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Monday, 21 Mar 2011

Oil Soars as UN-Authorized Strikes Rain Down on Libyan Targets

The price for a barrel of Light, Sweet Crude soared over the past several trading days, climbing above $103.75 in this morning's early trading session. After approving limited action to quell Muammar Qaddafi's assault on the Libyan rebels in Benghazi, the UN airstrikes have had the effect of pushing oil prices higher through an anticipated disruption in supply.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupdownupupup
Weekly Trendupupdowndowndownup
Resistance1.42501.619081.750.91301.01000.8815
1.42301.617081.550.91101.00800.8795
1.42001.614081.250.90801.00500.8765
Support1.41401.608080.650.90200.99900.8705
1.41101.605080.350.89900.99600.8675
1.39901.603080.150.89700.99400.8655

Economic News

USD - USD Bearish as Long-Term Investment Declines

The U.S. dollar fell against most of its major currency counterparts during last week's trading session. It saw a 300 pip fall against the euro and a 210 pip drop against the British pound. As a result, the EUR/USD has crossed the 1.4150 threshold and the GBP/USD is trading near the 1.6220 price level.

The dollar's weakness was brought on suddenly by disappointing economic releases from the U.S. The Long-Term Purchases report has shown that global demand for U.S. stocks, bonds and other financial assets fell in March. Net buying of long-term equities, notes and bonds totaled $51.5 billion during the month, compared with net buying of $62.5 billion in February.

In addition, the Building Permits report out of the U.S. increased less than projected in March. American housing has been steadily climbing lately, but a number of indicators have shown that the speed of recovery is slower than anticipated at almost every turn, with another wave of foreclosures nationwide dogging the housing and construction markets.

As for the week ahead, the most impacting economic releases from the U.S. look to be the Existing Home Sales and Durable Goods Orders. Traders are advised to follow these reports considering their correlation to local investment and the housing market mentioned in the above paragraphs. If we should see a continuation of last week's trends, the USD may persist in its bearishness.

EUR - Euro Upbeat as Many Anticipate Bailout Talks at EU Summit

The euro saw a bullish trend against most of the major currencies during last week's trading session. The euro gained about 300 pips against the U.S. dollar, and the EUR/USD pair has crossed the 1.4150 line. The 17-nation common currency also saw a 460 pip gain vs. the Japanese yen, recovering much of its losses following last week's flight to safety by investors.

The euro strengthened last week partially due to a U.S. stock market rally. The rally has boosted risk appetite in the market modestly, and as a result increased demand for higher yielding assets, such as the euro and the British pound.

The euro was also affected by the bearish dollar. The dollar weakened last week after several economic reports have shown that the U.S. economy is recovering at a slower pace than estimated.

Looking ahead to this week, the euro actually appears relatively quiet in comparison to its currency rivals. Today's ECOFIN meeting may produce some volatility if remarks by these economic delegates provoke any changes in risk portfolios, but otherwise little activity is due to be experienced by the EUR.

Throughout the week the euro will take a back seat to the British pound and Canadian dollar, whose respective countries will be publishing heavy reports this week. Friday's German business climate reports, however, should be an event worth watching given their recent rise in prominence during these times of economic uncertainty.

JPY - Japanese Yen on the Defensive as Traders Test BOJ Resolve

Following Monday's joint intervention by the G7, the Japanese yen appears to be on the defensive against unwanted volatility. The Bank of Japan's (BOJ) policy at the moment appears to be controlling volatile price swings, but not direction. While the massive spike in yen values appears harmful to Japan's economic recovery, it also grants the country stronger buying power in a time when it desperately needs to import reconstruction supplies and aid.

The boost to the yen's buying power makes their earthquake and tsunami rebuilding efforts more affordable. This means the BOJ may not necessarily favor weakening the yen at the moment, but controlling for its volatility instead.

Many traders are expecting a technical buy-in on the yen as this anticipated inaction by the BOJ to control direction allows traders to capitalize on numerous issues which favor yen-buying. These factors include geopolitical instability, unwinding carry trades, risk aversion, and low liquidity given Japan's absence from today's market as the nation celebrates Vernal Equinox Day. Additional yen strengthening should be expected this week as a result.

Crude Oil - Crude Oil at $103.75 as Bombs Descend on Libyan Targets

The price for a barrel of Light, Sweet Crude soared over the past several trading days, climbing above $103.75 in this morning's early trading session. After approving limited action to quell Muammar Qaddafi's assault on the Libyan rebels in Benghazi, the UN airstrikes have had the effect of pushing oil prices higher through an anticipated disruption in supply.

Market analysts are now expecting the UN joint naval and aerial operations to provoke a longer-term decline in oil production from the region as the Libyan supplies are removed from the market share over the coming weeks, with the possibility of an even longer period if tensions are not resolved soon. So long as the battle against Qaddafi continues, and as recovery efforts in Japan get underway, traders should expect a persistent uptrend in oil prices as speculators buy into the notion of a decline on the supply side.

Technical News

EUR/USD

The surging price of this pair has not yet signaled any downward correction on the longer-term technical indicators. The RSI on both the daily and weekly chart is just shy of entering the over-bought region. However, there does appear to be a bearish cross forming on the daily and weekly Stochastic (slow), suggesting an impending downturn may be developing. Waiting for the swing and then entering short may be a wise move over the coming days.

GBP/USD

This pair is once more testing the 1.6220 price level and meeting strong resistance. There appears to have been a recent bearish cross on the weekly Stochastic (slow) and the oscillator is now moving in a downward direction. Going short on this pair appears to be preferable today.

USD/JPY

Following last week's intense volatility in this pair, most indicators look to be leveling off in neutral territory. Not many indications are being signaled by the mid- and long-term charts. Waiting for a clearer signal may be a wise decision as a result.

USD/CHF

There seems to be a recent bullish cross on the weekly Stochastic (slow), highlighting a growing level of upward pressure on this pair. There does not seem to be much corroborating information to support this move, however. As a result, it appears keeping with the current downtrend and going short looks more probable over the coming week.

The Wild Card

Silver

Silver prices have been bouncing against the $36 an ounce price level for the past several days and failing to breach. With the US dollar in decline since Wednesday, commodity prices may find additional support this week. However, a few indicators on Silver's long-term charts suggest that it could see another bounce off the $36 price level. If this commodity fails to breach that line once again, forex traders may be able to make lucrative profits with a short entry position near that price.

Current Time: 07/29 02:11 GMT
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