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Monday, 10 May 2010
Greek Rescue Package to Recover Euro
There are very few words that can describe last week's trading session. Words such as abnormal, irregular, exceptional were used on a constant basis in order to try and explain how unique indeed was the global trading. Those who didn't think the unusual trading length could continue are now seeing how the EU's decision to confirm the Greek bailout plan is threatening to correct all of last week's trends. This week could be what looks to be yet another extraordinary trading week.
USD - Positive Employment Data to Boost Dollar
The Dollar rallied versus most of the major currency pairs during last week's trading session. The Dollar marked a 14-month high against the Euro, as the EUR/USD pair dropped close to the 1.2500 level. The Dollar also saw a 600 pips gain vs. the Pound.
The Dollar rallied last week as a result of a series of positive data from the U.S. economy. The Manufacturing Purchasing Managers' Index showed that the manufacturing in the U.S. expanded at a faster pace than expected. In addition, the housing data showed that the Pending Home Sales have increased by 5.3% in March, beating expectations for a 3.9% rise.
Yet the most significant economic release was published on Friday. The Non-Farm Employment Change report showed that the payrolls in the U.S. rose by 290,000 in May. This was the sharpest rise in the labor market in the last 4 years. The positive data has further reassured that the U.S. economy is reversing rapidly, and has boosted the Dollar.
Looking ahead to this week, many interesting economic publications are expected from the U.S. The most significant publications look to be the Trade Balance on Wednesday, the weekly Unemployment Claims on Thursday, and the Retail Sales and the Consumer Sentiment reports on Friday. If this data will continue to prove that the U.S. economy is expanding at such a fast pace, the Dollar is likely to continue its bullish trend.
EUR - Euro Rebounds as European Leaders Agree On Greek's Rescue Plan
The Euro saw mixed results during last week's trading session. The Euro tumbled to a 14-month low vs. the Dollar, and also saw bearish trends against the Pound and the Yen. However, close to the weekend the Euro managed to recover some if its losses versus the majors.
The EUR's freefall from the past week was first and foremost due to the Greek debt crisis. The ongoing concerns regarding the Euro-Zone's ability to offer a rescue package and, moreover, the concerns regarding the outcome of such a package and the message it send towards the other swinging economies have all weakened the Euro. The uncertainty regarding the stability of the Euro-Zone has turned investors to look for safe-haven assets such as the Dollar and the Yen.
However, over the weekend the European leaders have agreed on a $962 billion loan package for the region, which is expected to prevent Greece's fiscal woes from expanding to the rest of the Euro-Zone. The immediate reaction has boosted the Euro that gained over 400 pips against the Dollar since Friday and continues to strengthen at the moment.
As for this week, traders should keep following every development regarding the Greek debt crisis. This issue has the largest impact on the market for the past several weeks, and this isn't likely to change in the near future. At the moment it seems that the recent rescue package is contributing to the Euro's recovery, yet as the market remains fragile, every pessimistic update on this issue might weaken the Euro once again.
JPY - Yen's Exceptional Bullish Trend Halted
The Yen saw an abnormal rally during last week's trading session. Until Thursday the Yen saw a 700 pips gain versus the US Dollar, a 1,600 rally vs. the Euro and a 1,400 pips rise against the Pound. However, by Friday the trend was reversed, and the Yen lost about half of its gains.
The Yen's rally was a direct result to the Euro-Zone's crisis. It has proven over and over again that when global economic stability is threatened, investors tend to massively purchase the Yen. The Yen is still considered to be the safest investment among the major currencies, and thus every economic crisis, whether its origins are in the U.S. or the Euro-Zone is likely to boost the Yen.
For the very same reason, the recent rescue package which was offered to Greece may have signaled the ending of the Greek debt crisis. The Yen has promptly weakened and in fact has lost half of its gains within merely two trading days. It is quite remarkable to observe how well the Yen reflects investors' mood, and how easily it fluctuates accordingly.
As for the following week, traders should continue following the news updates from the Euro-Zone regarding the Greek fiscal crisis. Traders should take under consideration that until now, every positive data had a negative impact on the Yen and vice versa. In addition, traders should follow the leading Japanese economic publications such as the Current Account and the M2 Money Stock, as they are likely to have a large impact on the Yen as well.
Crude Oil - Crude Oil Continues Slide
Crude Oil prices saw a sharp drop during last week's trading session. After several weeks of consolidation above $80 a barrel, crude oil dropped below this mark for the first time in almost 2 months.
Spot Crude Oil's bearish trends came mostly as a result of the Greek's fiscal crisis. The concrete concerns regarding the possibility that the Greek crisis will expand and impact the rest of the Euro-Zone have created speculations that oil demand will decline. In addition, despite the positive U.S. Non-Farm Employment Change, the Unemployment rate unexpectedly rose to 9.9%.
This was enough to add to woes that the U.S, the largest energy consumer, might not increase its demand for oil in the near future. As a result, crude oil continues to tumble, and is currently trading at $76.50 a barrel.
Looking ahead to this week, traders are advised to follow the major news events from the U.S. and the Euro-Zone, especially regarding the Greek rescue package, as these seem to have the largest impact on crude oil prices.
Despite the overdue upward correction, this pair now seems poised for a downward move. The hourly RSI shows the pair floating in the overbought zone, which signals short-term sell pressure. The 4-hour Stochastic (slow) also shows an impending bearish cross. This pair may experience a downward correction in today's early trading hours and traders may want to have their positions set to capture this.
There appears to be a bearish cross about to form on the 4-hour Stochastic (slow), suggesting that a downward move may be in the works. The recent bearish cross on the daily MACD/OsMA supports this notion. Going short may be a wise decision today.
After last week's erratic behavior by this pair, we now see a consolidation trend on the hourly and 4-hour charts. The weekly Momentum oscillator suggests that this pair has moderate upward momentum. The RSI and Stochastic (slow) on both the hourly and 4-hour charts are in an ascending formation, all of which suggests that this pair is heading bullish. Going long with tight stops may not be a bad idea today.
This pair appears to be correcting downward, and most indicators are supporting a further sustained downward movement. The only exception is the 4-hour RSI which has the pair floating just inside the over-sold territory. But even this indicator continues to point in a downward direction, suggesting it has more bearishness remaining. Going short may be a wise move today.
The Wild Card
US stocks took an odd turn last week, both from a technical and a fundamental standpoint. But these CFDs now appear to be back on a normal trading pattern. After the corrective upward movement of this index last Friday and this morning, it is now beginning to see indicators suggesting a downward correction is impending. The hourly RSI is floating in the over-bought territory, suggesting downward pressure. The 4-hour Stochastic (slow) has a series of bearish crosses which suggests a strong downward movement may be building. Even the daily chart's Momentum oscillator is turned sharply downward. Going short on this CFD may not be a bad idea.
|07:00||CHF||UBS Consumption Indicator||1.29||-||-|
|07:00||EUR||GfK German Consumer Climate||9.0||9.2||-|
|07:00||EUR||German Import Prices||m/m||-0.8%||-1.4%||-|
|15:30||USD||Crude Oil Inventories||10.1M||-||-|
|19:00||USD||Federal Funds Rate||<0.25%||<0.25%||-|
|20:00||NZD||Official Cash Rate||3.50%||3.50%||-|
|20:00||NZD||RBNZ Rate Statement||-||-||-|
|23:00||AUD||CB Leading Index||m/m||-0.2%||-||-|
|EUR||German Prelim CPI||m/m||0.0%||-0.8%||-|
|00:00||EUR||Italian 10-y Bond Auction||1.89|1.3||-||-|