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Monday, 13 Sep 2010
Euro Maintains Bullish Trend as We Start the Week
Following solid economic news out of China released last Friday, the euro, as well as other so-called riskier currencies, has maintained an upward trend going into this week. That being said, analysts are warning that these gains may only be temporary. Overall economic sentiment regarding the euro zone is still fairly pessimistic. The slightest bit of bad news could cause investors to revert back to the safe haven US dollar and yen, which would lead to a drop for euro pairs.
USD - USD Starts Busy Week Down vs. Majors
Despite the significant gains the US dollar made in the first half of last week, a sudden switch to risk-taking among investors eventually caused the currency to slide back into a bearish trajectory. As we start off the week, the greenback continues to lose ground. The EUR/USD pair has gone up over 100 pips since markets opened, and is currently trading around the 1.2790 level. The USD/CAD dropped over 50 pips in overnight trading, reaching as low as 1.0311 before making a slight recovery. Currently the pair stands at around the 1.0325 level.
Today, USD crosses will likely fluctuate based on what ECB President Jean-Claude Trichet says in his speech. Pessimism in the euro zone economies is still relatively high. Should the ECB's president reflect this sentiment in his speech, the dollar is likely to make steady gains as investors return to safer assets like the greenback.
As for the week ahead, traders will want to pay attention to a batch of potentially significant US economic data. Tuesday's Retail Sales reports, as well as Thursday's PPI figure and Unemployment Claims, will likely dictate the direction of dollar pairs for some time. Any gains made in the US economy will likely lead to bullish movement for the buck.
EUR - Analysts Question How Long Euro Can Maintain Current Trend
The euro was able to move up against most of its main currency rivals, including the Japanese yen and UK pound, in overnight trading. The gains can largely be attributed to renewed investor confidence, following positive Chinese data released last week. Since markets opened for the week, the EUR/JPY has gone up around 90 pips, while the EUR/GBP moved up close to 50 pips.
While the euro has been able to make some fairly significant gains as of late, most analysts are questioning how long the currency can maintain this trend. Confidence in the euro zone economic recovery remains particularly low. Today's speech from ECB President Trichet may highlight these concerns; in which case euro crosses may correct themselves later in the day.
As for the week ahead, traders will want to pay attention to a number of potentially impacting news events. Tuesday's German ZEW Economic Sentiment figure as well as Wednesday's CPI and Core CPI figures are all predicted to create market volatility. Traders will want to note that should any of these results come in below analyst predictions, the euro will likely move down as a result.
JPY - Yen Corrects Earlier Gains as Risk Taking Returns
The yen corrected much of its recent gains in trading late last week and into overnight trading today. Positive Chinese economic news, as well as better than expected American labor news are seen as the leading causes for the return to risk taking.
As a result, the yen took some heavy losses against the euro and Swiss franc beginning last Friday. The one exception appears to be the US dollar. After beginning the week with slight upward movement, the USD/JPY pair has since dropped close to 30 pips and is currently trading around the 84.05 level.
This week, yen traders will want to pay attention to European and US economic news. Positive news is likely to give further confidence to investors in the global economic recovery. If so, then the yen will likely continue to lose ground against its main currency rivals.
Crude Oil - Optimism in US Recovery Causes Crude Prices to Soar
Positive US economic news, as well as the most recent US Crude Oil Inventories report has led to a prolonged upward trend for crude prices that appears to be continuing into this week. Crude prices are largely determined by the state of the US economy. Following a number of positive indicators last week, oil demand in the world's largest energy consuming nation appears to be on the rise.
Since beginning its most recent bullish trend late last week, oil prices have shot up over 300 pips. Currently, a barrel of crude goes for around $77.10. Traders will want to pay careful attention to US economic indicators this week in order to determine the direction crude is likely to take. Should the news again come in above expectations, prices are likely move up further.
There appears to be a fresh bearish cross on the hourly Stochastic (slow), indicating an impending short-term correction for the pair. The 4-hour Stochastic (slow) is also climbing towards the over-bought region and could also form a bearish cross later in the day if upward momentum does not change in the next few hours. Going short with tight stops may be a wise way to gain quick profits in intra-day trading today.
This pair appears to be trading within a distinct bearish channel, and has recently touched the upper border of this trend. The hourly Stochastic (slow) has a fresh bearish cross, while its RSI may also be just entering the over-bought territory. Short-term downward movements may be expected throughout the first half of the trading day. Selling this pair for short-term profits may be a wise move today.
Most indicators on this pair appear to be floating in the neutral territory, suggesting the current trend may continue. The long-term movement of this pair is in a very distinct bearish channel spanning the last few months. The only indicator which appears to suggest an upward correction is the weekly chart's RSI, which has the price of the pair floating just within the over-sold territory. Continuing with the downward direction by opening short positions may prove a smart decision for this pair.
The hourly Stochastic (slow) on this pair appears to be showing a recent bullish cross, suggesting upward movement may be imminent. The hourly RSI also floats in the over-sold territory, which supports this notion. Additionally, the weekly chart's RSI has the price of this pair floating deep within the over-sold region and beginning to turn upward. Longer-term upward movements may be expected on this pair.
The Wild Card
The recent bullish movements on this pair have pushed many indicators into corrective territory. The hourly, 4-hourly, and daily charts' RSIs all have the price in the over-bought territory. The Stochastic (slow) on all three of these charts also shows either a fresh or an impending bearish cross. Forex traders can usually be certain that after such strong movements there will be similarly strong counter-movements, and Crude Oil is no exception. Going short on oil today may not be a bad idea.
|02:00||AUD||HIA New Home Sales||m/m||-1.8%||-||-|
|02:01||JPY||Monetary Policy Statement||-||-||-|
|08:00||EUR||German Industrial Production||m/m||0.7%||-||-|
|08:01||JPY||BoJ Press Conference||-||-||-|
|08:45||EUR||French Trade Balance||-3.3B||-||-|
|09:00||CHF||Foreign Currency Reserves||540B||-||-|
|10:30||GBP||Manufacturing Production m/m||m/m||-0.8%||-||-|
|10:31||EUR||German 10-y Bond Auction||0.69|1.2||-||-|
|16:00||GBP||NIESR GDP Estimate||0.5%||-||-|
|16:30||USD||Crude Oil Inventories||4.0M||-||-|
|19:01||USD||10-y Bond Auction||2.24|2.7||-||-|
|01:01||GBP||RICS House Price Balance||53%||-||-|
|01:50||JPY||Core Machinery Orders||m/m||-3.6%||-||-|