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Wednesday, 7 Jul 2010
Markets Continued Previous Week Risk Taking
The EUR/USD pair continued last week rally during Tuesday trading session, which was the first trading day in the U.S. during this short trading week. The strength of the Euro came along with the Non Manufacturing Purchasing Manager's index which came lower than expected at 53.8. This figure was released after an array of disappointing data, adding to concern about U.S. continual growth. The EUR/USD pair traded higher through the day but paired some of its gains due to analysts warning about the Euro.
USD - ISM Non Manufacturing Came Lower Than Expected
The dollar fell against most of its major counterparts Tuesday after data showed Non- Manufacturing PMI fell in June, raising doubts about the U.S. economy and causing investors to reduce exposure to risk. Analysts are concerned the U.S. would not grow in 2010 as anticipated earlier in spite of fiscal packages introduced during 2009-2010. These concerns are turning the U.S. Dollar weaker against its major counterparts.
The EUR/USD cross is actually currently trading higher by 60 pips today at 1.2600 levels. Against the Yen, the Dollar is trading lower by 30 pips at around 87.50 which served as a significant support line. The AUD and CAD were among the biggest gainers yesterday and closed trading at $0.8488 and 1.0560 respectively.
Today is a quiet news day for the U.S., as there are no economic data releases on the calendar today. However, Japan and Euro-zone appear to be releasing the bulk of today's news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations.
EUR - Rally Continued Due to Weak U.S. Disappointing PMI figures
The Euro continued its rally against the U.S. Dollar. The rally was supported by an array of weak economic data since last week. The latest figure, Non Manufacturing Purchasing Manager's index, released yesterday came less than expected. The EUR traded much higher against the USD during yesterday's trading session as it reached $1.2661. Thereafter it paired some of it gains, while analysts raised concerns about the EUR. The rally thus far is seen more as a correction as traders locked recent profits from betting against the EUR. The Euro is also supported by the speculation that China is buying the Euro to keep the European currency high and support local export to Europe.
The EUR also staged a rally versus the British Pound; EUR/GBP is currently trading at 0.8330, two weeks high, after hitting 19-month lows at a 0.8065.
Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the German Factory Orders at 10:00 GMT. Analysts are forecasting this figure to decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the EUR in the short-term.
JPY - Remained a Safe Heaven Currency
The JPY strengthen slightly against the U.S. Dollar as investors expressed their concerns about the U.S. economy by selling the U.S. Dollar and buying the Japanese yen. The Yen traded mixed yesterday against its major counterparts. It strengthened against the British pound, but was weaker against AUD and the EUR.
Looking ahead to today traders should pay attention to the 87.33 support line, crossing down may take the USD/JPY even lower. Some analysts estimate that the yen should rebound its recent rally against the USD.
Crude Oil - Worries about Double Dip Hit Crude Oil price
Crude Oil price was slightly higher yesterday after recovery concerns sent the price lower by more than 8% during last week trading session. It is expected to remain flat today or little change, due to low volume of economic news released. However, price might decline further in the short term even toward $65 if economic figures continue to deteriorate. Investors are worried about a possible double dip, or a renewed recession. Crude Oil is trading at 72.15, during early trading hours.
Gold prices have dropped significantly during early trading hours today, after reaching record high levels last week. Gold is considered a safe haven when expectations are for high inflation. Recent data indicating a possible deflation is sending investors away from holding Gold. Gold price decline trend is expected to continue if more U.S. figures indicate global recovery is slowing. Gold price is trading at 1189.15 during early trading hours.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.2585 level. The daily chart's Slow Stochastic is showing a fresh bearish cross suggesting that downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The cross has been dropping for the past month now, as it now stands at the 87.50 level. However, the daily Chart's RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long with tight stops may turn out to be the right choice today.
The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the RSI. Going long with tight stops may turn out to pay off today.
The Wild Card
Gold prices have dropped significantly yesterday and peaked at $1189.15 an ounce. However, on the daily chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.
|13:30||USD||Challenger Job Cuts||y/y||-22.5%||-||42.7%|
|14:15||USD||ADP Non-Farm Employment Change||201K||212K||-|
|15:45||USD||Final Manufacturing PMI||53.4||53.4||-|
|16:00||USD||ISM Manufacturing PMI||52.8||53.2||-|
|16:00||USD||ISM Manufacturing Prices||49.5||52.1||-|
|16:30||USD||Crude Oil Inventories||-4.9M||-1.9M||-|
|01:00||EUR||French 10-y Bond Auction||-||-||-|
|01:00||EUR||Spanish 10-y Bond Auction||-||-||-|
|03:00||NZD||ANZ Commodity Prices||m/m||-4.7%||-||-|
|05:45||JPY||10-y Bond Auction||0.45|2.7||-||-|
|09:00||EUR||Spanish Unemployment Change||-118.0K||-||-|