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Monday, 9 May 2011

Greece's Rumored Exit from the Euro Zone Dragging EUR Lower

The German newspaper der Spiegel noted a rumor that was floating around last Friday which said Greece had considered exiting the 17-nation euro zone during one of its recent policy meetings. Though profusely denied by German and Greek officials, the powerful force of the rumor in speculative circles has drastically pulled down on the strength of the EUR.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndowndownupdown
Weekly Trendupupdowndownupup
Resistance1.44541.643880.920.87871.08261.0826
1.44191.641580.760.87711.07941.0794
1.44011.640680.690.87641.07801.0780
Support1.43651.638380.520.87491.07491.0749
1.43481.636980.430.87401.07321.0732
1.43121.634680.270.87241.07011.0701

Economic News

USD - Traders Bullish on USD as Euro News Hastens Flight to Safety

The US dollar experienced strongly bullish results since last Friday as traders began to shift away from the euro following the European Central Bank's (ECB) announcement to hold rates steady and rumors that Greece may quit the euro zone. The result has been for the value of the euro to drop like a stone versus its currency counterparts, and the US dollar looks poised to capture much of the beneficial side-effects.

With Friday's Non-Farm Payroll (NFP) figure revealing surprise growth in the US employment sector, traders appear less reluctant to go into the greenback in order to stave off further losses in their portfolios. The US economy has so far benefited from this shift as a stronger dollar should give Americans more buying power in the days ahead. 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.

As for today, traders will focus more attention on Europe and Canada given the US economy is not scheduled to publish any news or data releases. Japan's monetary policy meeting minutes were published this morning and are in the process of being digested by investors. The Canadian economy will also be releasing its latest findings on housing starts. With increased risk aversion since last Friday, traders appear to be anticipating a continuation of the USD's recent bullishness.

EUR - Rumors of Greece Exiting Euro Zone Gouges EUR Values

The euro appears to have lost substantially against its primary currency rivals since Friday following the European Central Bank's (ECB) rate statement on Thursday and rumors that Greece may consider exiting the euro zone. The data releases published over the last several days have pushed many traders away from riskier assets as well. So far the shift in risk sentiment has favored the US dollar over its European rival.

The German newspaper der Spiegel noted a rumor that was floating around which said Greece had considered exiting the 17-nation euro zone during one of its recent policy meetings. Though thoroughly denied by German and Greek officials, the powerful force of the rumor in speculative circles has drastically pulled down on the strength of the EUR. Many analysts have also noted that ECB President Jean-Claude Trichet's remarks during last Thursday's rate policy statement made predicting the next rate adjustment far more difficult than they have been in the past. The value of the EUR/USD, as a result, has shifted from its recent high near 1.49 to a current price around 1.44.

As for today, the euro is largely absent from the calendar, but with a few reports which should not have much impact overall. Germany will publish its trade balance, which has largely already been priced in to the value of the region's currency. The euro zone will also release its Sentix Investor Confidence report which tends to have little impact on the 17-nation bloc's currency; as such, present trends established last Friday appear to be dominant in Monday's market environment.

JPY - Japanese Yen Mixed as Investors Digest Policy Minutes

The JPY has been trading with largely positive results since Friday as investors turn their focus towards news out of Europe. After a week of ups and downs, the Japanese yen appears set to make gains today as investors largely flee riskier assets. The low interest rates of the Japanese economy have helped pull many investors into the safety of the yen following Thursday's rate announcement by the ECB. Rumors of Greece's exit from the euro zone have also sent traders on a hunt for safer assets.

With Japan's economy coming back online from a week of holiday celebrations, the market should receive a modicum of additional liquidity from the return of this island giant. The impact may be felt in today's early hours, but the news emerging out of Europe about last week's rumors will likely lead today's market environment. Traders should tune in to any comments made by European officials as these are likely to drive today's more important portfolio shifts and adjustments.

Oil - Crude Oil Prices Still Falling, Can this Decline Continue?

The price of Crude Oil ended Friday significantly lower as traders largely began to pull out from their investments in physical assets while the US dollar made a rapid jump. The result has been a sharp drop in oil prices reaching as low as $96 by end of trading Friday. Will the fall continue through this week?

Recent events have made speculating about oil prices more difficult. The plummeting value of the US dollar through the early days of last week should have helped lift oil prices, but the commodity remained in free fall for the fourth consecutive day as of this morning. Rising stockpiles in the United States, reported Wednesday, may have helped fuel the shift away from oil as rising inventory tends to suppress price hikes. As for the rest of today, oil prices appear heavily leaning towards the downside, with technical support targets near $88 a barrel coming into view.

Technical News

EUR/USD

This morning the EUR/USD gapped higher by 60 pips after last week's 6 cent decline which closed below the January trend line. Weekly stochastics are now falling after remaining oversold for some time. Daily stochastics are also showing signs of divergence and traders should keep an eye on this potentially bearish signal. If the EUR/USD fills the gap, the pair could target the support at 1.4150, a level that coincides with the 38.2% Fibonacci retracement from the January to April move. The 100-day moving average also could come into play at 1.4020. To the upside, the previous trend line should turn into resistance and comes in today at 1.4450. Friday's high of 1.4585 is 2nd resistance level.

GBP/USD

Last week's low for Cable at 1.6340 coincides with a 50% retracement from the March low to the April high. Should this support level hold, 1.6600 would be eyed followed by the April high of 1.6745. To the downside the mid-April low at 1.6160 stands out as a support, as does the rising trend line off of the May 2010 low which comes in this week near 1.6000.

USD/JPY

Weekly stochastics are rolling lower, indicating the momentum is to the downside on the pair. First support is last week's low at 79.50 with an initial target for the pair at the lower channel line from the December 2008 low which lines up this week at 78.40. A breach here would target the pre-intervention low at 76.40. Resistance comes in at 81.20 from the trend line off of the April high.

USD/CHF

After making a new all-time low last week at 0.8553 the pair found resistance at the 20-day moving average at 0.8800. A continuation of the move higher would run into the trend line off of the April high which comes in at 0.8850. A breach there would target 0.8900 off of the mid-April low.

The Wild Card

Oil

A sharp decline in commodity prices last week and crude oil shed 17% in a week. Last week's low coincides with a 61.8% retracement from the February low. Should the price continue to fall forex traders could target the rising trend line from the August lows at $90.10. A move higher would first target the mid-April low at $105.25 followed by last week's high at $114.81.

Current Time: 09/02 03:49 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/02
04:45JPY+ 10-y Bond Auction0.52|4.3*-1
05:30AUD+ Cash Rate2.50%2.50%-5
05:30AUD+ RBA Rate Statement***5
06:45CHF+ GDPq/q0.5%0.5%-1
08:00EUR+ Spanish Unemployment Change-29.8K25.5K-3
09:30GBP+ Construction PMI62.461.5-5
10:00EUR+ PPI m/m0.1%0.0%-1
14:45EUR+ Final Manufacturing PMI58.058.0-1
15:00USD+ ISM Manufacturing PMI57.157.0-5
15:00USD+ Construction Spending m/m-1.8%0.9%-1
15:00USD+ IBD/TIPP Economic Optimism44.546.2-1
15:00USD+ ISM Manufacturing Prices59.557.0-1
00:01GBP+ BRC Shop Price Indexy/y-1.9%--1
00:30AUD+ AIG Services Index49.3--1
09/03
USD+ Total Vehicle Sales16.5M16.5M-1
02:30AUD+ GDPq/q1.1%0.4%-5
04:20AUD+ RBA Gov Stevens Speaks***5
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