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Wednesday, 15 Dec 2010

Positive Tankan Manufacturing Survey Could Boost JPY

The unexpected positive movement in the Japanese Tankan survey this morning helped to boost the yen against some of its European rivals in today's trading, despite its downward movements against the CHF and USD. Traders should expect those Tankan figures to play out in today's trading as well, with a likely positive retracement in the JPY against those other currency rivals.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trenddowndownnodowndownup
Weekly Trendupdownupdownupup
Resistance1.34321.584484.620.96951.00310.8550
1.34101.582584.410.96741.00100.8531
1.33821.579484.100.96450.99810.8500
Support1.33211.573383.490.95840.99200.8439
1.32901.570183.190.95550.98910.8410
1.32711.568083.000.95340.98700.8391

Economic News

USD - Fed Policy Statement Strengthens Dollar

The US dollar strengthened yesterday after the Fed's monetary policy statement strengthened expectations that it would complete its stimulus plan. Traders are expecting further Fed stimulus to lead to stronger growth for the US economy, which is what has been pushing up short-term Treasury yields lately.

Completing the Fed's plan to buy $600 billion of Treasury bills by June would also increase the chance that the US could eventually experience a run-up in inflation, boosting longer-term yields. As a result, the EUR/USD experienced a solid retracement in yesterday's trading, closing at 1.3340, down from the previous day's high of 1.3432.

Today's publication of the American consumer price index (CPI) could show that inflationary figures on the consumer side are already in positive growth, laying the groundwork for future interest rate hikes.

The long-term investment figures from Treasury International Capital (TIC) could also show positive growth in foreign investment. The heavy volume of news expected today should lead to higher volatility in the market which may lead to a stronger recovery in the dollar following Monday's losses.

EUR - US Fed Speculation Drives EUR Lower in Tuesday Trading

The euro pared gains and retreated from a 3-week high against the US dollar yesterday after stronger-than-expected US retail sales data lifted bond yields and investor optimism about the American economy. The EUR/USD was trading lower at 1.3340 by the day's close, down from 1.3432. The EUR/AUD experienced similar losses with a closing price of 1.3413, down from 1.3500.

The euro remained stronger against its other currency counterparts; however, as the EUR/JPY moved up almost 100 pips since Tuesday's open and the EUR/GBP continues to move in a bullish direction, currently trading 0.8470.

Additionally, the European Central Bank (ECB) stepped up its purchases of government bonds last week, although the amount bought was still well below levels reached last spring. This has been one of the deciding factors in the EUR's mixed movements.

The euro will be largely absent from the economic calendar today, with only two minor publications expected. Britain's economic news may lead the European session with important unemployment data at 9:30 GMT and industry sales data at 11:00 GMT. The EUR is likely to continue the trends established at yesterday's close, but the pound may experience some heavy volatility in the morning hours of the European session.

JPY - Unexpected Optimism in Japanese Tankan Survey Mutes JPY Losses

Asian stock markets were mixed this morning, with shares in Japan weighed by a report showing a weak outlook for the country's manufacturing sector. The Tokyo market was slightly up, with demand capped by dim local economic news. The yen, surprisingly, was also lower as investment seemed to away from the Asian economies and into higher yielding assets.

The JPY was down against its major counterparts this morning, with the USD/JPY up at 83.85, from yesterday's low of 82.83. The safe-haven Swiss franc made the more significant gains against the yen with a 7-day streak of bullishness pushing the pair from 84.06 last Tuesday to a current price of 87.04.

The unexpected positive movement in the Tankan survey this morning did, however, help boost the yen against some of its European rivals, such as the EUR and GBP. Traders should expect those Tankan figures to play out in today's trading, with a likely positive retracement in the JPY.

Crude Oil - Oil Prices Continue Slide despite Canadian Pipeline Restart

The price of Crude Oil has been consolidating towards the $88 price level over the last week. News out of Canada regarding a pipeline restart was expected to halt the recent decline in crude prices, but appears to have had little impact. The latest movements have pushed the price from yesterday's high of $89.46 to a current price just over $87.80.

Positive economic data out of the United States has pushed the US dollar higher against its primary rival, the euro, leading to added bearish pressure to commodity prices. Precious metals like Gold and Silver also experienced a mild downturn in trading yesterday, suggesting the slide in oil prices were being driven by USD factors. Today's economic figures will likely have similar results. Traders should keep an eye on the American data at 13:30 and 14:00 GMT as this will likely drive dollar volatility today.

Technical News

EUR/USD

The price on this pair appears to be descending out of the over-bought region on the 8-hour and weekly RSI, suggesting a buildup in bearish momentum. A fresh bearish cross on the 8-hour Stochastic (slow) supports this notion. Going short appears preferable today.

GBP/USD

A recent bearish cross on the daily Stochastic (slow) indicates that impending bearishness could be in store for this pair today. The descending pattern on the weekly RSI adds weight to this concept. Going short may be ideal in today's market.

USD/JPY

The fresh bearish cross on the weekly Stochastic (slow) suggests an impending downward retracement to this pair's recent upward movement. An impending bearish cross on the 4-hour Stochastic (slow) suggests the same. Going short with tight stops may be a wise tactic today.

USD/CHF

The price on this pair appears to have recently breached the over-sold region on the daily RSI, suggesting an impending buildup in bullish pressure. A similar position on the 4-hour RSI and a fresh bullish cross on the 4-hour Stochastic (slow) both support this notion. Going long appears to be today's preferable strategy.

The Wild Card

EUR/CHF

This pair is showing a price just beginning to ascend out of the over-sold region on the daily RSI, suggesting a momentum shift may be occurring to the latest string of downward movements. The imminent bullish crosses on the daily and weekly Stochastic (slow) oscillators also suggest that forex traders may have a great opportunity to catch a trend reversal in action. When the price swings back upward, going long with tight stops could turn out to be highly profitable.

Current Time: 10/23 02:57 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
10/23
03:35JPY+ Flash Manufacturing PMI51.752.1-1
09:00EUR+ French Flash Manufacturing PMI48.848.6-5
09:00EUR+ French Flash Services PMI48.448.2-3
09:00EUR+ Spanish Unemployment Rate24.5%24.1%-3
09:10GBP+ MPC Member Broadbent Speaks3
09:30EUR+ German Flash Manufacturing PMI49.949.6-5
09:30EUR+ German Flash Services PMI55.755.0-3
10:00EUR+ Flash Manufacturing PMI50.350.0-3
10:00EUR+ Flash Services PMI52.452.0-3
10:30GBP+ Retail Sales m/m0.4%-0.1%-5
10:30GBP+ BBA Mortgage Approvals 41.6K43.5K-3
12:00GBP+ CBI Industrial Order Expectations-4-3-3
14:30USD+ Unemployment Claims 264K269K-5
15:00USD+ HPI m/m0.1%0.4%-1
15:45USD+ Flash Manufacturing PMI57.557.2-3
16:00EUR+ Consumer Confidence-11-12-1
16:00USD+ CB Leading Index m/m0.2%0.8%-1
16:30USD+ Natural Gas Storage 94B97B-1
23:45NZD+ Trade Balance-472M-620M-5
10/24
01:00EUR+ EU Economic Summit---3
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