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Tuesday, 8 Jun 2010
EUR Comes off of Last Week's Lows Versus the Majors
The EUR pairs rose from Friday's lows, particularly against the US Dollar and Japanese Yen, despite the continued slide in global equities. The EUR/USD finished the day higher despite a trading day that was influenced by reduced risk taking. Global equities were lower across the board with the DAX down 0.57% and the S&P 500 lower by 1.35%. Most of the gains in the EUR/USD, however, can be contributed to profit taking from Friday's trading session.
USD - Dollar Pares Losses on Slide in US Equities
The US Dollar was weaker in yesterday's trading, which was absent of any major data releases. Therefore, traders were working off of negative market sentiment that carried over from last Friday's trading session in which U.S. Non-Farm Payrolls failed to meet market expectations, combined with fiscal fears about Hungary.
The EUR/USD finished the day higher despite a trading day that was influenced by reduced risk taking. Global equities were lower across the board with the DAX down 0.57% and the S&P 500 lower by 1.35%. Most of the gains in the EUR/USD can be contributed to profit taking from Friday's trading session, which saw the pair plummet below the significant psychological support level of 1.2000.
Major USD pairs and crosses were lower for the day, with the EUR/USD ending trading at 1.1945 from an opening day price of 1.1895. The GBP/USD was higher at 1.4485 after opening at 1.4428, while the USD/CHF was lower at 1.1620 from 1.1658.
Today will be another trading day void of any major economic data releases. As such, traders will want to move in line with the previous momentum that was seen prior to the New York close. The greenback pared its losses as the Dow Jones Industrials sold off, indicating that the bearish economic sentiment remains. Sovereign debt issues remain a concern and should be on the forefront for today's trading sessions as risk sentiment is low. The EUR/USD could continue to head lower towards the next support level at 1.1830.
EUR - EUR Comes Off Low vs. USD
The EUR rallied in the Asian and European trading sessions, coming off of a breach below the significant psychological support level of 1.2000 vs. the USD.
However, as the Dow Jones Industrial Average sold off during the closing hours of the New York trading session, the 16-nation currency gave back most of its gains and the EUR/USD finished only slightly higher on the day.
The EUR/USD reached a high of 1.1990 before falling at the close of the day's trading. The EUR/GBP was unchanged at 0.8240, while the EUR/JPY was higher at 109.62 after opening the day at 108.44.
General risk aversion did not allow the Euro to keep its gains throughout the day as major stock indices were lower. The only bright spot was better than expected German factory orders. The release surprised traders by positing a 2.8% monthly increase on expectations of a decline of 0.1%.
Going into today's trading, Euro traders should remain focused on the range of sovereign debt issues from the nations of Greece, Spain, Portugal, and, most recently, Hungary, as these will be the primary issues surrounding the strength of the EUR and overall market sentiment in Europe.
JPY - Yen Rises in Late Trading
The yen rose during yesterday's trading following a lack of risk taking in the market as global equities were lower. The USD/JPY failed to make a breach of the resistance level at 92.00 and fell back to close the day at 91.57 after opening the day at 91.16. The GBP/JPY was higher at 132.63 from 131.54, while the EUR/JPY closed higher at 109.23 after opening the day at 108.44. The weakness in the yen versus the European currencies can be attributed to profit taking by traders closing short positions in these pairs.
The potential incoming Japanese Finance Minister, Yoshihiko Noda, who would be the 9th finance minister in 4 years, may be supportive of spending cuts in order to reduce the world's largest public debt. Noda would be the youngest finance minister to take the position, and a sizable task awaits him. The government's debt has ballooned to $9.7 trillion. Noda previously served as Japan's deputy finance minister.
The resistance line at 92.00 has served to cap appreciation for the yen and reduced risk taking in the market. This price level may continue to hold this pair's upward movement in check. The next support line for the USD/JPY rests at 91.00.
Crude Oil - Slow Growth and European Fiscal Concerns Weigh on Oil
Spot crude oil prices traded slightly higher yesterday, despite weakness in global equities and poor economic indicators.
The price of spot crude oil finished the day yesterday at $71.72, up from an opening day price of $71.15. Yesterday, Saudi Arabia reaffirmed its preference to a price range for spot crude oil between the prices of $70 - $80 a barrel.
Negative sentiment has continued in trading of spot crude oil as the commodity sold off sharply on Friday following the less than expected U.S. Non-Farm Payrolls data. The downtrend continued into yesterday's Asian trading session when the commodity reached a daily low of $69.51.
We may expect further bearishness from the commodity as sluggish economic growth and European fiscal concerns weigh on the price of oil. A breach below the $69.50 support level could drag the price of spot crude oil lower to the support of $67.00.
It appears as if this pair is anticipating a bullish correction today. The 4-hour RSI is showing the pair floating in the over-sold territory, and a fresh bullish cross has just taken place on the daily chart's Stochastic (slow), suggesting an imminent upturn. Going long with tight stops may be preferable today.
This pair does not appear to be giving off any signals of sharp movement, but almost every indicator is pointing in a downward posture. However, the 4-hour MACD is just above the 0 line and could easily make a bullish cross later in the day, which would put the pair back into its previous uptrend. It appears present sentiment is down, but the overall uptrend remains dominant and it appears as if traders would be wise to jump in on this momentum.
The Pound seems to be testing a new support line after breaking out of its 2-week-long uptrend. The breach has the pair trading slightly lower than the previous trend, but the direction now seems to be identical to before. With few indications of direction it appears as if this uptrend will continue for the time being. Going long appears preferable.
Short-term indicators appear to be void of any indication for direction. However, the weekly chart appears to be giving off strong signals at the moment. The weekly RSI is deep within the over-bought territory, suggesting downward pressure, while the Stochastic (slow) just performed a bearish cross. We can also see a doji candlestick for last week which indicates that a momentum shift may be underway. If a downward breach of the current trend takes place it seems as if a short position would be the safest bet.
The Wild Card
The recent jump in the price of this commodity has given us the ability to use technical indicators to predict the likely downward correction which typically follows such movements. The 4-hour and daily RSI show this commodity deep within the over-bought territory, and the 4-hour Stochastic (slow) has recently performed a bearish cross, all of this tells our forex traders that now may be a good time to sell for a quick short-term profit, or simply hold onto your long positions because overall momentum still appears to be upward.
|23:30||USD||FOMC Member Williams Speaks||-||-||-|
|00:30||AUD||AIG Construction Index||53.8||-||-|
|01:01||GBP||BRC Shop Price Index||y/y||-1.4%||-||-|
|02:00||AUD||HIA New Home Sales||m/m||-1.8%||-||-|
|02:01||JPY||Monetary Policy Statement||-||-||-|
|08:00||EUR||German Industrial Production||m/m||0.7%||-||-|
|08:01||JPY||BoJ Press Conference||-||-||-|
|08:45||EUR||French Trade Balance||-3.3B||-||-|
|09:00||CHF||Foreign Currency Reserves||540B||-||-|
|10:30||GBP||Manufacturing Production m/m||m/m||-0.8%||-||-|
|10:31||EUR||German 10-y Bond Auction||0.69|1.2||-||-|
|16:00||GBP||NIESR GDP Estimate||0.5%||-||-|
|16:30||USD||Crude Oil Inventories||4.0M||-||-|
|19:01||USD||10-y Bond Auction||2.24|2.7||-||-|