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Wednesday, 7 Apr 2010
EUR Falls versus USD over Renewed Greece Concerns
Disagreement over Greece's rescue package reignited concerns over the pace of recovery in the Euro-Zone, dampening demand for the common currency. The U.S Dollar reached parity with the Canadian Dollar yesterday, briefly trading below the CAD for the first time since July 2008.
USD - USD Trades Higher versus Most Counterparts
The Dollar strengthened Tuesday as new doubts surfaced about Greece's financial situation and economic recovery. Supporting the USD further were minutes from the FOMC meeting which trimmed the forecasts for economic growth and inflation while not giving any hints as to when the extended period of low rates is expected to change in the near future.
Contributing to the greenback's strength was the fact that European and British markets were closed Monday and last Friday for Easter, and Tuesday was the first opportunity of markets to react to the positive economic data released from the U.S during those days, particularly Monday's ISM Non Manufacturing PMI and Pending Home Sales.
The Canadian Dollar reached parity versus the USD Tuesday, trading higher than the greenback for the first time since July 2008 as Crude Oil Prices continue to rise on prospects of an increase in interest rates ahead of the U.S.
EUR - EUR Down on Renewed Greece Concerns
New reports concerning Greece's dissatisfaction with the standby credit plan agreed to during a European Union summit last month and the involvement of the IMF reignited negative sentiment towards the EUR. The EUR weakened to $1.3379 from $1.3399.
The British pound was also lower Tuesday, falling to $1.5239 in today's early trading, after British Prime Minister Gordon Brown set a date for the much anticipated U.K. general election. Sterling dropped against 10 of its 16 most traded currency pairs over concerns the elections will result in a parliament in which no party wins a clear majority. The U.K fiscal troubles are a major part behind the election.
Looking ahead to today, traders should follow the release of the British Services PMI at 8:30 GMT. A better than expected result might help revive the Pound.
JPY - Yen Rises on Renewed Concerns over Global Recovery
The Yen continued its rise against the EUR Tuesday as concerns over Greece's rescue package dampened demand for the common currency and boosted demand for the safety of the Japanese currency. The Yen rose to 125.36 per EUR in today's Asian trading from 125.67 yesterday; however, it stayed relatively unchanged against the Dollar at 93.70 per Dollar from 93.79 yesterday.
The Australian Dollar rose 0.8% to 92.78 U.S. cents Tuesday after the Reserve Bank of Australia hiked its key interest rate a quarter of a percentage point, to 4.25%, as expected by most economists.
The BOJ Press Conference and Overnight Call Rate are expected today. While the interest rate is expected to remain unchanged, the press conference is expected to provide direction for the JPY for the day as well as the rest of the week.
OIL - Crude Stays Higher Ahead of Inventory Release
Crude Oil futures stayed higher Tuesday ahead of today's release of U.S. energy supply data. Light, sweet crude for May delivery settled at $86.84 a barrel on the New York Mercantile Exchange.
Oil wavered most of the day Tuesday as a shaky stock market and strong Dollar weighed on Crude prices. Crude did receive a boost following the release of minutes from the FOMC meeting which signaled that monetary policy is unlikely to tighten in the near future, boosting commodities as an alternative investment.
For today, traders should follow the release of the U.S Crude Oil inventory data which are expected to show a decline in inventories. Better than or as expected results may help push Oil prices closer to the $90 a barrel level.
Euro weakness continues as the pair broke through the bearish flag continuation pattern that appeared on the daily chart. We may expect the pair to continue to fall as the 7-day Relative Strength Indicator is sloping sharply lower. The indicator has moved into the oversold level and traders may want to stay short until the indicator moves back above the 30 level.
A double bottom pattern has formed on the daily chart, signaling a potential shift in the long term trend. The first bottom formed on March 1st, the second bottom occurred on March 25th, and the resistance level rests at 1.5385. A break of this resistance line will signal a completion of the double bottom pattern and a turn to a bullish trend. The move higher could be the measurement from the resistance line to the bottom, approximately 600 pips.
The daily chart shows the uptrend may be weakening, as the MACD histogram has begun to slope downwards, signaling the momentum of the price move is fading. Traders will want to look for 2 signals before going short. Two potential signals may be a breach of the 10-day RSI below the 70 line and the second signal being the price moving below the support level of 93.75.
The pair continues to move higher and the indicators do not show any resistance on the daily chart. Traders will want to be aware of the resistance level resting at 1.0750. A breach of this price level could propel the pair higher to the next significant resistance line of 1.0820.
The Wild Card
Spot gold could see resistance to the recent uptrend that has taken place since the end of March. The price is approaching the 23.6% Fibonacci retracement level from the previous long term bullish trend on the daily chart. Forex and commodity traders may be wise to anticipate the price to fall once it arrives at this key level of $1139.