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Friday, 26 Nov 2010
Head and Shoulders Reversal for Gold?
A potential bearish chart pattern signals an impending drop in the price of gold.
USD - Flows Returning to Normal Following US Holiday
Liquidity was light yesterday as US banks were closed in observance of Thanksgiving. During the Asian and European trading sessions the US dollar was mixed against the majors. The Irish bailout continues to dominate the headlines along with speculations of whether the European financial problems will intensify in the nations of Portugal and Spain.
An absence of high impact economic data and low liquidity left the pairs trading in moderate trading ranges. The EUR/USD was up at 1.3343 after beginning the day at 1.3321. The GBP/USD was even on the day at 1.5760. The USD/JPY was higher at 83.66 following an opening day price of 83.51.
Today's trading should see a return to normal market conditions as US banks will be open. Traders' sights will be set on developments in the euro zone surrounding the European debt crisis along with a slew of European data releases. Support for the EUR/USD comes in at 1.3080, the 50% retracement level for the June to September move. Resistance is found at 1.3360, the 61.8% retracement for the June to September move.
EUR - Euro Receives Support from ECB Member
The euro continues to receive supporting words from the President of the German Bundesbank, Axel Weber. Weber is also a voting member on the ECB governing council. The highly influential banker, and frontrunner to replace ECB President Jean-Claude Trichet next year, said the euro is one of the world's most stable currencies and it is unlikely that Spain will require aid from the euro zone or the IMF.
The comments helped to drive the euro higher yesterday. This follows three consecutive days of declines for the euro where the currency has given up 4 cents to the dollar in this week's trading.
The Wall Street Journal reported yesterday that the European Commission is attempting to increase the size of the European bailout fund to 880 billion euros from 440 billion euros. This does not bode well for European officials who are attempting to stave off the spread of the European debt crisis to other nations at risk such as Spain, Portugal, and Italy.
Today traders will be following developments in Europe for direction of the euro. Also set to be released today are German preliminary CPI data along with money supply figures. Positive numbers for both of these economic releases could help the euro build on today's gains.
AUD - RBA Governor Supports Strong Aussie Dollar
In a speech today, the Royal Bank of Australia (RBA) Governor Glenn Stevens said the strong Aussie dollar is helping to drive inflation lower and reaffirmed that current interest rates were at an appropriate level. Governor Stevens expects inflation to maintain its present rate with rising labor costs factored in.
Stevens' comments helped to push down the AUD in trading as hopes waned for another quick increase in Australian interest rates.
The AUD/USD is trading lower at 0.9750, down from an opening day price of 0.9785.
However, long term inflationary pressures remain in the fast growing Australian economy. A commodities boom has led the way for strong economic expansion. As such the RBA will not be able to maintain the current interest rate environment in the long term. This should lead to a stronger Aussie dollar. A near term target for the AUD/USD is the November high of 1.0181.
Commodities - Gold Shows Potential Reversal Pattern
Commodity prices were steady yesterday as US exchanges were closed in observance of Thanksgiving. Spot crude oil is trading at its opening day price of $83.74. This comes one day after strong gains were booked with the price of spot crude oil rising over $1.40.
Gold prices continue their climb and are currently trading at $1372. The price of spot gold has come off of a low when the price fell to the support level of $1330.
Some correction may be seen for the pair today as the RSI for the pair is floating gin the oversold territory on the hourly, 8 hour and daily charts while a bearish cross is seen on the hourly chart's Slow Stochastic. Going long with tight stops may be advised for today.
A breach of the lower Bollinger Band is seen on the hourly chart with the RSI for the pair floating in the oversold territory on the daily and 8 hour charts. Going long may be a good choice for today.
A breach of the upper Bollinger Band is evident on the 8 hour chart with a bearish cross seen on the 2 hour, 4 hour and 8 hour charts' Slow Stochastic. The RSI for the pair is floating in the overbought territory on the 2 hour and 4 hour charts. Going short may be advised for today.
Some downward correction may be expected for the pair as a bearish cross is seen on the 8 hour chart's Slow Stochastic and the RSI for the pair is floating in the overbought territory on the daily chart. Traders may be advised to go short for the day.
The Wild Card
A breach of the lower Bollinger Band can be seen on the hourly chart while the RSI for the pair is floating in the oversold territory on the 8 hour chart. A bullish cross is seen on the hourly chart, indicating an impending upward move. Forex traders may be advised to go long on the pair for today.
|14:30||USD||Core Durable Goods Orders||m/m||0.3%||0.5%||0.5%|
|14:30||USD||Durable Goods Orders m/m||m/m||4.7%||-0.4%||-0.5%|
|15:00||USD||S&P/CS Composite-20 HPI||y/y||5.0%||4.6%||5.0%|
|15:45||USD||Flash Services PMI||57.4||57.0||-|
|16:00||USD||CB Consumer Confidence||95.2||95.3||-|
|16:00||USD||New Home Sales||481K||501K||-|
|16:00||USD||Richmond Manufacturing Index||-3||0||-|
|01:50||JPY||Monetary Policy Meeting Minutes||-||-||-|
|02:10||USD||FOMC Member Lacker Speaks||-||-||-|
|02:30||AUD||MI Leading Index||m/m||-0.3%||-||-|
|03:30||AUD||Construction Work Done||q/q||-0.2%||-1.1%||-|
|08:00||CHF||UBS Consumption Indicator||1.35||-||-|
|08:00||EUR||GfK German Consumer Climate||10.1||10.0||-|
|12:05||EUR||German 30-y Bond Auction||1.07|1.3||-||-|