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Tuesday, 7 Dec 2010
EUR Being Sold ahead of ECOFIN Meeting
The main concern in Europe lately has been the possible spread of the debt contagion which was meant to be contained by the financial bailout of Ireland. These debt concerns appear to have not yet subsided and investors have begun once more to take profit on their EUR positions, driving the currency lower in the short-term.
USD - Bernanke Statements Lift USD in Short-Term
Statements from Federal Reserve Chairman Ben Bernanke yesterday helped fuel a rebound in the US dollar against many of its primary currency rivals. The EUR/USD, after climbing Friday, has pared much of those gains to currently trade just under 1.3300, a 1% daily decline. The GBP/USD likewise experienced a minor paring, with a current price near 1.5720.
Bernanke expressed the sentiment that the US economy was not likely to fall back into recession any time soon and that the Fed may consider expanding its asset purchasing facility. Traders found reason to buy into the greenback Monday following the less-dovish sentiment than was expected.
Going into today's busy trading day, investors should be on the lookout for a number of reports from Europe, Australia and Canada. Britain is publishing its manufacturing production report at 9:30 GMT while Canada and Australia will be releasing their latest interest rate decisions today. The US appears largely absent from the economic calendar with only a few reports on consumer credit and economic optimism. The USD looks poised to continue its latest bullish movement.
EUR - Traders Ditching EUR as ECOFIN Meeting Begins
Finance ministers from across the European Union (EU) are scheduled to gather for a meeting of the Economic and Financial Affairs Council (ECOFIN). The meeting will convene to discuss euro zone monetary support mechanisms and the financial status and structure of all member states. While officially closed to the press, the ministers tend to release information throughout the day.
The main concern in Europe lately has been the possible spread of the debt contagion which was meant to be contained by the financial bailout of Ireland. These debt concerns appear to have not yet subsided and investors have begun once more to take profit on their EUR positions, driving the currency lower.
The EUR/USD fell approximately 1% today, with a current price of 1.3296 while the EUR/JPY decreased a staggering 113 pips to currently trade at 109.63 from an opening price of 110.76
The euro zone has a few reports scheduled for today but most of the attention will be on the ECOFIN meeting and a manufacturing production report from Britain at 9:30 GMT. Depending on the statements being released from the meeting of finance ministers, it may be difficult to gauge the direction of the EUR and traders should be aware of the heightened volatility in today's market.
JPY - JPY Gaining while Nikkei 225 Enters Mild Decline
The Japanese yen has been climbing the last few trading days. The USD/JPY fell from a recent high of 84.39 last week to a 1-month low of 82.46, despite the recent gains experienced by the US dollar against its other rivals. The EUR/JPY has undergone similar price movements, with the pair dropping over 110 pips yesterday and currently trading at a price of 109.63.
Japanese stocks have also experienced a dip in price recently as investors anticipate a resurgent yen. It appears their sentiment could be correct. Fed Chairman Bernanke made statements yesterday about possibly expanding the asset purchasing program known as QE2 while Europe continues to also face a threatening debt contagion.
The safe haven investments which remain are the Japanese yen and precious metals, like Gold and Silver, all of which have been rising for some time now. The JPY looks to continue a rising trend this week and the Nikkei 225 may be looking to enter a bearish transition over the coming days as traders shift their equities.
Crude Oil - Crude Oil Breaks Past $89.50, but Meets Resistance from Rising USD
After spiking towards $89.60 a barrel, the price of Crude Oil appears to have settled over the last day and a half. The price of black gold has entered a mild decline on USD gains and currently trades just under $89 a barrel.
As expected, the winter heating oil season in the northern hemisphere has driven oil prices higher, appearing to have broken out of the $80-88 price range. However, with the US dollar on the rise, commodity gains may become muted as the week wears on.
With little news expected out of the euro zone and the United States today, traders should focus their attention on the movements of the EUR and CAD in response to the ECOFIN meeting in Europe and interest rate announcement in Canada. These events will have the strongest impact on USD values and thus the most effect on oil prices, albeit indirectly.
This pair appears to be showing mixed signals as the daily Stochastic (slow) reveals an impending bearish cross while the weekly Stochastic (slow) looks to be forming an imminent bullish cross. Traders may want to wait for clearer signals before entering positions on this pair.
The price of the GBP/USD looks to have reached the upper border of its bearish channel on the daily chart and has entered an expected corrective movement. Downward targets look to be near 1.5600 over the next few trading days. Going short appears preferable.
Technical indicators on this pair appear to have shifted into a long-term bearish pattern, suggesting that the pair's recent uptick was a cyclical part of a longer downward pattern. The weekly Stochastic (slow) supports this notion with a recent bearish cross. Going short with tight stops may turn out to be a wise decision in this week's trading.
This pair looks to have stalled near the 0.9800 price level and the technical indicators on the daily and weekly charts seem to indicate neutrality. The daily Stochastic (slow) does, however, reveal what looks to be an impending bullish cross, but more time will be needed before it becomes definitive. Waiting for a clearer signal may be wise today.
The Wild Card
The price of this commodity appears to have recently turned bearish as it exited the over-bought region on the daily RSI. However, a fresh bearish cross looks to have recently formed on the daily Stochastic (slow) which suggests this commodity has much more room for downward movement. Such signals allow forex traders a great opportunity to catch this short-term corrective movement for fast profits today.