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Monday, 11 Jul 2011
Precious Metals Rising amid Risk Uncertainty
The price of precious metals like Gold, Silver, and Platinum found support this past week despite the rising strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since this past April, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from Greece and dismal jobs reports out of the US. So far, this resurgence appears to be gaining momentum as these words are being written.
CAD - CAD Losing Steam as US Recovery Outlook Weakened
The Canadian dollar was seen in decline last week as traders began to view the lackluster performance of the US economy these past several weeks as a sign that regional economic growth will be limited. The USD/CAD moved from its two-month low of 0.9563 to 0.9693 on Wednesday before consolidating near its current price level of 0.9625.
Though news from Canada has been primarily bullish, forex traders investing in the CAD, charmingly known as the Loonie, have been predisposed to short the region in general as the US economy falters. Assisting this shift was a dismal NFP jobs report out of the American economy which revealed sluggishness in US employment growth that may affect economic and financial outlook for the US and its neighbors.
As for today, the US economy will be absent from the economic calendar, but Canada is set to release two significant reports which may impact the Loonie greatly. The first is a housing report expected at 13:15 GMT which is forecast to show continued growth along the lines seen last week.
At 15:00 GMT, the Bank of Canada (BOC) will release its Business Outlook Survey that should summarize the points made above more clearly. The CAD may be consolidating, but if the BOC report can capitalize on the independent growth of Canada beyond American economic prosperity, the currency could see some gains today.
EUR - French Industrial Production on Tap
The euro (EUR) was seen trading lower last Friday following news of pessimistic growth in the US job sector. Against the US dollar (USD) the euro was trading somewhat bearish in late trading as shifts into safe-haven investments pulled money out of the euro and into stores of value. The EUR/GBP, however, was more straightforward, with a severe downturn coming Thursday, followed by even more bearishness on Friday. The pair ended the week moving from 0.9050 to 0.8860.
It appears the EUR also moved mildly lower versus the Japanese yen as safe-haven assets across the board experienced a rise due to increased market pessimism. Today's industrial production figure out of France may see the region's second largest economy returning to growth in the industrial sphere, but should the data disappoint market forecasts, a quick swing into additional safety will likely ensue.
Sentiment across the euro zone has turned negative, with many analysts and economists expecting a move towards safety by traders this week. Last Friday's NFP jobs report out of the American economy forced a reevaluation by several large investors who had become hopeful after ADP published positive growth in the private sector. Any more bearishly-leaning news out of either economy will likely pull down on the EUR even further as investors flee risk.
JPY - JPY Trading Higher as Safe-Haven Assets Grow
The Japanese yen (JPY) was seen trading moderately higher versus most other currencies last Friday after news began to shift many traders back into risk averse assets. The yen has been a top performer these past several months considering many traders turn to the island powerhouse in times of risk aversion; a sentiment of high frequency these past four years.
Given this understanding, traders witnessed a turn towards safety after last Friday's NFP report from the United States. The resultant move into safe-haven assets has helped to lift the JPY as traders turn to its record low interest rates as a way to store value in times of uncertainty. Japan's economy is publishing several reports this morning, all of which will likely impact the value of the yen very little. Traders should keep an eye on data out of Europe and the United States for signals on the direction of risk appetite this week.
Gold - Gold and Silver Prices Advance despite USD Pressures
The price of precious metals like Gold and Silver found support this past week despite the rising strength of the US dollar, the currency in which such assets are valued. Precious metals bear their name as a result of their traditional store of value in times of uncertainty. Gold has been trading with rather mild price action since this past April, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from Greece and dismal jobs reports out of the US.
As investors seek safety, the value of gold and silver, which have been seen trading with mixed results, jump to a 2-week high of $1542.60 and $36.60 per troy ounce, respectively. A sudden jump in dollar values due to this week's risk averse environment has so far done little to suppress this price movement as all three assets serve as traditional stores of value. Should risk sentiment hold steady this week, the prices for these precious metals may continue to find support as the week moves ahead.
After a false breakout higher from the triangle chart pattern the EUR/USD is approaching the rising support line off of the May low at 1.4160. Falling daily and monthly stochastics suggest the next move will be to the downside. A break here and the next major support is found at 1.3970. The 200-day moving average at 1.3905 may also prove supportive. Below this key technical mile marker the rising trend line from the 2010 May low comes in at 1.3710 and traders may see buying interest at this level. To the upside the July 7th high at 1.4370 could be supportive, as well as the falling resistance off of the May and July highs at 1.4530. A close above the June high at 1.4700 would likely signal a shift in momentum to the upside.
Cable is caught in a 220 pip range as the pair struggles to stay above its 200-day moving average and its initial support at 1.5910. A move lower and the next support to enter the picture stands at the late January low of 1.5750, not far from the 38% Fibonacci retracement from the 2010 May to 2011 April move. Support is also found at 1.5650 which has served as both support and resistance in October and in December of last year. The consolidation pattern is capped at 1.6140 where the neckline from a head and shoulders pattern rests. For traders who are not yet short this would be a point from which to sell a potential rally. The head and shoulders reversal chart pattern shows a measured move which could take the GBP/USD lower to 1.5370.
A series of higher highs and lower lows has created a bullish channel on the daily chart but the pair will likely remain locked in a range that has contained the USD/JPY since early June. A number of resistance levels will provide ample opportunities to sell into any gains, a play that is in-line with the long-term trend. The top of the channel is found at 81.50 and is close to the 100-day moving average. Additional resistance is located at the May high of 82.20 and the falling trend line from the 2007 high comes in at 82.80. The bottom of the channel could prove to be supportive at 80.45 but a break here could test the May low at 79.50.
The daily chart provides an interesting technical picture for the Swissie. The pair is flirting with its 50-day moving average at 0.8550, a technical indicator the pair has not traded above since February. A potential head and shoulders bottom reversal may also be forming with the neckline falling from the mid-June highs and the high from July 1st. A measured move from the pattern suggests potential gains of 260 pips and a reversal would likely target the mid-May lows at 0.8755 and the March 16th spike lower which is also a Fibonacci retracement target at 0.8845.
The Wild Card
Spot crude oil prices have moved higher from a falling wedge pattern that appeared on but have stalled at the psychological $100 price level. Given the measured move from the chart pattern and the current resistance levels, a likely target would be the $104.50-$105.50 range between the mid-May high and the mid-April low. Support is found at the falling wedge line which comes in just below $92.50. Forex traders who missed the initial breakout may be patient and wait for a pullback to the wedge line where the pair could bounce higher which often occurs with a wedge chart pattern.
|03:00||CHF||Daylight Saving Time Shift||-||-||-|
|03:00||EUR||Daylight Saving Time Shift||-||-||-|
|03:00||GBP||Daylight Saving Time Shift||-||-||-|
|01:00||EUR||German Prelim CPI||m/m||0.9%||-||-|
|01:00||EUR||Italian 10-y Bond Auction||1.36|1.5||-||-|
|01:50||JPY||Prelim Industrial Production||m/m||3.7%||-||-|