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Friday, 21 May 2010
EUR Resurfaces, but Will it Stick this Time?
The EUR has reemerged these past couple of trading days. Few analysts were anticipating such a rapid bounce-back in the value of the EUR by this time last week. Now, however, it seems as if this rise has left some feeling uneasy. Upward corrections to such a sustained downward movement are to be expected, analysts have repeatedly stated, but there is still a concern that these sharp swings represent instability, and have a number of investors worried as a result.
USD - USD Making Strong Gains against Exotic Currencies
The US Dollar has seen mixed results these past few days. Against its primary rival, the EUR, the greenback has been in a mild downward corrective pattern; falling back down to as low as 1.2645 against the 16-nation single currency. On the other hand, the USD has risen against most of the more exotic currencies by significant leaps and bounds.
Against the Australian Dollar, the buck has risen from a low of 0.9400 just two weeks ago to now trade below 0.8200. A comparative rise can be seen against the New Zealand Dollar, with an increase from 0.7320 to 0.6667. The USD/CAD likewise went from just under parity to now trade 700 pips higher at 1.0698. The flight away from riskier assets appears to be benefiting the USD significantly.
A heavy amount of market uncertainty remains at the moment. The European Monetary Union, in conjunction with the IMF and European Union, has taken steps to strengthen the Euro-Zone. However, this measure has only served to temporarily halt the EUR's recent downturn. Whether or not it can fix the larger issues remains to be seen.
Today we will be experiencing a flurry of market activity. The Euro-Zone, Switzerland, and Great Britain are all scheduled to release a vast string of data releases which should fill in many of the gaps which traders feel uncertain about at the moment. Today's data may help clarify the direction of the market for next week. Traders won't want to miss out on these movements.
EUR - EUR Experiencing Rapid Recovery
The EUR has reemerged these past couple of trading days. Few analysts were anticipating such a rapid bounce-back in the value of the EUR by this time last week. Now, however, it seems as if this rise has left some feeling uneasy. Upward corrections to such a sustained downward movement are to be expected, analysts have stated, but n the other hand, there is a concern that these sharp swings represent instability, and have a number of investors worried as a result.
The EUR made a solid rebound against some of the riskier currencies, such as the CAD, AUD, and NZD. The most significant bounce was no doubt against the US Dollar. The EUR/USD currency pair struck a low mark under 1.2200. The pair now trades over 400 pips higher with a price of 1.2633 as of this morning. The other most noticeable gain was the EUR/AUD which spiked over 1,200 pips in just 2 days and currently trades at 1.5298, up from just under 1.4000.
Europe is expected to publish its series of data releases on manufacturing and services data from across the region. This data should help fill in some of the gaps investors have been concerned about lately. Germany will also be releasing its Germany Ifo Business Climate report at 08:00 GMT. If confidence in Germany is indeed on the rise, as is forecast, we could see the EUR's rebound sustain itself into the end of this week's trading.
JPY - JPY Gaining on Risk-Aversion; Strengthening Should Continue
A clear sign that the economy is in severe flight from risk is the massive surge in the value of the Japanese Yen against every currency pair these past few days. Even against the resurgent Euro, the JPY has managed to gain over 1,500 pips by moving from 128.85 to 112.78 in just 2 weeks. The Yen has been strengthening against most currencies for some time now. The latest spike only mirrors the market's move away from riskier currencies and into safe-havens.
News from Japan will not likely have a significant impact on the value of the Yen. At this point the market is simply pushing its assets into safe-havens such as the USD and JPY and little that Japan can say or do will change this for the time being. Traders should be focusing on the news from Europe considering that the Euro-Zone has been the key player in market sentiment these past few weeks.
Crude Oil - Crude Oil Expected to Continue Falling
The price of Spot Crude Oil continues to plummet due to the momentum-gaining strength of the US Dollar. Despite the EUR's recent progress against most other currencies, the spiking value of the greenback seems to appear as if it's here to stay, for now. What this means is that commodities are beginning to reflect the loss in value that is inherent in this valuation of the USD.
The finance ministers from OPEC nations have made statements about potential future meetings to discuss production levels to combat the recent trend, but most speculators claim that the oil cartel is in a very weak position to change the price of oil at this point in time. Market forces seem to be favoring safe-haven investments like the USD and JPY, oil will continue to be on the losing side of this equation so long as the greenback is on the winning side.
The pair's recent rally seems to have been slightly overstretched as the RSI for the pair seems to be floating in the overbought territory on the hourly, 2 hour and 4 hour charts. Furthermore, a breach of the upper Bollinger Band on the 2 hour and 4 hour charts. Going short with tight stops might be advised for today.
The pair seems to be range trading at the moment, between 1.4350 and 1.4450, with most indicators floating in neutral territory. Waiting on a clearer direction for the pair may be advised for the day.
An upward correction may be expected for the pair today as the RSI for the pair seems to be floating in the oversold territory on the 2 hour and 4 hour charts. A breach of the lower Bollinger Band is evident on the daily chart. Going long for the day may be advised.
While most of the pair's indicators are floating in neutral territory at the moment, a downward correction may be in store for the pair today as the daily RSI for the pair is floating in the overbought territory and a bearish cross is evident on the daily chart's Slow Stochastic. Going short for the day may be advised.
The Wild Card
A downward correction may be seen today for the pair, following EUR's recent extensive rally. A breach of the upper Bollinger Band is evident on the daily and 8 hour charts. The RSI for the pair is floating in the overbought territory on the hourly, 2 hourly, 4 hour and 8 hour charts with a bearish cross evident on the 2 hour, 4 hour and 8 hour charts. Forex traders may be advised to go short for the day.
|01:30||AUD||AIG Construction Index||50.1||-||-|
|07:45||CHF||SECO Consumer Climate||-6||-11||-|
|08:00||EUR||German Factory Orders||m/m||-0.9%||1.6%||-|
|08:45||EUR||French Industrial Production||m/m||0.0%||0.1%||-|
|08:45||EUR||French Trade Balance||-3.4B||-3.5B||-|
|09:00||CHF||Foreign Currency Reserves||522.3B||-||-|
|10:15||EUR||Spanish 10-y Bond Auction||-||-||-|
|13:30||USD||Challenger Job Cuts||y/y||6.4%||-||-|
|16:30||USD||Natural Gas Storage||81B||-||-|