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Friday, 1 Jul 2011
EUR/USD at 3-Wk High as Greece Fears Ease
The EUR/USD was seen moving towards a three week high of 1.4570 yesterday after bullish economic reports pushed many investors away from the safe-haven greenback. Yesterday's bullish PMI data from Chicago helped add to the trend of risk seeking, but the primary source behind the movement was the easing of fears across Europe as Greece passed its austerity budget in parliament.
USD - USD Declining as Traders Seek Higher Yields
The US dollar was seen in decline yesterday as traders began to seek riskier assets following several upbeat economic data releases and speculation that Greece would be saved temporarily from a default on its debt. The EUR/USD was seen moving towards a three week high of 1.4570 yesterday after bullish economic reports pushed many investors away from the safe haven greenback.
Yesterday's bullish PMI data from Chicago helped add to the trend of risk seeking, but the primary source behind the movement was the easing of fears across Europe as Greece passed its austerity budget in parliament. The passed measure allows Greece to obtain the next allotment of funding from the IMF. The EUR, GBP, and AUD were each rising against the US dollar throughout Thursday's session as a result.
With another heavy news day expected today, traders are sure to see heightened volatility. Most significantly, the US economy will be publishing its ISM Manufacturing PMI figures alongside data on consumer sentiment, construction spending, and total vehicle sales. Most investors continue to focus on the easing of debt woes in Europe and this may continue to push safe havens like the USD lower against its primary currency rivals.
EUR - EUR Moving Strongly Bullish after Greece Fears Ease
The 17-nation EUR found strength yesterday following news of heightened risk appetite across the embattled region. With Greece voting in favor of the austerity budget, investors began to shift their portfolios to higher yielding. The EUR/USD moved to a 3-week high near 1.4570 while the euro saw similarly strong gains against other safe haven currencies like the Japanese yen and Swiss franc.
An optimistic economic news day Thursday kept volatility heightened as investors attempted to digest the results of the Greek budget vote, which passed amid violent protests around the country's capitol. The market jubilation at the news of a passed budget helped riskier assets climb throughout the latter half of the day and eased fears that the region may face a severe debt contagion.
With today's heavy news day ahead, traders will want to pay attention to the shifts in risk sentiment following yesterday's euphoric highs. Given the relatively fewer economic indicators being published in the euro zone today, the possibility exists for current sentiment to get turned around. On tap this morning in the euro zone will be the 9:00 GMT publication of several minor reports followed by the 10:00 GMT release of the region's unemployment rate which is expected to hold steady at 9.9%.
JPY - Japanese Yen Mixed ahead of Tankan Manufacturing Data
The Japanese yen was seen trading with mixed results against most of its currency rivals yesterday as investors moved towards higher yielding assets in Europe and the Pacific. Japan's economy has published several positive figures over the last week, much of which has helped establish the yen's recent bullishness. With the recent news of Greece passing its austerity budget, eased tensions are leading investors away from safe havens like the yen.
While the yen suffers from its own economic concerns, shifts in consumer sentiment have helped lift yen values against a number of its rivals. Expected today are the highly significant reports on the country's manufacturing sector, which was seen in heavy decline since the March earthquake and tsunami. If the manufacturing sector can reveal returned growth, the yen's values could see a bump despite the return of risk appetite.
Oil - Hopes of Increased Fuel Demand Stabilizes Oil Prices
Crude Oil prices held steady near $94 a barrel Thursday as sentiment appeared to favor a pause in the downturn seen across global industry. Data releases out of Europe and the US yesterday were driving many investors back into riskier assets as most reports suggested a return of steady growth in global inflationary figures and manufacturing.
As investors sought higher yields, the value of crude oil, which was seen plummeting all of last week, rose to a weekly high near $95 a barrel. A sudden jump in EUR values due to yesterday's risk hungry environment has helped many investors ram up their long-taking positions on physical assets. If Crude Oil sentiment can hold steady this week, oil prices may continue to find support near its current price and beyond.
Momentum has now turned lower as falling stochastics appear on the monthly, weekly, and daily charts. Initial support comes in at the June low of 1.4075 and the May low of 1.3970. A break here and technical traders will target the 200-day moving average at 1.3860. While the 8 cent decline from the May high is a sharp drop, traders should keep in mind that the correction the pair is currently undergoing is just that, a correction. Buyers may be lurking at the rising trend line from the June 2010 low. Resistance comes in at the recent high of 1.4440 where the 50-day and 20-day moving averages are floating.
The pair has broken a significant technical barrier at the neckline from a head and shoulders pattern which measures a target at 1.5370. Monthly and weekly stochastics are turning lower so traders may expect further declines. Support is located at the March low at 1.5935 followed by the late January low at 1.5750. To the upside the neckline from the head and shoulders pattern at 1.6120 could offer traders a level to enter short as many times in a head and shoulders chart pattern the pair will revert back to the neckline only to head lower from there.
Yen bears are making a stand at the 80 level. A previously broken trend line from the April high comes in at this level and will also support the bears. However, once this last bastion of support is broken the fallout could be similar the price action in March. Should the move higher continue, resistance is found at 81 and 81.75.
The previous resistance at 0.8550 held and the all-time low at 0.8325 is continually being pressured so a break here may be in the works. An absence of supports or trend lines below this level makes it difficult to predict how low the pair could go.
The Wild Card
Short EUR/CHF trades are being unwound as a temporary solution for the Greek debt crisis takes shape. The pair is currently testing the trend line from its April high and may have further room to appreciate. Forex traders may look to jump back into the downtrend at one of the key resistance levels from the June 1st high of 1.2315 or at 1.2470.
|09:00||CHF||KOF Economic Barometer||89.7||90.3||-|
|09:00||EUR||Spanish Flash CPI||y/y||0.1%||0.1%||-|
|09:00||EUR||Spanish Flash GDP||q/q||0.9%||1.1%||-|
|09:55||EUR||German Unemployment Change||-1K||-5K||-|
|10:30||EUR||Italian 10-y Bond Auction||2.35|1.4||-||-|
|14:30||USD||Advance GDP Price Index||q/q||0.0%||1.5%||-|
|16:30||USD||Natural Gas Storage||61B||-||-|
|01:05||GBP||GfK Consumer Confidence||7||5||-|
|01:30||JPY||Tokyo Core CPI||y/y||0.1%||0.0%||-|
|01:30||JPY||National Core CPI||y/y||0.1%||0.0%||-|
|03:00||NZD||ANZ Business Confidence||-2.3||-||-|
|03:30||AUD||Private Sector Credit||m/m||0.5%||0.5%||-|
|08:00||EUR||German Retail Sales||m/m||0.5%||0.3%||-|