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Thursday, 9 Jun 2011

Euro Zone Interest Rates on Tap Today

The euro felt pressure versus the US dollar this morning, with the pair's price reaching a one-month high near 1.4700 then entering a moderate decline. Soft data out of the American economy last week forced a reevaluation by many investors who went long on the USD following the European Central Bank's (ECB) cloudy rate statement from a month back. Today's rate statement, therefore, has gained in prominence in relative terms.

Daily Trendupnodowndownnono
Weekly Trendupupdowndowndownup

Economic News

USD - Traders Mixed on USD as Euro Zone Interest Rates Expected Today

The US dollar experienced mixed results yesterday as traders began to shift in and out of the greenback following last week's non-farm employment data and this week's relatively positive sentiment. The results so far have been for the value of the USD to decline and then hold versus its currency counterparts.

The euro zone has so far benefited from this shift, but failed to break through the significant price barrier at 1.47 against the dollar. The issue of interest rate differentials has generated market tension over the past two weeks and, indeed, the shift in value among the safe-havens and the EUR has made currency forecasting a much more difficult profession. Today's rate statements out of Europe will be of primary interest for most traders.

As for today, as just mentioned, traders will be focusing more attention on Europe given the recent hype about interest rate differentials. The US economy will also be publishing several significant reports, though, which could make today's trading interesting. The unemployment claims report and trade balance figure should generate intense volatility in today's later sessions.

EUR - EUR Weighted ahead of Interest Rate Decision

The euro felt pressure versus the US dollar this morning, with the pair's price reaching a one-month high near 1.4700 then entering a moderate decline. Soft data out of the American economy last week forced a reevaluation by many investors who went long on the USD following the European Central Bank's (ECB) cloudy rate statement from a month back. Today's rate statement, therefore, has gained in prominence in relative terms.

With the US economy releasing several soft data reports, the euro zone is set to take a major jump against its Atlantic rival should it be capable of pushing hawkish in today's rate announcement. A dovish approach, however, could signal continued weakness in the region as well as a less significant divergence between the two regions' respective interest rates.

As for today, the euro zone will be publishing its monthly interest rate decision. Most investors are turning their attention on this announcement following last month's unclear direction. There also appears to be a good chance that dollar bears will continue to push the EUR higher as the day wears on, but only if news from Europe delivers on expectations for hawkishness in its policy statement.

JPY - Japanese Yen Mixed as Investors Examine Global Risk Sentiment

The Japanese yen (JPY) has been trading with largely positive results since Friday as investors turn their focus towards news out of the euro zone. After a week of ups and downs, the Japanese yen appears set to take losses today as investors largely seek out risk ahead of today's rate statements in Europe and Britain.

The USD/JPY was seen trading somewhat lower this morning, holding steady near 80.20 and moving up towards 80.60 at today's opening Asian sessions. Market news released out of Europe today will likely be the driving force behind forex market values and traders would be wise to watch the rate statement by the European Central Bank (ECB) scheduled for 13:30 GMT since it has a strong correlation with global economic growth and monetary values.

Oil - OPEC Breakdown Helps Crude Oil End above $100

The price of Crude Oil ended yesterday higher as traders largely began to push back into their investments in physical assets while the US dollar flattened out. A breakdown in talks between OPEC members in Vienna this week has also generated tension among oil speculators who are anticipating a delayed response to rising oil prices. The result has been a sudden climb in oil prices since Tuesday, reaching upwards of $100.50 a barrel this morning.

Recent events have made speculating about oil prices more difficult. The plummeting value of the US dollar since Friday should have helped lift oil prices, but the commodity's flat movement through most of the week had many withholding their investments in oil until clearer direction was provided. The OPEC spat, however, has made the investment environment around oil even less clear. Without some sign of production output agreement by OPEC, speculation is likely to drive prices into a stable range above $100 a barrel.

Technical News


The current rally has helped the pair climb above the 61.8% Fibonacci retracement level from the May downtrend at 1.4570. While monthly stochastics are beginning to roll over, both the weekly and the daily stochastics are moving sharply higher. The pair could continue to rise where it may encounter resistance off of the previous trend line from the January to May rally which comes in at 1.4750. This level has additional significance as it coincides with the late April/early May lows. Further strength would test the May high at 1.4940. Initial support is found at 1.4550 while any pullback could find support at 1.4420, the 38% retracement from the May to June move higher. The 50-day moving average also hovers in this area. A deeper move could extend to 1.4330-00.


Sterling is showing a few signs of weakness versus the dollar as daily stochastics are declining and a failed attempt to close the previous week above the 1.6515 resistance level. The pair is trading in a triangle consolidation pattern with resistance at 1.644. A move higher would then test the April high at 1.6745. To the downside support from the consolidation pattern is located at 1.6360. The 20-day moving average may prove to be supportive at 1.6320 as well as the trend line rising from the May 2010 low which comes in at 1.6170. A breach here would expose the May 2011 low at 1.6055.


Yen strength has reemerged and the pair looks to test its post-intervention lows from early May at 79.56. A break of this level exposes the pre-intervention low at 76.11 as the charts are absent of any significant support levels. To the upside, 81.75 should see some resistance followed by the May high at 82.15.


A new week and a new high for the Swiss franc as the USD/CHF traded as low as 0.8326. Falling stochastics on the weekly chart point to further potential declines in the pair. Traders may find opportunities to enter into the downtrend on a pullback in the pair. Support is located at the May low of 0.8550 followed by the falling trend line off of the February high at 0.8750.

The Wild Card


Following a jump higher and a failure to move above the 1.3190 resistance level the pair came under renewed selling pressure and reached a new monthly low in overnight trading. A few major levels stand out on the way down; the January pivot at 1.2775 and the 61.8% retracement level from the 2010 low to the May 2011 high at 1.2740. forex traders may want to target the November low at 1.2640 which would be a last stand for the Aussie dollar.

Current Time: 10/06 14:34 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
14:30CAD+ Trade Balance-0.8B-1.1B-2.5B5
14:30USD+ Trade Balance-41.8B-47.6B-48.3B5
16:00CAD+ Ivey PMI58.0--3
16:00USD+ IBD/TIPP Economic Optimism42.0--1
19:00EUR+ ECB President Draghi Speaks---5
23:30USD+ FOMC Member Williams Speaks---3
00:30AUD+ AIG Construction Index53.8--1
01:01GBP+ BRC Shop Price Indexy/y-1.4%--1
02:00AUD+ HIA New Home Salesm/m-1.8%--1
02:01JPY+ Monetary Policy Statement---5
07:00JPY+ Leading Indicators 105.0%--1
08:00EUR+ German Industrial Productionm/m0.7%--1
08:01JPY+ BoJ Press Conference---5
08:45EUR+ French Trade Balance-3.3B--1
09:00CHF+ Foreign Currency Reserves540B--3
10:30GBP+ Manufacturing Production m/mm/m-0.8%--5
10:30GBP+ Industrial Production m/m-0.4%--1
10:31EUR+ German 10-y Bond Auction0.69|1.2--1
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