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Thursday, 20 Oct 2011
Dollar Losses Limited, Markets Expecting Heightened Volatility
Liquidity will likely be higher in today's early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Great Britain will contribute to today's movements with its retail sales figure.
USD - US Dollar Bearish, but Downturn Limited
The US dollar (USD) was seen trading mildly bearish early Thursday as traders viewed comments by the Fed as a sign of potentially impending hawkish moves on the policy front. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted following a string of reports out of the US today which could reverse much of the markets recently acquired short-term stability.
Data from the American housing market yesterday also signaled mixed messages between building permits and home sales, representing a possible lull in impending construction, but an increase in mortgage loans and other sales. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets later in the year.
As for today, the US economic releases will focus mostly on housing and manufacturing. Liquidity will likely be higher in today's early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Great Britain will contribute to today's movements with its retail sales report.
EUR - Euro Bullish from Sudden Growth in Risk Appetite
The euro (EUR) is expected to be seen trading with bullish results this morning ahead of a slew of reports from Great Britain, Canada and the United States. Against the US dollar (USD) the euro has been seen trading somewhat bearish as the greenback moves upward against its currency rivals.
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 the US dollar at the moment has many investors on edge. 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 such as the Swiss franc (CHF) and Japanese yen (JPY) make gains.
Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today's data continues to reveal negative market directionality, the EUR is likely to remain bearish.
JPY - JPY Beginning to Feel Pressure
The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of diminished industrial activity and production. 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 some downturn following this week's industrial activity releases. 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 industry slumps in Japan, this uptrend may meet resistance.
Crude Oil - Oil Prices Holding Steady amid Market Turmoil
Crude Oil prices held steady Wednesday as sentiment appeared to favor a mild uptick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are beginning to generate some risk taking after statements by the Federal Reserve began to cause investors to seek out higher yields.
An expected dip in dollar values due to this week's risk seeking environment has helped many investors ram up their long-taking positions on physical assets, but with the USD's losses not materializing in large enough numbers, sentiment appears to have the price of crude oil holding steady. 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 pair has traded within a wide 8 cent range since the beginning of the month and could continue its rebound. Initial resistance for the EUR/USD is found at the weekly high which coincides with the 50-day moving average at 1.3910 and a retracement target at 1.4015. A move above here would signal more than just a correction in the downtrend. The previously broken trend line from May 2010 beckons as resistance at 1.4175. Should any downside price action be seen in the EUR/USD pair then the 20-day moving average could come into play at 1.3550.
Cable has received a significant bounce after the downtrend failed to follow through below the 1.5300-1.5270 range. Initial resistance can be found from last week's high of 1.5850 with scope to the 1.6000-1.6100 range. Support is located at Tuesday's low of 1.5630 followed by the September low of 1.5325.
The range trading for the USD/JPY continues with the pair held in check between the levels of 77.50 and 76.30. A move higher would likely find willing sellers at the September high of 77.85 while a break here could test the post intervention high of 80.25.
The USD/CHF is encroaching on its rising trend line from the August and September lows which comes in at 0.8900. A bounce here could retest the October high of 0.9310 while a break of the trend may have scope to the 0.8550 support.
The Wild Card
Spot gold prices failed to move above the $1702.50 resistance level, limiting the upside moment. Forex traders should note that a break below $1627 could open the door open for a retest of the September low of $1530.
|08:00||GBP||Bank Stress Test Results||-||-||-|
|08:00||GBP||BoE Financial Stability Report||-||-||-|
|09:15||EUR||Spanish Manufacturing PMI||51.3||51.9||-|
|09:45||EUR||Italian Manufacturing PMI||54.1||54.3||-|
|09:50||EUR||French Final Employment Change||50.8||50.8||-|
|09:55||EUR||German Unemployment Change||-5K||-4K||-|
|09:55||EUR||German Final CPI||52.6||52.6||-|
|10:00||EUR||Final Manufacturing PMI||52.8||52.8||-|
|10:00||EUR||Italian Monthly Unemployment Rate||11.8%||11.7%||-|
|10:00||EUR||Italian Quarterly Unemployment Rate||12.4%||11.9%||-|
|10:00||GBP||BOE Gov Carney Speaks||-||-||-|