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Tuesday, 9 Feb 2010
Euro-Zone Debt Concerns Weigh Heavily on EUR
Traders are expecting a slow news day, and as such may experience thin trading conditions and low liquidity. The few reports expected shouldn't cause too much of a stir, but with thin trading it may result in some decent price action. The EUR's uptick on Monday has many concerned that the 16-nation currency is now due for a downward correction, especially given the rapidly declining sentiment in the Euro-Zone caused by decisions made in Greece and Portugal concerning national debt and government spending, respectively.
USD - USD Leveling-Out against Majors
The US Dollar has steadily risen over the past few days, with other regions experiencing continual weakness from economic woes. Yesterday's price movements gave little indication of direction for the greenback, however, as the price seemed to enter a consolidation trend against the majority of its primary currency rivals.
Against the EUR, the Dollar gained only moderately from 1.3677 to 1.3620, and similar results against the Pound, finishing the day near 1.5600. As of this morning, on the other hand, the USD appears to be in a mild decline as part of the consolidation taking place since last Friday. Analysts are beginning to anticipate a dramatic price movement sometime early this week.
Today's news events may not create the spark necessary to push the USD out of its currently flat trend. The Investor's Business Daily's TechnoMetrica Institute of Policy and Politics (IBD/TIPP) is publishing its monthly Economic Optimism report. While not traditionally carrying a heavy impact, it is the most significant release coming out of the United States today and could therefore have a greater impact. Should today's news be USD positive, the consolidation of the Dollar against its primary rivals could come to an end and the bullish movement of the greenback may likely continue.
EUR - EUR Bearish Despite Recent Uptick
The EUR seems to have sustained its bearish momentum despite yesterday's brief upward tick. With a stellar performance against the Australian and Canadian Dollars, the EUR actually finished Monday at the 1.5795 and 1.4680 price levels, respectively. Economists remain weary, however, given economic worries surrounding member nations of the European Monetary Union (EMU).
The reason many analysts claim that downward pressure still exists on the 16-nation European currency is because Greece's plan to tighten its spending has created some concern that the current plan doesn't do enough. Moreover, Portugal announced that it would increase its government's spending options, which has a number of market participants unnerved. A report out of Europe yesterday also showed the Sentix Investor Confidence report dropping much further than was anticipated, highlighting an upcoming downturn in the Euro-Zone.
Yesterday's upward movement of the EUR shouldn't be taken as a serious indicator of continued bullishness. With the US Dollar consolidating against most of its pairs, there exists a likelihood that the USD will break-out soon and the EUR will correct back downwards against the majority of its pairs. Many investors out there are beginning to short the 16-nation currency and forex traders would be wise to take note.
JPY - Yen Price Action Restrained by Conflicting Publications
The Japanese Yen's price action yesterday was among the flattest in the market. With little price movement against any currency pair, the JPY has apparently entered a narrow trading tunnel of no more than 50 pips between the highs and lows versus most currency rivals. The yen fluctuates near the 89.30 price mark against the USD, and sits steadily at 139.30 opposite the British Pound.
The likely culprit in this constricted movement are the contradictory reports of growing market sentiment and declines in money supplies published in reports on Sunday and Monday. With little news coming from the island economy today, and with a deficit in impacting news events from other regions, there is little reason to believe that the JPY will exit this tight trading range today. Traders can take advantage of these small fluctuations by entering short-term trades within the current range.
Crude Oil - Crude Oil Expected to Hit $76 a Barrel
The price of spot Crude Oil has apparently begun to mirror the consolidation movement of the US Dollar since Friday. The price of this commodity has begun to sit steadily near $71.50 and a number of analysts are calling for an upward price target near $76 in the short-run with longer-term expectations below $70 a barrel.
Crude Oil's recent price movement has been less predictable than many were forecasting coming into 2010. However, as the greenback's strength returns from increased market optimism and a halt to the rise in unemployment, there is a chance that crude oil's price will more accurately reflect what is happening in the market in general as opposed to the contradictory movements we've seen lately. If the US Dollar does indeed break out of its consolidation trend, then it is very probable that Oil's price will inversely reflect the movement of the greenback.
The pair seems to be exhibiting some mixed signals. The hourly chart's Slow Stochastic exhibits a fresh bearish cross; however, the daily chart's Slow Stochastic is exhibiting a bullish cross while the RSI is floating in the oversold territory. Going long with tight stops may be a good choice for today.
The pair's recent downward trend may be seeing a correction later today as the 8 hour and daily chart's RSI are floating in the oversold territory and a bearish cross is evident on the daily chart's Slow Stochastic, indicating an imminent upward correction. Going long for the day may be advised.
The pair seems to be range trading at the moment, staying between 89.10 and 89.60, with most indicators floating in neutral territory. Waiting on a clearer direction for the pair may be advised for today.
The 8 hour and daily charts' RSI are floating in the overbought territory while the daily chart's Slow Stochastic is exhibiting a bearish cross. Going short for the day may be advised.
The Wild Card
The daily chart's Slow Stochastic is exhibiting a bearish cross while the 8 hour and daily RSI are floating in the overbought territory indicating an imminent downward trend. Forex traders are advised to go short for the day.
|22:30||AUD||AIG Construction Index||54.4||*||-|
|07:45||EUR||French Gov Budget Balance||-80.8B||-||-|
|07:45||EUR||French Trade Balance||-5.8B||-5.1B||-|
|08:00||CHF||Foreign Currency Reserves||434.7B||*||-|
|09:30||GBP||Consumer Inflation Expectations||3.2%||-||-|
|11:00||EUR||German Factory Orders||m/m||3.3%||-0.4%||-|
|13:30||USD||Non-Farm Employment Change||204K||180K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.1%||0.2%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|14:55||USD||Prelim UoM Consumer Sentiment||75.1||76.2||-|
|14:55||USD||Prelim UoM Inflation Expectations||2.9%||-||-|
|20:00||USD||FOMC Member Evans Speaks||*||*||*|