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Tuesday, 23 Nov 2010

Irish Debt Woes Continue to Weigh on the EUR

The euro dropped on concern Ireland's debt woes will spread to other euro-zone economies such as Portugal and Spain. The possibility of an election in Ireland also pressures the euro as it may hinder the nation's aid talks with the European Union and the International Monetary Fund.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownnodowndowndown
Weekly Trenddowndownupupnoup
Resistance1.36551.601084.200.99800.99250.8600
1.36351.599084.000.99600.99050.8580
1.36051.596083.700.99300.98750.8550
Support1.35451.590083.100.98700.98150.8490
1.35151.587082.900.98400.97850.8460
1.34951.585082.700.98200.97650.8440

Economic News

USD - Dollar Rises as Investors Fear Spain, Portugal May soon Follow Ireland

The dollar rose against the euro Monday, continuing the trend during today's Asian trading as investors turned their focus to other euro-zone nations that are facing debt problem and may require financial aid.

The dollar initially dropped after Ireland formally agreed to request aid from the International Monetary Fund and European Union to the sum of €80 billion to €90 billion ($109 billion to $123 billion), aimed to address the country's budget deficit and banking system's problems, reaching near $1.3800. However, after the initial euphoria, concerns regarding other euro-zone nations' debt issues resurfaced and the EUR/USD pair soon sank below $1.3600. The pair reached a low of $1.3545 overnight and is currently trading around $1.3570.

Gold futures rose modestly Monday but a stronger dollar capped the gains. Gold futures for December delivery gained $5.50, or 0.4%, to settle at $1,357.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Silver futures for December delivery rose 28.2 cents, or 1%, to $27.461 an ounce. The metal gained 7.7% in the previous three sessions.

A busy news day is expected today from the U.S heading towards Thanksgiving weekend; traders should follow the release of the Prelim GDP numbers at 13:30 GMT as well as the FOMC meeting minutes release at 19:00 GMT. Better than expected GDP numbers may help push the EUR/USD pair back towards $1.3500 and Gold towards $1355 an ounce.

EUR - EUR Drops below $1.3600 despite Initial Surge

The euro dropped against the dollar Monday, surrendering all gains made following Ireland's official request for aid as investors turned to Spain and Portugal as the next possible euro-zone sovereign debt casualties. The Irish government Sunday said it had formally applied for tens of billions of euros in aid from the European Union and the International Monetary Fund.

Political uncertainty, brought on by Ireland's Green Party's call for new general elections in January added to the negative pressure on the common currency. The EUR dropped below $1.3600 after nearing $1.3800 earlier on Monday. It also dropped over 150 pips versus the JPY to currently trade around 113.00.

Commodities such as Gold and Silver have been benefiting from the uncertainty surrounding Irish government's request for financial aid as well as other indebted euro-zone nations as the metals are perceived as an alternative investment with Gold reaching a high of $1367 Monday.

A busy news day is expected from the euro-zone today with the release of the French, German and euro-zone Manufacturing and Services PMI data at 8:00, 8:30 and 9:00 GMT respectively; better than expected numbers may provide a much needed boost for the euro.

JPY - JPY Gains versus EUR, GBP

The USD/JPY continues its recent range trading, staying comfortably between 83.00 and 83.60. The Japanese currency, however, made great gains versus the EUR and the Pound Monday, gaining over 150 pips against both currencies. The yes is perceived as safe haven currency and tends to benefit greatly in times of financial uncertainty as is the current situation in the euro-zone; with the euro dragging other riskier currencies down with it, the yen benefits.

With a bank holiday in japan today, no news is expected from the region. Traders should follow, however, any news release from the euro-zone and the U.S, as well as any new developments regarding the Irish debt crisis as these will likely have great effect on the JPY.

Crude Oil - Crude Declines Below $82 a Barrel

The January delivery contract during today's early Asian trading dropped to $81.72 a barrel on the New York Mercantile Exchange. Earlier, it advanced as much as 0.4 % to $82.10.

Oil traded near $82 a barrel in New York yesterday after climbing Monday as analyst estimates showed crude inventories dropped for a third week in the U.S., the world's largest energy consumer. Spot crude declined this morning as the dollar strengthened versus the EUR and is currently trading near $81.50 a barrel.

Despite the decline in inventories Oil prices remain under pressure over speculations that Europe's debt crisis might spread, debilitating economic growth and thus reducing fuel demand. Traders are advised to follow any development from the region as any negative data will likely push oil prices back towards $80 a barrel.

Technical News

EUR/USD

Some upward movement may be expected for the pair as a bullish cross can be seen on the 4 hour chart's Slow Stochastic while the RSI for the pair is floating in the oversold territory on the hourly and 2 hour charts. Going long with tight stops may be advised for the day.

GBP/USD

While the pair is range trading at the moment with most indicators floating gin neutral territory, some upward correction may be seen today as a bullish cross is evident on the 4 hour chart's Slow Stochastic. Going long for the day may be advised.

USD/JPY

The pair is range trading at the moment between 83.10 and 83.60, with most indicators floating in neutral territory, waiting on a clearer direction for the pair may be advised

USD/CHF

While the par is currently range trading, with most indicators in neutral territory, it seems that there is still room for the downward momentum to continue as the daily and weekly RSI are floating in the overbought territory. Going short may be a good option for the day.

The Wild Card

GBP/CHF

The RSI for the pair is floating in the oversold territory on the 2 hour and 4 hour charts. A bullish cross is evident on the 4 hour chart's Slow Stochastic while a doji candlestick is seen on the chart, indicating a possible reversal in direction. Forex traders may be advised to go long for the day.

Current Time: 10/01 05:17 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/01
07:30AUD+ Commodity Prices y/y-11.5%*-1
08:15EUR+ Spanish Manufacturing PMI52.852.3-3
08:30CHF+ SVME PMI52.952.1-1
08:45EUR+ Italian Manufacturing PMI49.849.4-3
09:00EUR+ Final Manufacturing PMI50.550.5-1
09:30GBP+ Manufacturing PMI52.552.6-5
10:00EUR+ Final GDP q/q---1
13:15USD+ ADP Non-Farm Employment Change204K206K-5
14:45USD+ Final Manufacturing PMI57.958.0-1
15:00USD+ ISM Manufacturing PMI58.056.8-5
15:00USD+ Construction Spending m/m1.8%0.5%-1
15:00USD+ ISM Manufacturing Prices58.058.6-5
15:30USD+ Crude Oil Inventories-4.3M--3
00:50JPY+ Monetary Base y/y40.5%38.9%-1
10/02
01:00NZD+ ANZ Commodity Pricesm/m-3.3%*-1
01:00AUD+ HIA New Home Salesm/m-5.7%*-1
01:00EUR+ Spanish 10-y Bond Auction2.27|1.8*-1
01:00EUR+ French 10-y Bond Auction1.32|2.8*-1
02:30AUD+ Building Approvals m/m2.5%1.1%-5
02:30AUD+ Trade Balance-1.36B-0.78B-5
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