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Tuesday, 16 Mar 2010

EUR Falls on Risk Aversion; Rebound Expected?

With a sharp reduction in domestic and foreign investment in the United States, and a decline in the US stock market, the USD and JPY appear to have made more than moderate gains against most of their rivals, and the EUR may be on the short end of the market as a result. However, given today's ZEW economic sentiment reports, there is a chance that the EUR could experience a modest rebound if the figures come out in favor of the Euro-Zone's regional economy.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownnonoup
Weekly Trenddowndowndowndownupup
Resistance1.37701.512590.901.06800.92300.9175
1.37501.510590.701.06600.92100.9155
1.37201.507590.401.06300.91800.9125
Support1.36601.501589.801.05700.91200.9065
1.36301.498589.501.05400.90900.9035
1.36101.496589.301.05200.90700.9015

Economic News

USD - Dollar Up on Risk Aversion; Fed Funds Rate on Tap

The US Dollar surged versus the majority of its currency counterparts during yesterday's trading. Against the EUR, the greenback reached towards 1.3640 up from yesterday opening price of 1.3775. A significant price shift in the market yesterday was also the sudden surge in the value of the Canadian Dollar (CAD) against the buck. The USD/CAD began to reach towards parity with a current price of 1.0185.

Two important economic indicators came in at levels unforeseen by economists yesterday. The TIC Long-Term Purchases report, which is a measure of investment in the local US market, was published significantly lower than was expected. Additionally, the NAHB Housing Market Index dropped this past month, highlighting weakness in the American housing sector.

Most investors would normally expect a sudden sell-off in USD, but the opposite in fact took place. The Dollar and Yen each shot up following the above reports due to a dramatic rise in risk aversion. US stocks plummeted following the news but the greenback has gained from risk flight.

These price movements also seem to have come at the start of a volatile trading week. Today's release of the US Building Permits report could help verify whether yesterday's NAHB report was accurate and give more direction for the strength of the local economy in the US. The Federal Reserve Board will also be publishing its decision on US short-term interest rates. The latest string of data from the United States suggests that a rate hike would be premature at this point, so investors shouldn't expect much change from this event, but volatility, as always, should be anticipated.

EUR - EUR Facing Sell Pressure from Risk Flight

The EUR appears to have taken modest losses in yesterday's trading. Starting with a high near 1.3775 versus the USD, the 16-nation single currency is now trading near the 1.3690 price level. The Euro has also taken similar losses against the Swiss Franc, and currently trades at 1.4505, down from 1.4550.

With a sharp reduction in domestic and foreign investment in the United States, and a decline in the US stock market, the USD and JPY appear to have made more than moderate gains against most of their rivals, and the EUR may be on the short end of the market as a result. The sudden return of risk aversion has the Euro-Zone currency bearing the brunt of this sell-off.

Should today's releases of the ZEW Economic Sentiment reports come lower than forecasted, there is a strong chance the EUR will continue to face selling pressure, especially if the report from Germany, the Euro-Zone's largest economy, fails to meet expectations. In other news, however, the US Federal Reserve Board is due to release their decision on short-term interest rates and although no major changes are expected, there is typically a lot of pressure built into the opening of the American market prior to this event.

JPY - Yen Sees Modest Gains; BOJ Concerned over European Spill-Over

The Yen appears to be on the winning side of a recent return of risk aversion in the forex market. US stocks dropped after less-than-stellar investment data was published in the US. However, the JPY did gain from a positive manufacturing report from New York. The USD/JPY currently trades at a 2-week low of 90.02, from yesterday's opening price near 90.55.

No matter how much strength the Yen gained in recent trading, the truth remains that the JPY continues to trade within steady ranges against its primary crosses. The mixed movements of the EUR and CHF have resulted in somewhat volatile conditions for the Yen, but it seems to be to the advantage of Japan in both cases. The only concern the Bank of Japan (BOJ) seems to be carrying is regarding the status of Europe considering their recent debt woes. BOJ governors are rightfully concerned about spillover into East Asia, but no real effect has been priced in yet.

Crude Oil - Crude Falls on USD Surge and Market Uncertainty

The price of Crude Oil has begun to waver in light of economic uncertainty. The TIC Long-Term Purchases report published from the US yesterday helped shake business sentiment, and stocks are trading lower as a result. The surging US Dollar has helped to put a damper on oil prices, but few economists see prices dropping further. Demand concerns appear to have risen out of yesterday's economic data.

On the upside, Crude Oil has failed to breach out of its range-trading pattern and many analysts are expecting a rebound in today's trading. The Federal Reserve Board is due to release their decision on short-term interest rates, and other monetary policies, later today. In light of recent data, rates will not likely be raised, but a hawkish statement could help to return some of the risk which was pulled out of the market yesterday. Such a result would pull the USD back down and help spot Crude Oil prices rebound.

Technical News

EUR/USD

While most of the pair's indicators are floating in neutral territory, the hourly chart's Slow Stochastic is exhibiting a fresh bearish cross while the RSI is floating in the overbought territory. Going short with tight stops might be advised for today.

GBP/USD

An upward correction may take place for the pair today as the 2 hour chart RSI is floating in the oversold territory and a bullish cross is evident on the 4 hour chart's Slow Stochastic. Going long for the day may be a good option.

USD/JPY

The hourly and 2 hour charts' RSI are floating in the oversold territory while a bullish cross is evident on the 2 hour and 4 hour charts' Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the 2 hour and 4 hour charts. Going long for the day may be advised.

USD/CHF

The pair may see an upward correction today as a bullish cross is evident on the hourly and daily charts' Slow Stochastic, while the hourly and 8 hour charts' RSI is floating in the oversold territory indicating an imminent upward movement. Going long for the day may be a good option.

The Wild Card

GBP/NZD

The pair's hourly and 2 hour chart's RSI is floating in the oversold territory with a bullish cross evident on the hourly, 2 hour and 4 hour charts' Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the hourly chart. Forex traders are advised to go long for the day

Current Time: 04/16 10:10 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/16
10:00CHF+ ZEW Economic Expectations19.0*7.03
10:00EUR+ CPI y/y0.5%0.5%0.5%3
10:00EUR+ Core CPI y/y1.0%0.8%0.7%3
10:34EUR+ German 10-y Bond Auction1.58|1.6*1.49|1.33
13:00USD+ FOMC Member Stein Speaks***3
13:30CAD+ Foreign Securities Purchases1.09B4.57B-3
13:30USD+ Building Permits1.01M1.00M-5
13:30USD+ Housing Starts0.91M0.97M-3
14:15USD+ Capacity Utilization Rate78.4%78.8%-3
14:15USD+ Industrial Production m/m0.6%0.5%-3
15:00CAD+ BoC Monetary Policy Report***5
15:00CAD+ BoC Rate Statement***5
15:00CAD+ Overnight Rate1.00%1.00%-5
15:30USD+ Crude Oil Inventories4.0M--3
16:15CAD+ BOC Press Conference***5
17:15USD+ Fed Chair Yellen Speaks***5
18:25USD+ FOMC Member Fisher Speaks***3
19:00USD+ Beige Book***3
04/17
01:30JPY+ BOJ Gov Kuroda Speaks***5
02:30AUD+ NAB Quarterly Business Confidence8*-3
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