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Monday, 29 Aug 2011
Jackson Hole Speech Delivers Sober Assessment
Bernanke's sober assessment of the US economic condition at the Jackson Hole Symposium in Wyoming initially drove many investors into the value of the dollar as a vote of confidence that further measures could be taken, but weren't at this time. But a sudden flight to higher yielding assets generated a wide swing in dollar values by late trading Friday, with the USD's value now floating near weekly lows.
USD - US Dollar Dips on Risk Taking Surge
The US dollar (USD) was seen trading bearish Monday morning as traders saw a sharp rise in risk taking following last week's statements by Fed chairmen Ben Bernanke. The EUR/USD jumped from last Friday's low of 1.4328 to a weekly high of 1.4485 in this morning's early trading hours. The USD/JPY dropped a similar amount as dollar traders dumped the greenback en masse in exchange for other assets.
Bernanke's sober assessment of the US economic condition initially drove many investors into the value of the dollar as a vote of confidence that further measures could be taken, but weren't at this time. But a sudden flight to higher yielding assets generated a wide swing in dollar values by late trading Friday, with the USD's value now floating near the aforementioned lows.
As for this week, the US economic releases will focus mostly on housing, consumer confidence, and employment, with the ever-important Non-Farm Payrolls (NFP) data being released this Friday. Today's publications also appear to be USD-heavy. Liquidity will likely be higher in today's afternoon trading as several events are being published in rapid succession by the American economy. Housing data will get published at 15:00 GMT after earlier data gets released on personal income and spending.
EUR - EUR Bullish as Traders Seek Higher Yields
The euro (EUR) was seen trading with largely bullish results this morning following Friday's sobering assessment by Fed chairman Ben Bernanke. Against the US dollar (USD) the euro was trading near a weekly high of 1.4485 before leveling off in today's early Asian sessions. Against the Great British pound (GBP), however, the EUR soared, making significant gains and reaching a high not seen since the rapid spike of August 10.
Traders are looking for a way to balance a renewal of risk appetite with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be standing on uncertain ground as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains despite the sudden risk-taking sentiment.
Economic sentiment across the euro zone remains negative, with many analysts and economists expecting moves towards safety by traders this week following last Friday's sudden surge of risk taking. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today's data turns negative, the EUR is likely to take a hit.
JPY - JPY Bullish as Intervention Fails to Quell Buying
The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven continues to push its value bullish. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.
The latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan's (BOJ) latest intervention. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan's current financial model. The persistence of the yen's rising strength is causing some furrowed brows in Japan's economic circles.
Gold - Gold Price on the Rise
The price of Gold found support over the weekend amid the plummeting strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from the euro zone's periphery and a recent downgrade of US debt by S&P's ratings agency.
As investors seek safety, the value of gold, which has been seen trading with mixed results, is expected to rise, but a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week's uncertain environment is expected to assist the sentiment favoring Gold. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value.
Last Friday's candlestick posted an outside day up, a telling bullish signal. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.4520 area. Initial resistance for the pair comes in at 1.4540. A close above 1.4700 would signal an end to the sideways price action and open the door to the next resistance level from the May high of 1.4940. To the downside the euro may find willing buyers at 1.4325 where the 20-day moving average is located. Further support is found at 1.4260 off of the rising support line from the July low as well as the long term trend line at 1.3940.
After failing to make a close above the 1.6550 resistance level sterling was sold only to find support at its 55-day moving average near 1.6210. Rising daily stochastics hint at an additional test of the range between 1.6550 and 1.6615. A break here may have scope to the April high of 1.6745. Should the 55-day average fail to contain the pair support is found at 1.6110 where the 200-day moving average is floating. 1.6000 may also prove to be supportive.
The doji candlestick reversal has bought the yen some temporary respite from the selling pressure on the 76 yen level as the pair failed to test the all-time low last week. However, falling stochastics appear on both the weekly and monthly charts and hint at additional declines in the USD/JPY. A lack of support on the charts makes it difficult to find a target to the downside. A move higher could find resistance at last week's high of 77.70 followed by 78.50 and the post intervention high of 80.20.
The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line from the February high at 0.8090 and if broken could turn into support as often occurs with previously broken trend lines. Additional resistance is found at 0.8270 followed by the 100-day moving average at 0.8340.
The Wild Card
The Swiss franc continues to weaken versus both the USD and the EUR as risk appetite shows a bit of a turnaround. The pair is currently testing its falling trend line from the April high with the next resistance located at 1.1890. Forex traders should note a break here could encounter three significant resistance levels in the near term; the 100-day moving average at 1.2020, the July 4th high of 1.2345, and the all-important 200-day moving average at 1.2460.
|10:00||EUR||Italian Retail Sales||m/m||-0.2%||0.1%||0.1%|
|12:30||USD||Final GDP Price Index||q/q||0.1%||0.1%||-|
|14:00||USD||Revised UoM Consumer Sentiment||91.2||93.9||-|
|14:00||USD||Revised UoM Inflation Expectations||3.0%||-||-|