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Monday, 20 Jun 2011
EUR Hangs On as Traders Await News of Greece Bailout
The EUR was able to hold its recent price against the US dollar as regional investors battled over the direction of the 17-nation common currency. The push and pull between bears and bulls was mostly even this morning as the rumor mill chewed on the speculative reports that Greece had already secured a new financial aid package. With today's ECOFIN meetings getting started, news surrounding Greece's bailout should surface in the near future leading to major swings in currency values this week.
USD - US Dollar Opens Week Bearish vs. Euro
The US dollar opened this week moderately weaker versus the euro as traders appear to have continued nursing wounds from last week's dizzying sessions. The result has been for the EUR/USD to come within reach of 1.4300 as of this morning. Against the pound, the greenback held close to 1.6150 after a short upward move during the early Asian session, though bullishness in Britain has generated pressure beneath the Cable in anticipation of an uptick.
Last week's market data was enough to bring the EUR crashing down against a number of its currency rivals with the USD gaining the most from the turmoil. American economic data was only slightly better, however, as most analysts considered US fundamentals soft considering the shift. Inflationary data out of the United States last week was bullish; whether it is enough to force an adjustment in interest rates is another matter. The Fed has made it rather apparent that interest rates will remain where they are for the time being.
As for today, forex traders appear to be anticipating a thin trading day with only minor news coming out of Europe, Great Britain and Japan. The United States will be absent from today's calendar, but the euro zone will be starting another session of the Economic and Financial Affairs Council (ECOFIN) in Brussels. Greek debt concerns appear to be on the top of the agenda and many investors are speculating that another round of financing is on the way which could help the EUR push back strongly against the USD.
EUR - EUR Holds Ground as Traders Eye Greece Bailout News
The euro held steady versus the US dollar this morning, with a price of 1.4250 acting as support. Speculation about a possible round of financing for Greece is coming into view as favorable, but the rapidity of a response being formed to handle regional debt woes have pulled the euro sharply lower since early last week. The EUR has held modestly steady versus many other currencies, but its primary counterpart was seen gouging the common currency heavily towards last week's closing.
The EUR was able to hold its recent price against the US dollar as regional investors battled over the direction of the 17-nation common currency. The push and pull between bears and bulls was mostly even as the rumor mill chewed on the speculative reports that Greece had already secured a new financial aid package. With today's ECOFIN meetings getting started, news surrounding Greece's bailout should surface in the near future.
As for today, the euro zone will be publishing its Current Account with expectations for a widening of its regional deficit. Germany will also be publishing its PPI data with forecasters expecting very weak growth of about 0.2%. If inflationary pressures fall short of what's expected, the ECB may end up failing on its promise to deliver a rate adjustment in the months ahead. The chance for a bearish euro could also grow if Greece's financial aid isn't delivered soon. Traders appear anxious ahead of this week's market news as a result.
JPY - JPY Bullish as Trade Deficit Grows Less than Forecast
The Japanese yen (JPY) has been trading with somewhat mixed results since early last week, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to make gains today as investors seek safety from recent turmoil and as the Bank of Japan (BOJ) published a report this morning which could help the island economy make gains. The dominant stance of risk aversion overarching last week's trading environment has many traders moving towards the yen against the higher yielding currencies like the euro and British pound.
The USD/JPY was seen trading somewhat lower this morning, finding resistance near 80.60 on Friday and moving down towards the intervention level of 80.00 at today's opening Asian sessions. Japan's trade balance report was published this morning and revealed a modest uptick which may help the island currency in today's market hours. Market news released out of Europe today will likely be the driving force behind JPY values, though, and traders would be wise to watch the comments emerging from the latest round of ECOFIN meetings to determine whether risk aversion will again gain predominance in this week's market.
Oil - Crude Oil Prices Bearing Weight of USD Uptick
Oil prices fell hard this morning with $92 a barrel coming easily into view. US oil stockpiles dropped over 3 million barrels last week which appears to have failed to support the price of the black gold. Speculative reports of unilateral action by Saudi Arabia to boost production have many investors going short on physical assets. Diminishing demand by the manufacturing and industrial sectors of multiple economies may also be adding to the weight oil prices are bearing this week.
With today's steady downwards movement, traders appear likely to see oil reaching a support line early this week. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or whether they decide to pull away from the black gold out of a perceived global oversupply, is a point traders will bear witness to this week. Such sharp downward price action, however, is typically met with staunch resistance as the new price gets tested. We should see news from today's ECOFIN meetings generating tension among risk sensitive traders which may cause large swings in and out of commodities.
Last week's failure of the pair to close below the 100-day moving average should not dismay euro shorts. The late in the week rally failed to move above the 20-day moving average which may induce some traders to sell into any euro gains. Both monthly and weekly stochastics have turned lower and point to potential declines. Support is found at 1.4075 followed by the May low at 1.3970. The 200-day moving average may be a likely target and below that the rising trend line from the May 2010 low comes in this week at 1.3610. Resistance is found at Friday's high of 1.4340 followed by 1.4500 and the early June high of 1.4690.
Cable is on the verge of breaking the neckline of a head and shoulders top which comes in today at 1.6120. A breach at this level and a measured move from the chart pattern could take the GBP/USD lower to 1.5370. The likeliest target on the charts is the December low at 1.5350. On the way lower cable could encounter support at the May low of 1.6050 and the March low at 1.5940. To the upside the pair may see resistance at last week's high at 1.6440 as well as 1.6550 off of the May high.
The pair failed to establish a beachhead above the 81 yen level and proceeded to fall. This level will serve as initial resistance followed by the May 31st high at 81.75 followed by 82.20 and 82.57. Falling daily stochastics hint at further declines. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.
The USD/CHF rose to the May support which has turned into a resistance level at 0.8550, a phenomenon which often occurs in technical analysis. A break higher would run into the 50-day moving average which coincides with the falling trend line off of the February high at 0.8640. This may offer traders a good level to enter short into the long term downtrend. Additional resistance is located at the mid-May low at 0.8750 and the May high of 0.8950. To the downside the all-time low could be supportive at 0.8325.
The Wild Card
Spot crude oil prices have broken out to the downside from a triangle consolidation pattern and are currently testing the rising trend line from the August low which comes in today at $92.80. Forex traders should note this level carries additional significance as it coincides with the support off of the January highs. A solid close below this level would shift momentum to the downside with the next significant support located at the mid-February low at $83.75.
|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||-||-|