnerable to further weakness and volatility before and during the summit.
The British Pound weakened for a 3rd day against the U.S Dollar. The GBP was also driven lower amid speculation that Dubai World will prolong the repayment of its loans, hurting earnings at U.K. banks that serviced the state-owned Emirati company. The key event for the week will be the release of the government's budget for the 2010-11 fiscal year on Wednesday.
JPY - The Yen Weakens Broadly
Japan's currency declined against all of its 16 major counterparts as an advance in Asian stocks encouraged investors to buy for higher-yielding assets. The Japanese yen fell for the first time in 5 days against the EUR on speculation European Union (EU) leaders meeting this week will agree on an aid package for Greece, dampening demand for the safety of Japan's currency. The JPY dropped to 122.43 per EUR from 122.21 yesterday when it climbed to 121.06, the highest since March 5.
OIL - Spot Crude Oil Rises Above $81 as Dollar Dips
Oil prices turned higher and above the $80-a-barrel mark on Monday as confidence on Wall Street and easing concerns over Greece pressured the U.S. Dollar downwards and lifted commodities.
Oil prices slumped 1.8% on Friday, pressured by the USD's strength and the decision of India's central bank to raise interest rates. A stronger Dollar tends to hamper commodities, as it makes them more expensive for holders of other currencies and reduces their value as an investment hedge.
In the absence of major economic data Tuesday, oil traders will be taking most of their cues from currency and equity markets.
The price of this pair appears to be floating in the over-sold territory on the weekly chart's RSI indicating an upward correction may be imminent. The upward direction on the daily chart's Slow Stochastic also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The GBP/USD has gone bullish yesterday, and currently stands at the 1.5085 level. The daily chart's Slow Stochastic supports this currency cross to rise further today. However, the 4-hour chart's Stochastic Slow signals that a bearish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
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 typical range trading on the hourly chart continues. The 4-hour chart RSI is floating in neutral territory. However, there is an impending bullish cross forming on the daily chart's MACD indicating a bullish correction might take place in the nearest future. Going long with tight stops might be the right strategy today.
The Wild Card
This pair's sustained upward movement has finally pushed its price into the over-bought territory on the 8-hour chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
|08:15||EUR||Spanish Manufacturing PMI||52.8||52.3||-|
|08:45||EUR||Italian Manufacturing PMI||49.8||49.4||-|
|09:00||EUR||Final Manufacturing PMI||50.5||50.5||-|
|13:15||USD||ADP Non-Farm Employment Change||204K||206K||-|
|14:45||USD||Final Manufacturing PMI||57.9||58.0||-|
|15:00||USD||ISM Manufacturing PMI||58.0||56.8||-|
|15:00||USD||ISM Manufacturing Prices||58.0||58.6||-|
|15:30||USD||Crude Oil Inventories||-4.3M||-||-|
|01:00||NZD||ANZ Commodity Prices||m/m||-3.3%||*||-|
|01:00||AUD||HIA New Home Sales||m/m||-5.7%||*||-|
|01:00||EUR||Spanish 10-y Bond Auction||2.27|1.8||*||-|
|01:00||EUR||French 10-y Bond Auction||1.32|2.8||*||-|