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Monday, 17 May 2010
EUR/USD Hits 4-Year Low!
Following several weeks in which the Dollar rallied vs. the Euro, the EUR/USD pair has finally breached every support level and dropped to a 4-year low. The trigger to this trend that took the pair 1,400 pips downward in no more than 1 month was of course the Greek debt crisis and its affects over the Euro-Zone. Could the Euro drop further?
USD - Dollar Closes another Bullish Week Vs. The Majors
The Dollar rallied against most of the major currencies for the fourth consecutive week. The Dollar gained about 700 pips against the Euro and about 600 pips against the Pound. The Dollar also reached an 18-month high against the Euro.
The Dollar continues to strengthen against its major counterparts as the data from the U.S. economy continues to provide recovery signals. The Retails Sales report showed that the total value of sales at the retail level rose for the seventh month in a row in April. The ongoing improvement of the retail sales indicates that the U.S. consumers feel safer regarding their financial outlook, and as a result increase their total amount of spending. Another consumption related data that was published last week was the University of Michigan Preliminary Consumer Sentiment survey. The survey also stated that the confidence among U.S. consumers has increased in May. These results prove yet again that the American economy is recovering in a faster pace than what was previously expected. It currently seems that for as long that the U.S. economy will continue to provide positive data, the Dollar's bullish trend is likely to continue.
Looking ahead to this week, many interesting economic publications are expected from the U.S. Traders are advised to follow the Building Permits and the Producer Price Index on Tuesday, the Consumer Price Index on Wednesday, and the weekly Unemployment Claims on Thursday, as these publications are expected to have the largest impact on the Dollar. If the results will continue to provide recovery signals, the Dollar is likely to rise as a result.
EUR - Euro Drops to 4-Year Low Vs. The Dollar
The Euro continued to drop against most of the major currencies during last week's trading session. The Euro dropped about 700 pips vs. the Dollar, as the EUR/USD pair marked an 18-month low. The Euro also dropped about 800 against the Yen last week.
The Euro continued to drop following concerns that the Greek debt crisis will have an impact on other nations within the Euro-Zone. In addition, the European Central Bank President Jean-Claude Trichet said on an interview that there is a need for a quantum leap in the governance of the Euro area. He added that there need to be major improvements to prevent bad behavior, to ensure effective implementation of the recommendations made by peers and ensure real and effective sanctions in the case of breaches. This speech was clearly directed towards several nations in the Euro-Zone that are in risk to ask for sovereign economic assistance. The impact of his words wasn't late to appear, and the Euro plunged deeper vs. the major currencies, especially the Dollar and the Yen.
As for the week ahead, traders are advised to continue following every news update regarding the Greek debt crisis and its affects over the Euro-Zone. This issue continues to have the largest impact on the market, and every development is likely to affect the Euro. In addition, traders are advised to follow the major economic publications from the Euro-Zone, especially from the German economy, as these might have a large impact on the market as well.
JPY - Risk-Aversion Continues To Boost the Yen
The Yen rallied against most of the major currencies during last week's trading session. The Yen gained about 800 pips vs. the Euro and about 850 pips against the Pound.
The Yen's extraordinary bullish trend against most of the major currencies continues to be a direct result to the Greek debt crisis. At the moment, despite the enormous bailout package which was offered to Greece, the market still has sincere concerns regarding the ability of the Euro-Zone to outlast the current crisis. The largest concerns are whether other nations in the Euro-Zone, such as Spain and Portugal will seek rescue packages as well. This creates high uncertainty in the market, which leads to risk aversion. When investors look for safer assets they usually tend to invest in the Yen and the Dollar, especially the Yen, which is considered to be the safest currency in the market. It seems that for as long as the Greek crisis continues to remain unsolved, the Yen is likely to strengthen further.
As for this week, traders are advised to continue to follow the developments regarding the Greek debt crisis and its affects over the Euro-Zone, as this seems to have the largest impact on the Yen at the moment. In addition, traders should follow the leading news publications from the Japanese economy, especially the Preliminary Gross Domestic Product, which is expected on Wednesday.
Crude Oil - Crude Oil Drops Below $70 a Barrel
Crude Oil's freefall proceeded during last week's trading session. By the beginning of the past week, Crude Oil was traded at $78.00 a barrel. However, as the week progressed, crude oil prices constantly dropped and eventually reached a 3-month low at $69.82 a barrel.
Crude Oil dropped below $70 a barrel on concerns that global demand for energy might weaken due to Europe's sovereign debt crisis. There are currently concrete woes that fuel consumption within the Euro-Zone will be reduced over the next few months. In addition, the constant worries regarding the affects of the Euro-Zone crisis over global economies also threatens to damage energy demand world-wide. As it seems right now, until the Euro-Zone will show signals of recovery, oil prices might slide further and further.
Looking ahead to this week, traders are advised to remain updated regarding any publication about the Euro-Zone crisis. This issue is likely to determine Crude Oil's trend for this week as well, such as every other commodities.
The sustained downward movement of this pair has pushed many technical indicators into showing impending corrections. The hourly, 4-hour and daily charts all have near-identical signals. The RSIs on each show the pair as heavily over-sold; the Stochastic (slow) on each, excluding the hourly chart, show bullish crosses. Going long to capture the upward correction may be a good tactic in the short-run, but the trend remains strongly down and traders would be unwise to ignore this.
After a steep decline, this pair is beginning to show upward corrective mobility. The RSI on the hourly, 4-hour and daily charts are all in the over-sold territory and turning upward, indicating solid upward pressure. As with the EUR/USD, this pair may see some short-term corrections, but the downtrend is about as clear as it can be.
This pair has been trading flat for a few days, but a few indicators could be giving us signals of an impending upward movement. The 4-hour RSI is floating just above the over-sold territory, hinting at minor upward pressure which could translate into an upward movement later today. Going long with tight stops appears to be today's preferable strategy.
The sustained upward movement of this pair has pushed many technical indicators into showing impending corrections. The RSIs on the hourly, 4-hour and daily show the pair as heavily over-bought; the Stochastic (slow) on each, excluding the hourly chart, show bearish crosses. Going short to capture the downward correction may be a good tactic in the short-run, but the trend remains strongly up and traders would be unwise to ignore this.
The Wild Card
The Nasdaq 100 has been experiencing a small amount of downward movement over the past few days of trading. We're now seeing a number of indicators which suggest it may see some upward movement later today. The hourly Stochastic (slow) appears to show a fresh bullish cross, highlighting a potential upward movement later in the day. The 4-hour RSI also shows this CFD floating in the over-sold territory, suggesting upward pressure. Going long may be a wise move today.
|01:30||AUD||Construction Work Done||q/q||-1.2%||-1.7%||-|
|08:00||CHF||UBS Consumption Indicator||1.41||-||-|
|08:00||EUR||German Import Prices||0.3%||-0.3%||-|
|10:30||GBP||Second Estimate GDP||q/q||0.7%||0.7%||-|
|10:30||GBP||Prelim Business Investment||3.3%||2.3%||-|
|10:30||GBP||Index of Services 3m/3m||0.8%||0.7%||-|
|12:00||GBP||CBI Realized Sales||28||31||-|
|14:30||USD||Core Durable Goods Orders||m/m||-0.1%||0.5%||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|14:30||USD||Durable Goods Orders m/m||m/m||-1.1%||-0.4%||-|
|15:55||USD||Revised UoM Consumer Sentiment||89.4||90.2||-|
|15:55||USD||Revised UoM Inflation Expectations||2.6%||-|
|16:00||USD||New Home Sales||467K||471K||-|
|16:00||USD||Pending Home Sales||m/m||0.3%||0.9%||-|
|16:30||USD||Crude Oil Inventories||2.6M||-|
|18:00||USD||Natural Gas Storage||-17B||-|