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Wednesday, 28 Dec 2011
Euro Hovers around 11-Month Low against USD
Low liquidity in the marketplace kept the euro relatively unchanged in trading yesterday. With the currency currently hovering close to an 11-month low versus the US dollar, traders are waiting to see if ongoing the euro-zone debt crisis will bring it down any lower.
USD - Dollar Takes Light Losses in Thin Trading Day
The US dollar registered mild losses against most of its main currency rivals in trading yesterday, as the lack of significant news combined with low liquidity in the marketplace resulted in an uneventful session. That being said, rumors that the Fed may consider another round of quantitative easing next year has put pressure on the greenback. While the dollar registered losses against currencies like the yen and British pound, it managed to maintain its recent gains against the euro. Investors continue to flock to the safe-haven dollar against the euro as the euro-zone debt crisis threatens to bring the EUR further down.
Turning to today, traders can look forward to another slow market session. The lack of significant economic news will likely lead to low liquidity in the marketplace as many investors are still on holiday. That being said, traders will want to watch out for irregular price movements. The low liquidity environment means that prices may jump or fall for seemingly no reason.
EUR - Euro-zone crisis continues to bring EUR down
The euro hovered close to an 11-month low versus the dollar on Thursday, as low liquidity in the marketplace resulted in a slow trading day. The euro-zone debt crisis is largely to blame for the currency's low levels. In addition, with many investors currently on holiday until the New Year, trading has been particularly thin.
Despite the uneventful trading environment in recent day, there is still some significant euro news on the horizon. Specifically, the Italian debt auction scheduled for Thursday is likely to generate heavy market volatility. Should the Italian government struggle to sell their debt, market analysts will likely take it as a sign that the euro-zone debt crisis is worsening going into 2012.
JPY - Yen Maintains Strength in Low Liquidity Session
The yen once again proved that it was the ideal safe haven currency on Tuesday, as it registered gains against most of its main currency rivals despite a thin trading session. Rumors of another round of quantitative easing in the US next year as well as the ongoing euro-zone debt crisis helped steer customers toward the Japanese currency throughout the day.
Turning to today, a lack of significant news will likely mean that yesterday's positive trend for the yen will continue. That being said, the low liquidity environment in the marketplace means that unexpected price movement could occur at any time. Traders will want to pay particular attention to the USD/JPY and GBP/JPY pairs, as they have seen some dramatic shifts in recent days.
Crude Oil - Oil Sees Mixed Trading Tuesday
Crude oil had a decidedly mixed day yesterday, as poor European economic news combined with worries about supplies in the Middle East brought the commodity down. Still, oil was able to eventually rally above the psychologically significant $100 a barrel level. Analysts attributed the late day spike in prices to increased demand from China. Meanwhile, demand in the US for oil has increased recently as cold weather across the country has led to more energy consumption.
Today, oil appears ready to continue with its bullish trend. Traders will want to keep their eyes on the markets though as the low liquidity environment means that unexpected price movements can occur for seemingly no reason.
The weekly chart is telling. After a break of the support line from the January and October lows the pair rose back to this line where it turned into resistance at 1.3200 as often occurs with previously broken trend lines. Weekly stochastics are oversold though the monthlies may still have room to run. 1.2670 will be an important support level as the triangle pattern from the 2008 and 2010 lows on the monthly chart is found here. Below this support there is the 2008 low of 1.2520. Resistance is located back at the 20-day moving average of 1.3215, and the December 9th high of 1.3430, which coincides with the 38% Fibonacci retracement from the October high to the December low.
In a similar fashion cable has weekly stochastics which are oversold while the monthlies continue to decline. Over the course of December sterling has failed multiple times to establish a beachhead above the 1.5770 resistance. The October low of 1.5270 is the initial support though market participants will likely eye the rising trend line from 2009 which is found at 1.5110. A break of the 1.5770 resistance could spur a bout of short covering where the bears may regroup near the November 18th high of 1.5890. This level coincides with the 61% retracement of the October to December move. Only a break of the October high at 1.6165 would turn the technical sentiment from bearish to bullish.
The USD/JPY is testing the downward sloping trend line from the 2007 high which comes in this week at 78.30. A break here and the USD/JPY would most likely encounter selling pressure at the October high of 79.50 and the July high of 81.50. The 100-week moving average at 83.30 is an additional level that long-term players will be watching for confirmation of a bullish technical move. That being said the long term trend remains to the downside and the pair has support at the December low of 77.15, and the November low of 76.50, before the pair's all-time low.
A monthly close above the 20-month moving average at 0.9385 would confirm USD strength. This will put in play the 2011 yearly high of 0.9780, and the December 2010 high of 1.0065. The technical level that stands out the most is 1.1140, off of the long-term downtrend line from the 2003 high. Initial support is back at 0.9065, with the potential for a deeper move back to the pivot from October at 0.8565.
The Wild Card
The EUR/CAD has breached the significant support level at 1.3400 which has served as support multiple times this year. Forex traders should note only the February low of 1.3265 stands in the way of 1.2775 from the January low.
|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%||-||-|
|09:00||CHF||KOF Economic Barometer||90.1||-||-|
|09:00||EUR||Spanish Flash CPI||y/y||-1.1%||-||-|
|10:30||GBP||Net Lending to Individuals m/m||m/m||2.4B||-||-|
|10:30||GBP||M4 Money Supply||-0.8%||-||-|
|14:30||USD||Core PCE Price Index||m/m||0.1%||-||-|
|16:00||USD||Pending Home Sales||m/m||1.7%||-||-|