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Tuesday, 6 Apr 2010

Markets Respond to U.S. Employment Results

Following Friday's U.S. Employment figure, the best in three years, risk taking returned to the marketplace. Additionally, the U.S. economy saw further signs of improvement after yesterday's ISM Non-Manufacturing PMI and Pending Home Sales reports. While risk taking caused the Euro to trade above the 1.3500 level throughout yesterday, it has since fallen almost 100 pips to its current level of 1.3430.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndowndownupupdown
Weekly Trenddownupupupupdown
Resistance1.34951.530094.801.07500.93000.8895
1.34751.528094.601.07300.92800.8875
1.34451.525094.301.07000.92500.8845
Support1.33851.519093.701.06400.91900.8785
1.33551.516093.401.06100.91600.8755
1.33351.514093.201.05900.91400.8735

Economic News

USD - Unexpectedly Higher Pending Home Sales Leads to Dollar Gains

The Dollar had a mixed trading day yesterday in response to a number of economic indicators, including Friday's employment data. The Pending Home Sales figure came in at 8.2%, significantly higher then expected, while the ISM Non-Manufacturing PMI also exceeded predictions.
The greenback was able to capitalize on the positive data, making fairly significant gains against the Euro and British Pound. EUR/USD, currently trading around the 1.3415 level, is down over 60 pips since last night. Similarly, GBP/USD has fallen some 80 pips to its current level of 1.5214. That being said, it appears that the Dollar's record highs against the Yen have begun to reverse. While USD/JPY is still trading around the 94.00 level, it has dropped some 50 pips since yesterday afternoon. The dollar was also lower against commodity currencies such as the CAD, with the pair currently trading at 1.0019, down 50 pips from yesterday.
Apart from the Federal Open Market Committee (FOMC) meeting minutes, there is no other significant U.S. news scheduled to be released today. Traders will want to pay attention to a number of important indicators later in the week, including the Consumer Credit report set to be released on Wednesday and the Wholesale Inventories report on Friday.

EUR - EUR/USD Reverses Bullish Trend

European markets were closed last Friday and Monday, resulting in low volatility. With markets reopening today, the single currency is forecasted to drop as investors digest the positive American news of the last few days. While EUR/USD managed to stay above 1.3500 throughout the day yesterday, it has since corrected itself and is currently at the 1.3420 level.
European currencies are still under pressure over sovereign debt worries, as well as fears of ratings downgrades. Greece is planning to raise capital this month in the U.S. via bond issue, which could bring confidence back to the Euro. That being said, failure on Greece's part could put further pressure on the currency. This week traders will want to pay attention to the ECB and BOE statements due on Thursday. While a hike in interest rates is not expected, investors will likely look for clues about any future changes. With both the Euro and Pound still down against the Dollar, any positive European news will likely lead to a boost for the currencies.

JPY - Yen Makes Gains Against its Major Counterparts

The Yen was able to make moderate to high gains versus its major counterparts yesterday, including the Euro and Dollar. Analysts largely attributed the Yen's gains to an increase in Japanese exports. While JPY reached a seven month low against the Greenback last week, the pair has since started to slowly retreat, and is currently trading around the 94.00 level. The Yen has seen a significantly higher gain against the Euro over the last 24 hours. EUR/JPY is currently trading at 126.22, down well over 100 pips since yesterday morning.
This week, traders will want to pay attention to the BOJ policy meeting, set to begin on Tuesday. While no dramatic changes are forecasted to take place, the meeting could provide valuable clues regarding the direction of the Japanese economy.

Crude Oil - Crude Oil Prices Surge

Oil is currently trading around the 86.50 level, slightly down from overnight trading. Unexpectedly positive U.S. Pending Home Sales data helped boost Crude prices yesterday, a continuation of the surge caused by Friday's unemployment report. Crude Oil has recently reached an 18-month high. Providing prices can stay above $85 a barrel today, analysts are forecasting an even greater increase in prices. That being said, recent Dollar gains indicate that a downward correction for oil may be imminent. Traders will want to carefully watch the direction oil takes versus the Dollar in trading today.

Technical News

EUR/USD

The price of this pair appears to be floating in the over-sold territory on the daily chart's RSI indicating an upward correction may be imminent. The upward direction on the hourly chart Slow Stochastic also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

The pair has been range-trading for a while now, with no specific direction. The Daily chart's RSI providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourly chart might be a good strategy today.

USD/JPY

The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily chart's RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. Going short with tight stops may turn out to be the right choice today.

USD/CHF

The USD/CHF cross has experienced a bullish trend yesterday. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

The Wild Card

Crude oil

Crude oil prices rose significantly in the last week and peaked at $86.35 per barrel. However, the daily chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

Current Time: 09/22 01:35 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/22
14:00EUR+ ECB President Draghi Speaks***5
15:00EUR+ Consumer Confidence-10--3
15:00USD+ Existing Home Sales5.15M--3
15:05USD+ FOMC Member Dudley Speaks***3
00:30USD+ FOMC Member Kocherlakota Speaks***3
09/23
08:00EUR+ French Flash Manufacturing PMI46.9--5
08:00EUR+ French Flash Services PMI50.3--3
08:30EUR+ German Flash Manufacturing PMI51.4--5
08:30EUR+ German Flash Services PMI54.9--3
09:00EUR+ Flash Manufacturing PMI50.7--3
09:00EUR+ Flash Services PMI53.1--3
09:30GBP+ BBA Mortgage Approvals 42.8K--3
09:30GBP+ Public Sector Net Borrowing-1.1B--3
13:30CAD+ NZD Core Retail Sales 1.5%--5
13:30CAD+ Retail Sales m/m1.1%--3
13:30CAD+ Retail Sales m/m1.1%--3
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