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Monday, 24 May 2010
Euro Drops as the Trading Week Begins
During the past week, the Euro managed to recover against most of the major currencies. However as this week began, concerns over an economic growth due to the Euro-Zone's debt crisis have weakened the Euro. Will the Euro face yet another bearish trend this week?
USD - Dollar's Bullishness Is Halted Following Disappointing Economic Data
The Dollar dropped against most of its major counterparts during last week's trading session. Following several weeks in which the Dollar strengthened against most of the major currencies, the greenback saw mild corrections vs. the Euro and the Yen.
The Dollar dropped a bit during last week's trading due to several disappointing economic publications. The Building Permits report showed that 0.61M building permits were issued during April, failing to reach expectations for 0.68M. In addition, the U.S. Producer Price Index dropped by 0.1% in April, as opposed to March. Similarly, the Consumer Price Index dropped by 0.1% in April as well, failing to reach expectations for a 0.2% rise. The negative data have created an opportunity for traders to close long positions on the Dollar, and as a result to slightly weaken the Dollar against the major currencies.
Looking ahead to this week, many interesting economic publications are expected from the U.S. economy. Today, the Existing Home Sales report is expected on 14:00 GMT. This report measures the number of buildings that were sold during April. If the end result will reach expectations for 5.62M, the Dollar could strengthen as a result. Traders are also advised to follow the Consumer Confidence, the Durable Goods Orders, the New Home Sales, the Preliminary GDP and the weekly Unemployment Claims. All these publications have potential to impact the Dollar's trading this week.
EUR - Has The Euro's Recovery Reached Its End?
The Euro saw a bullish trend against most of the major currencies during last week's trading session. The Euro rose from a 4-year low against the Dollar, and the EUR/USD pair is currently trading around the $1.2500 level. The Euro also strengthened against the Pound.
The Euro's recovery seems to be a market correction to the extreme devaluation of the Euro over the past several weeks. What began with the Greek debt crisis, continued with an overall Euro-Zone debt crisis, and eventually took the Euro to a 4-year low against the Dollar. It seems that the lack of extremely negative data from the Euro-Zone has provided the market the ability to correct the sharp freefall of the Euro. Yet as this week's trading begins, the Euro weakened against most of the major currencies. The Euro weakened after the European finance ministers pledged to stiffen sanctions in high-deficit countries. The concerns regarding a long-tem damage to the Euro-Zone's leading economies due to the high deficits of several European countries continues to weigh on the Euro, and has potential to weaken it further.
As for this week, traders are advised to first and for most remain updated on every publication regarding the Euro-Zone debt crisis. Special attention should be given to news regarding the Spanish economy, as it is considered to be the most fragile economy in the Euro-Zone at the moment. It now seems that until a series of reassuring economic data will be received from the Euro-Zone, the Euro has potential to drop once again.
JPY - Yen Rises on All Fronts As Risk Aversion Continues
The Yen rallied against all the major currencies during last week's trading. The Yen gained about 300 pips against the Dollar, and the USD/JPY pair dropped to the 89.00 level. The Yen rose against the Euro and the Pound as well.
The trigger to the bullish Yen continues to be the concerns from yet another global economic crisis due to the Euro-Zone fragile condition. The ongoing publications regarding the debt crisis in several European nations is threatening to have impacts on the global economy. As a result, investors are looking for relatively safe assets, and the Yen is considered to be the safe-haven investment. It currently seems that until the concerns regarding the potential impacts of the Euro-Zone's debt crisis will be refuted, the Yen is likely to strengthen further.
As for the week ahead, traders are advised to follow the updates regarding the European debt crisis, as this seems to have a very large impact on the Yen. Traders should also follow the leading publications from the Japanese economy, especially the Trade Balance on Wednesday and the Tokyo Core CPI.
Crude Oil - Crude Oil Stabilizes Around $70 a Barrel
Crude Oil saw a relatively peaceful trading during last week's session. Crude Oil was traded around $70.00 a barrel during most of the week, and as the new trading week begins, Crude is still trading at $70.
Crude Oil's freefall was halted during last week's trading. This was mainly due to the recovery of the Euro and the weakness of the Dollar. For the past few weeks the strengthening of the Dollar had a harsh impact on Crude Oil, and prices dropped over 1,500 pips in three weeks. Currently it seems that concerns over the European debt crisis may slow recovery, and as a result weaken demand for energy. In such a scenario, Crude Oil has potential to drop below $70 a barrel.
As for the week ahead, traders are advised to follow the updates regarding the Euro-Zone debt crisis, as these have an immediate impact on crude oil trading. Traders are also advised to follow the U.S. Crude Oil Inventories publications on Wednesday.
Most technical indicators show the pair trading in neutral territory at the moment. That being said, a day of low volatility is expected, which may lead to erratic price movements. Traders may want to take a wait and see approach for this pair today.
A bearish cross is evident on the 4 hour and 8 hour charts' Slow Stochastic, indicating an impending downward correction may take place. Traders may be advised to go short for the day.
The pair seems to be range trading at the moment, between 89.80 and 90.35, with most indicators floating in neutral territory. The 8 hour RSI, however, is floating in the oversold territory indicating a possible upward movement. Going long with tight stops may be advised for the day.
The RSI for the pair is floating in the overbought territory on the hourly, 8 hour and daily charts. Furthermore a bearish cross is evident on the hourly, 2 hours and daily charts' Slow Stochastic. Going short for today may be advised.
The Wild Card
The Relative Strength Index on the 8-hour chart indicates the commodity is trading well in oversold territory, indicating that an upward correction may occur later today. This theory is supported by the Bollinger Bands on the daily chart. With platinum trading at or below the lower band, CFD traders can anticipate a price jump today. Going long with tight stops may be the preferred option.
|18:00||USD||FOMC Member Dudley Speaks||*||*||*|
|01:00||JPY||Monetary Policy Statement||*||*||*|
|01:00||JPY||BoJ Press Conference||*||*||*|
|01:00||EUR||German 10-y Bond Auction||1.28|1.6||-||-|
|EUR||EU Economic Summit||*||*||*|
|01:30||AUD||Westpac Consumer Sentiment||-5.1%||-||-|
|09:30||GBP||MPC Meeting Minutes||0-0-9||0-0-9||-|
|09:30||GBP||Public Sector Net Borrowing||16.7B||7.6B||-|
|11:00||CHF||SNB Chairman Jordan Speaks||*||*||*|
|11:00||GBP||CBI Industrial Order Expectations||-25||-17||-|
|13:30||CAD||NZD Core Retail Sales||m/m||0.7%||0.2%||-|
|15:00||USD||Existing Home Sales||4.92M||4.99M||-|
|15:00||USD||Fed Chairman Bernanke Testifies||*||*||*|
|15:30||USD||Crude Oil Inventories||-0.6M||-||-|