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Wednesday, 1 Jun 2011

Greece May Avoid Restructuring; EUR Traders Ecstatic

The euro has been a top performer against the other major currencies lately as investors have turned their attention to the potential for Greece to move beyond its debt concerns. Speculators have been largely betting that Greece may be able to bear its debt burden without restructuring and this has helped lift the 17-nation common currency regardless of its weak monthly performance.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupnodownnoup
Weekly Trendupupdowndownupno
Resistance1.46561.671883.440.86781.09180.8898
1.45101.659482.380.85971.08030.8810
1.44531.651981.940.85681.07360.8779
Support1.43071.639680.890.84871.06220.8692
1.42201.634780.270.84361.05750.8634
1.40751.622479.210.83551.04600.8546

Economic News

USD - US Dollar Sees Mixed Gains

The US dollar halted its plummet against most currencies yesterday, with mixed gains seen versus the British pound, Japanese yen and Swiss franc. Positive news regarding Greece's debt woes helped the EUR hold its ground against the USD's resurgence and differences between the two regions' fundamental data remains stark.

The EUR/USD rose to a three-week high Tuesday, reaching upwards of 1.4415 on news that Greece may not require a debt restructuring. The GBP/USD slumped from its four-week high of 1.6553 to a current price just below 1.6470.

The shift into riskier assets supports a variety of analyses which have called for a solid return to growth in the early summer months of Europe and North America, which is leading the way into these investment shifts. But weak fundamentals out of the US and other leading economies have some analysts a bit skeptical.

Today, the United States is scheduled to release a series of significant data sets. The most impactful figure being published will be ADP's non-farm employment change report, set to be released at 13:15 GMT. This figure above all others should be a solid gauge from which to view the impending NFP employment reports due to be released Friday.

EUR - EUR Gains as Greece May have Dodged Bullet

The euro has been a top performer against the other major currencies lately as investors have turned their attention to the potential for Greece to move beyond its debt concerns. Speculators have been largely betting that Greece may be able to bear its debt burden without restructuring and this has helped lift the 17-nation common currency regardless of its weak monthly performance.

The EUR/USD pushed above a three-week high yesterday, reaching upwards of 1.4415 before flattening out in today's morning session. Potential for a technical cap to get triggered near 1.4450 could push the pair lower later on in the day, but analysts are still looking for additional gains by the currency if the current risk sentiment holds. Market pessimists, however, are noting the increase in poor fundamentals out of most major economies as a sign that this risk appetite may not materialize.

As for Wednesday, the euro looks to be continuing its gains against the greenback but with a technical selling point approaching fast. A busy trading session in the Pacific economies caused a stir early on today, but traders appear to still be favoring a move into higher yielding assets. Europe, however, will be largely absent from the calendar today with all eyes focused on the employment and manufacturing reports out of the US.

JPY - Japanese Yen Drops as Moody's Puts Japan on Path of Downgrade

The Japanese yen took a sharp dive yesterday against most of the other major currencies after Moody's Investor Services placed Japan up for a possible review that may result in a downgrade of its bond rating. After dropping to as low as 80.80 this week, the USD/JPY appears to now be moving upwards, recently climbing beyond 81.30.

Yen traders have been weighing risk sentiment lately, attempting to decipher the direction of the economy during this news heavy week. With Friday's Non-Farm Payrolls (NFP) ahead, much can be said about the increase in speculative shifts taking place in the market right now. Last week's data provided a temporary bullish uptick for the island currency, but yesterday's news from Moody's has reversed much of this sentiment.

Oil - Shifts in Growth Forecasts Lift Oil beyond $103 a Barrel

Oil prices pushed beyond $103 a barrel today after investors viewed the recent downward correction as a natural process to help get prices in line with supply. This movement between $96 and $102 a barrel was representative of a market corrective sentiment to get speculation more in step with supply and demand. The upward movement in prices seen yesterday, according to the Organization of Petroleum Exporting Countries (OPEC), was a shift in growth forecasts which view oil consumption to be on the rise going into the second half of 2011.

The decision point anticipated since Monday appears to have been reached, but technical forces appear to now be in play testing this recent jump. Whether oil traders decide to lift oil prices beyond their current high of $103.06 will depend on manufacturing and industrial growth figures out of the major global economies. Employment also appears to be a top priority in this growth sentiment and oil traders are eyeing this week's NFP data out of the United States to verify their revamped growth schedule for oil prices.

Technical News

EUR/USD

Yesterday's solid close above the pair's 50-day moving average should be taken as a bullish signal. The Momentum-14 indicator shows short term momentum is moving to the upside as the pair rises above its two week consolidation pattern. Resistance is found at 1.4490 followed by the May high at 1.4940. 1.4340 should serve as the initial support level followed by 1.4205 and the 100-day moving average at 1.4035.

GBP/USD

Cable received a strong bounce higher at a level that coincided with the rising trend line off of the May 2010 low. As such, momentum has swung back in favor of the pound and rising weekly stochastics support further gains. Resistance is found at 1.6520 followed by the April high at 1.6750. A breach here would target the August 2008 high at1.7040. To the downside, support comes in at 1.6330 and 1.6000, followed by the trend line at 1.6120. Below the trend line the March low at 1.5935 comes into play.

USD/JPY

The yen's rally failed to breach the 82.25 resistance as well as the 100-day moving average before the pair turned sharply lower while making a significant close below the rising trend line from the May low. Falling daily stochastics point to further declines in the pair. Therefore traders may look to be short on the USD/JPY with initial support at 80.70 and 80.35, followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10. A move to the upside and the pair may encounter initial resistance at the previous trend line which comes in at 81.95, followed by 82.25, and retracement targets from the April to May move at 82.50 and 83.25.

USD/CHF

In almost textbook like fashion, the USD/CHF rose as high as 0.8890, a level that coincides with the trend line off of the February high only to encounter resistance and plummet, ending the week at a new all-time low at 0.8464. This level should serve as initial support for the USD/CHF, followed by 0.8400. A retracement back to the falling trend line would offer traders better levels at which to enter the trend with a stop above one of the resistance levels near 0.8890 and 0.8945.

The Wild Card

AUD/USD

Following a triangle consolidation pattern off of its May high the AUD/USD broke out above the upper consolidation line only to retrace lower before moving higher again. This is typical price behavior of a triangle pattern and forex traders may look to be long on the AUD/USD. A protective stop should be placed inside the triangle near 1.0600 with a target near the 1.1000 level.

Current Time: 10/21 19:10 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
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
16:00CAD+ BoC Monetary Policy Report---5
16:00CAD+ BoC Rate Statement---5
16:00CAD+ Overnight Rate1.00%1.00%-5
16:30USD+ Crude Oil Inventories8.9M--3
17:15CAD+ BOC Press Conference---5
21:00GBP+ MPC Member Weale Speaks---3
23:00AUD+ RBA Gov Stevens Speaks---5
23:45NZD+ CPI q/q0.3%0.5%-5
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