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Monday, 24 Oct 2011
EUR/USD Meets Technical Resistance at 1.3900
The EUR/USD rose last week following the completion of a long-term consolidation trend, reaching a 4-day high of 1.3900. This morning, however, the pair bounced off the resistance level and is now trading near 1.3865.
USD - US Dollar Jumps Higher at Monday Opening
The US dollar (USD) was seen trading moderately bullish Monday morning as traders saw a small increase in risk aversion following last week's economic reports. The EUR/USD rose last week following the completion of a long-term consolidation trend, reaching a 4-day high of 1.3900. This morning, however, the pair bounced off the resistance level and is now trading near 1.3865.
Inflation and housing reports from the US and Canada last week portrayed a Western Hemispheric economy somewhat stronger than what many had expected. The mixed results from American housing last week revealed a mildly stagnant market, but inflation appeared to rise as businesses across the United States and Canada begin seasonal hiring for the holidays. Such reports are likely to drive risk aversion into odd swings as the holidays draw near.
With a moderate news day ahead, traders appear anxious for the week's data which seems to be centered mostly on manufacturing reports. Today's publications are limited to the euro zone, however, with several figures on manufacturing due this morning. Liquidity will likely be held in moderation making the market unlikely to experience any major swings.
EUR - EUR Trading Lower as Traders Flee Risk
The euro (EUR) was seen trading with largely bearish results this morning following last week's mildly optimistic assessments from North American inflation and housing reports. Against the US dollar (USD) the euro was trading near a 4-day low, with few signs of halting the bearishness which appears to come on the coattails of a long-term consolidation pattern. Against the Great British pound (GBP), the EUR witnessed a similar, albeit weaker, loss in strength.
Traders appear to be clinging less and less to the 17-nation common currency with lower yielding investments in mind. With inflation rising and employment increasing in the North American continent, it seems likely that more traders will opt for higher yields heading into the 2011 holiday season, but this morning's downtick was a likely a reverberation of insecurity when the EUR/USD touched the 1.39 resistance line.
Economic sentiment across the euro zone remains negative overall, with many analysts and economists expecting moves towards safety by traders early this week. With a moderate news day ahead, many traders are awaiting more data releases later in the week before buying up further EUR. With today's low liquidity, not much movement is expected, though European manufacturing statements could roil markets at any time during the European market sessions.
JPY - Japanese Yen Expecting Little Movement
The Japanese yen (JPY) was seen trading significantly higher versus most currencies this morning as its value as an international safe haven begins to get challenged by the prevailing economic conditions. 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 latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan's (BOJ) latest rate statement. 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. The persistence of the yen's rising strength is causing some furrowed brows in Japan's economic circles, and this may be a cause of its mixed trading behavior.
Silver - Silver Price Trading in Consolidation Pattern
The price of Silver found modest support over the weekend amid the surging strength of the US dollar, the currency in which such assets are valued. Silver has been trading with wilder price action since early August, but traders have been awaiting a price correction from the rampant increase in risk aversion due to rising tensions from the euro zone's periphery and a sudden lift off in dollar values.
As investors seek safety, the value of Silver, which has been seen trading with mixed results since two weeks ago, is expected to rise following its current flat, consolidation channel, bouncing off a recent low near $30.00 an ounce after a selloff in commodity futures pulled down on precious metals two weeks ago. A sudden rise in dollar values due to this week's uncertain environment is expected to assist the sentiment favoring Silver, however. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value, favoring an upside as Silver holds within its current consolidation pattern.
The EUR/USD has moved above its consolidation pattern from the previous week and has a technical retracement towards 1.4040, the 50% Fibonacci retracement off of the move stemming from the 1.4940 high in May to the October low of 1.3145. Both daily and weekly stochastics are moving higher and as such further resistance is located near 1.4100 where the 100 and 200-day moving averages rest. To the downside support is seen at last week's low of 1.3650.
Cable has jumped out to new 6-week high to its 50% Fibonacci retracement at 1.6010 from the move lower covering the April high to the October low. A break of this retracement level would put in play the 1.6110 resistance from the August low followed by the 61% retracement level at 1.6180. 1.5850 can be eyed as the first significant support line followed by 1.5630.
Last Friday the sleepy USD/JPY awakened from its slumber and quickly set a new all-time low of 75.78, triggering a plethora of stops before moving back above the 76 yen mark. While the range trading environment may continue, a quick move below the 75 yen level could invite an additional round of intervention from the Ministry of Finance which would likely take out the initial resistance levels at 77.85. The post intervention high of 80.25 may find willing sellers of the pair at more attractive levels.
The one way price move in the USD/CHF has ended with the pair forming what looks to be a falling wedge pattern. The chart pattern typically brings about a breakout to the upside but forex traders should follow the price action. The consolidation pattern has resistance at 0.9025, a level that coincides with the rising trend line from the August low which was broken last week. Additional resistance is located at 0.9340-0.9315. Support is found at 0.8640 and 0.8550.
The Wild Card
Momentum is rising as the AUD/USD has punched through its initial resistance at 1.0385, a level that has additional significance as the 200-day moving average is also found here. The pair's next test will come at 1.0440 at the 100-day moving average with a key resistance located off of the September high of 1.0765. Forex traders should note that support is found at 1.0115
|00:00||EUR||German 10-y Bond Auction||-||0.87/1.2||-|
|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||-|