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Wednesday, 28 Sep 2011
Optimism Returns to Markets; Commodities, EUR Rally
Stock markets, commodities and other riskier assets rallied Tuesday on hopes the European officials will soon reach an agreement on measures for handling the Euro-Zone debt crisis.
USD - USD Drops as Stock Markets Rally
The US Dollar declined Tuesday as global risk appetite recovered on growing speculation euro-zone will soon take measures to attack the debt crisis. As global stocks rallied Tuesday, safe currencies such as the USD and JPY declined versus their riskier counterparts.
The Dollar also lost some ground after the release of better than expected data from the US. The S&P/CS Composite-20 HPI showed U.S. home prices rose 0.9% in July and the CB Consumer Confidence also showed a slight increase this month, though came less than expected.
Wednesday, traders should follow the release of the Core Durable Goods Orders as well as the address by Fed Chairman Bernanke for clues regarding the state of the US economy and future actions.
EUR - EUR Higher on speculation of Action by Euro-Zone Officials
Riskier currencies such as the EUR gained Tuesday as sock markets rallied and optimism returned to markets. Expectations of action by Euro-Zone officials in solving the regions debt crisis prompted risk appetite from traders. The EUR rose to $1.3620, compared with $1.3497 late Monday.
The optimism may have been a bit premature and many analysts are skeptical of short term resolutions.
Traders are advised to follow the German Prelim CPI release as well as stock markets for overall market sentiment.
JPY - Yen Declines as Demand for Safe Currencies Wanes
The Yen declined as global stocks rallied on optimism European leaders will soon agree on measures to attack the debt crisis, damping demand for safe currencies.
The yen has strengthened against all its 16 major counterparts this month, prompting concern Japan will intervene in the market and devaluate the currency.
If current market optimism continues today, the Yen will likely continue to decline.
OIL - Crude future rally on Market Optimism regarding Euro-Zone Debt Crisis
Crude rose by close to $3 Tuesday as optimism regarding an imminent resolution agreement on steps by European Leader in resolving the debt crisis bolstered demand for commodities.
Crude oil for November delivery advanced $3.60, or 4.5 percent, to $83.84 a barrel.
Continued market optimism will likely support Oil prices at current level, however, a return to a bearish mode may see Oil below $80 a barrel again. Traders should follow the news releases from the US and Euro-Zone as to gauge market sentiment.
EUR / USD
The EUR/USD has gone increasingly bearish in the past few weeks, and currently stands at the 1.3630 level. The weekly chart's Slow Stochastic supports this currency cross to fall further today. However, the daily chart's Stochastic Slow signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
GBP / USD
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 weekly chart's Slow Stochastic. Going long with tight stops may turn out to pay off today.
USD / JPY
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. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
USD / CHF
The bullish trend is loosing its steam and the pair seems to consolidate around the 0.8940 level. The weekly chart's RSI is already floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The Wild Card
This pair's sustained upward movement has finally pushed its price into the over-bought territory on the weekly chart's RSI. Not only that, but there actually appears to be a bearish cross on the daily chart's Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
|07:00||JPY||BoJ Outlook Report||-||-||-|
|08:00||EUR||German Retail Sales||m/m||2.5%||-0.8%||-|
|08:45||EUR||French Consumer Spending||m/m||0.7%||-0.3%||-|
|10:00||EUR||Italian Monthly Unemployment Rate||12.3%||12.4%||-|
|11:00||EUR||CPI Flash Estimate||y/y||0.3%||0.4%||-|
|11:00||EUR||Italian Prelim CPI||m/m||-0.3%||-0.1%||-|
|13:30||USD||Core PCE Price Index||m/m||0.1%||0.1%||-|
|13:30||USD||Employment Cost Index||m/m||0.7%||0.6%||-|
|14:55||USD||Revised UoM Consumer Sentiment||86.4||86.4||-|
|14:55||USD||Revised UoM Inflation Expectations||2.8%||-||-|