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Tuesday, 27 Apr 2010
Euro Consolidates After EU Leader Comments
Uncertainty was apparent throughout most of the trading day as market worries continue over the Greek financial position and are affecting the direction of the currencies. A lack of economic data releases may have allowed the market to consolidate prior to the news heavy trading day that awaits traders.
USD - Dollar Fails to Find Direction in Forex Trading
The markets continue to feel the squeeze from Greece's fiscal troubles. U.S. equities lost their early gains to finish at their opening levels. The dollar was stronger most of the day but gave back the gains after the New York trading session. A lack of economic data releases did not allow for a particular direction to form in the markets. Therefore, traders were forced to rely on the weekend's events following the conclusion of IMF meetings in Washington. Traders remain skeptical following Greece's request to tap the EU/IMF bailout funds package. The prevailing view in the market is despite access to the new funds, Greece may still struggle to meet their debt payment schedule.
The EUR/USD was trading higher following the closing of the New York trading session when the currency pair rallied to a high of 1.3414 after opening the day at 1.3369. The GBP/USD was unchanged at 1.5469, as was the USD/CHF at 1.0730.
Today's trading should be influenced by economic releases and speeches. The key data releases for the day will be British CBI Realized Sales at 10:00 GMT and U.S. CB Consumer Confidence at 14:00 GMT. Both Fed Chairman Ben Bernanke and ECB President Trichet are due to speak at separate events close to 14:00. The EUR/USD could fall further as market sentiment is clearly against the EUR. The next major support level for the pair rests at 1.3180.
EUR - EUR Rallies after New York Close
The 16-nation currency was higher versus the Dollar after Monday's trading following positive comments from EU officials. This helped to reduce fears over the aid package offered to Greece. German Chancellor Angela Markel said that a bailout package could be implemented before Greece's next debt payment which is scheduled for May 19. Greece will most likely be required to implement strict austerity measures as a precondition to any EU/IMF aid package. The negotiations between the Greek government, the EU, and the IMF could be dragged on until the debt payment is due. The EUR was also supported by comments by Bundesbank President Axel Weber who said that despite the Greek debt crisis, there is no risk of a collapse of the euro.
The EUR/USD was higher following the close of New York trading at 1.3414 from an opening price of 1.3369. The EUR/GBP was unchanged at 0.8664.
This past weekend's meeting of the IMF and World Bank gave the impression that the world's finance heads were unimpressed with the EU's response to the Greek crisis. Leaders would have liked to have seen a faster and larger response by the EU and the IMF. A lack of action, particularly on Germany's part was noted. It is apparent that the Greek sovereign debt crisis is far from being resolved and should continue to weigh on the EUR.
JPY - Yen Mixed in Choppy Trading
The Yen was mixed in yesterday's forex trading, trading lower against the Dollar and unchanged versus the Pound and the EUR. A lack of economic data was a primary cause for a trend-less trading environment.
The USD/JPY finished the day lower at 93.90 from an opening day price of 94.18. The GBP/JPY closed at 145.06 while the EUR/JPY was at 125.64. Both of the currency pairs closed near their opening day prices.
Traders will have to wait until the end of the trading day to get any Japanese economic data releases. At 23:50 GMT, Japanese Retail Sales numbers are due to be released. Thursday will bring the release of inflationary data and Friday the Bank of Japan will announce the Overnight Call Rate. No change is expected in the rate but the accompanying rate statement may bring heavy market volatility. The USD/JPY has a major resistance level at the price of 94.80. A break of this price could propel the pair to the 97.80 price level.
Crude Oil - Crude Oil Shows Bullish Chart Pattern
The price of spot Crude Oil declined sharply yesterday as traders were concerned that overly strong economic data may lead the Federal Reserve to raise interest rates. Economic data from the previous week was stronger than expected for new home sales and durable goods. A rise in the interest rate the Fed charges banks could cause the U.S. economy to slow, thereby reducing future demand for Crude Oil.
Spot Crude Oil prices finished the day at $84.15, from an opening price of $85.43. The price found support near the 83.90 price level.
The Federal Reserve Open Market Committee (FOMC) is due to meet on Tuesday and Wednesday. On Wednesday the FOMC will release its rate decision and accompanying rate statement. Any change to the wording in the Fed's statement could be a negative for the price of spot Crude Oil.
The price of spot Crude Oil appears to be in a consolidation pattern as of recent. A bullish flag pattern has formed on the daily chart with the top of the pattern beginning at the price high of $87. A break of this price could propel the price of spot Crude Oil towards the $94 range.
The pair's recent upward correction may have been over extended as the pair's RSI is seen floating in the overbought territory on the hourly and 4 hour charts. Going short with tight stops might be advised for today.
The pair's RSI is floating in the overbought territory on the 4 hour chart and a bearish cross is evident on the 8 hour chart's Slow Stochastic. Going short with tight stops may be advised for today.
The RSI for the pair seems to be floating in the oversold territory as evident on the hourly and 2 hour charts while a bullish cross is evident on the 4 hour and 2 hour charts' Slow Stochastic. However, a bearish cross is evident on the daily chart's slow stochastic with the 7 hour RSI floating near the overbought territory. Waiting on a clearer direction for the pair may be advised for today.
The pair seems to be range trading at the moment between 1.0700 and 1.0750, with most indicators floating in neutral territory. Waiting on a clearer direction for the pair may be advised.
The Wild Card
Dow Jones Industrials
The Relative Strength Index (RSI) on the 4-hour chart currently shows the Dow Jones in overbought territory. This typically indicates that a downward correction is imminent. The Stochastic Slow on the daily chart currently shows a cross above the upper resistance line, which lends support to the theory that a bearish trend may occur in the near future. CFD traders are advised to go short with tight stops today.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|