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Friday, 15 Jul 2011

Forex Market Ends Friday with Heavy News Day

With a moderately heavy US news day expected Friday, dollar traders should be anticipating some exciting currency movements brought about by heightened liquidity. Beginning at 13:30 GMT, the US will be releasing its nominal and core CPI figures to fill in the consumer side of its inflationary reports this week. Shortly thereafter it will publish its Empire State Manufacturing Index, its Capacity Utilization Rate, Industrial Production, and Preliminary University of Michigan (UoM) Consumer Sentiment and Inflation Expectations reports.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndowndownnodown
Weekly Trendupupdowndownupup
Resistance1.47001.655081.500.87551.10100.9075
1.45001.632080.500.85501.08900.8950
1.42801.621079.600.83601.07900.8870
Support1.41101.607078.500.82751.06600.8720
1.38401.578076.110.80801.05100.8630
1.37401.56501.03900.8530

Economic News

USD - US Dollar Gains as Bernanke Notes Delay in Potential Easing

The US dollar was seen trading higher yesterday as traders began to reevaluate the recent dip in USD values from statements the Fed may institute another round of quantitative easing. The EUR/USD was seen meeting resistance near 1.4100 yesterday and plummeted towards 1.4055 in late trading. Commentary from Fed Chairman Ben Bernanke revealed the sentiment that the Fed may not yet be ready to undergo additional easing as conditions were not dire enough to warrant such an implementation.

The series of PPI and retail sales data released yesterday painted a relatively weak picture for the US economy's growth; but growth is shown to be occurring nevertheless. Both reports saw variance between the nominal reading and their partnered core data. Nominal PPI shrank by 0.4% while the core reading witnessed a 0.3% expansion. Likewise, the nominal reading on retail sales witnessed 0.1% growth whereas the core reading saw 0% change from the previous month.

With a moderately heavy US news day expected Friday, dollar traders should be anticipating some exciting currency movements brought about by heightened liquidity. Beginning at 13:30 GMT, the US will be releasing its nominal and core CPI figures to fill in the consumer side of its inflationary reports this week. Shortly thereafter it will publish its Empire State Manufacturing Index, its Capacity Utilization Rate, Industrial Production, and Preliminary University of Michigan (UoM) Consumer Sentiment and Inflation Expectations reports.

EUR - EUR Bearish as Fed Easing Move Stalled

The euro was seen trading lower yesterday in light of statements suggesting a wait-and-see approach adopted by the US Federal Reserve regarding another round of quantitative easing. Following yesterday's CPI reports in the euro zone, traders appeared more concentrated on news out of the US to determine values, and we've seen a retracement of the USD versus its primary currency counterparts as a result of this sentiment.

While interest rate differentials between the US and Europe came into view this past week, the higher yielding assets like the GBP and EUR appear positioned to lose significant value as traders choose to focus on growth concerns and sovereign debt. The growth in risk aversion may have many investors choosing to store their value in lower yielding currencies, like the USD and JPY.

As for Friday, the euro looks to be anticipating an evaluation of its recent downturn against the other major currencies with mild bias to the downside. The euro zone will be publishing a few economic events on today's calendar. Traders should try and follow the significant publication emanating from the US economy today, however, as a heavy string of reports is expected this afternoon.

JPY - JPY Seen in Ascent as Traders Seek Store of Value

The Japanese yen (JPY) was seen trading higher versus most other currencies yesterday after news began to shift many traders back into safe-haven assets. The yen has been a top performer these past several months considering many traders bank on the Japanese carry trade during times of intense risk appetite and move towards the JPY in times of risk aversion, making it an appealing currency in these recent times of ominous reports.

The JPY was in a position to make solid gains yesterday after Federal Reserve Board Chairman Ben Bernanke commented that the US central bank would delay undertaking another round of easing. Moves toward riskier currencies, however, failed to materialize as a string of industrial output and inflationary reports in the euro zone have pushed many investors away from the region and into safe haven assets. As such, traders appear to be anticipating a mild uptick in the JPY prior to this week's close.

Oil - Oil Price Dips Below $96 a Barrel

Crude Oil prices dipped yesterday, reaching as low as $95.60 in late trading. Interest rate differentials have dropped from sight while industrial output and inflationary data revealed mild weakness in Europe and this has so far led several large investors and analysts to consider a shift away from the EUR and physical assets in exchange for the safety of the USD and JPY.

As investors sought safety, the value of crude oil, which has been seen holding steady most of the week, dipped to a weekly low of $95.60 a barrel. A sudden jump in dollar values due to this week's risk sensitive environment has helped many investors move hesitantly away from assets like oil. Should Crude Oil sentiment hold steady this week, oil prices may continue to take losses going into the week's final hours.

Technical News

EUR/USD

After a false breakout higher from the triangle chart pattern the EUR/USD is approaching the rising support line off of the May low at 1.4160. Falling daily and monthly stochastics suggest the next move will be to the downside. A break here and the next major support is found at 1.3970. The 200-day moving average at 1.3905 may also prove supportive. Below this key technical mile marker the rising trend line from the 2010 May low comes in at 1.3710 and traders may see buying interest at this level. To the upside the July 7th high at 1.4370 could be supportive, as well as the falling resistance off of the May and July highs at 1.4530. A close above the June high at 1.4700 would likely signal a shift in momentum to the upside.

GBP/USD

Cable is caught in a 220 pip range as the pair struggles to stay above its 200-day moving average and its initial support at 1.5910. A move lower and the next support to enter the picture stands at the late January low of 1.5750, not far from the 38% Fibonacci retracement from the 2010 May to 2011 April move. Support is also found at 1.5650 which has served as both support and resistance in October and in December of last year. The consolidation pattern is capped at 1.6140 where the neckline from a head and shoulders pattern rests. For traders who are not yet short this would be a point from which to sell a potential rally. The head and shoulders reversal chart pattern shows a measured move which could take the GBP/USD lower to 1.5370.

USD/JPY

A series of higher highs and lower lows has created a bullish channel on the daily chart but the pair will likely remain locked in a range that has contained the USD/JPY since early June. A number of resistance levels will provide ample opportunities to sell into any gains, a play that is in-line with the long-term trend. The top of the channel is found at 81.50 and is close to the 100-day moving average. Additional resistance is located at the May high of 82.20 and the falling trend line from the 2007 high comes in at 82.80. The bottom of the channel could prove to be supportive at 80.45 but a break here could test the May low at 79.50.

USD/CHF

The daily chart provides an interesting technical picture for the Swissie. The pair is flirting with its 50-day moving average at 0.8550, a technical indicator the pair has not traded above since February. A potential head and shoulders bottom reversal may also be forming with the neckline falling from the mid-June highs and the high from July 1st. A measured move from the pattern suggests potential gains of 260 pips and a reversal would likely target the mid-May lows at 0.8755 and the March 16th spike lower which is also a Fibonacci retracement target at 0.8845.

The Wild Card

Gold

The developments in Europe and the threat of a downgrade of the US credit rating have boosted the safe-haven appeal of gold. Yesterday price of spot gold made a new all-time high but the commodity snapped an 8-day consecutive win streak when the price pulled back from $1,594, just off of the $1,600 psychological resistance level. Forex traders should be eyeing this price as the next target with support at $1,558.

Current Time: 10/21 11:13 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/21
16:00USD+ Existing Home Sales5.05M5.11M-3
10/22
01:00EUR+ German 30-y Bond Auction2.25|1.1--1
02:30AUD+ CPI q/q0.5%0.4%-5
02:30AUD+ Trimmed Mean CPIq/q0.8%0.6%3
10:30GBP+ MPC Asset Purchase Facility Votes0-0-90-0-9-5
10:30GBP+ MPC Official Bank Rate Votes2-0-72-0-7-5
13:00AUD+ CB Leading Index m/m0.5%--1
13:30AUD+ MI Leading Index m/m-0.1%--1
13:50JPY+ Trade Balance-0.92T-0.91T-3
14:30CAD+ NZD Core Retail Sales m/m-0.6%0.2%-5
14:30CAD+ Retail Sales m/m-0.1%0.1%-3
14:30USD+ Core CPI m/m0.0%0.2%-5
14:30USD+ CPI m/m-0.2%0.0%-3
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