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Tuesday, 27 Jul 2010
Risk Appetite Rises Boosting Riskier Currencies
The EUR once again reached above $1.30 on Monday after better than expected economic data from the US, and an advance in global equities, boosted demand for riskier assets. Gold continues to decline as market concerns ease and people turn away from safe-haven assets.
USD - Dollar Declines on Renewed Risk Appetite
The US dollar declined against all of its major counterparts Monday following the release of better than expected US New Home Sales data. Combined with a boost in FedEx Corp.'s earnings, these two reports together have helped to raise demand for riskier assets. New US home purchases increased 24% from May to an annual pace of 330,000.
The Dollar depreciated 0.7% to $1.008 per EUR during today's early Asian trading, from $1.2909 at the end of last week. The dollar fell to 86.86 Yen, from 87.46.
Looking ahead to today, traders are advised to follow the release of the CB Consumer Confidence at 14:00 GMT. Better than expected results on this report may intensify the greenback's recent downtrend, especially since risk appetite will rise with a positive reading.
EUR - EUR and GBP Advance after Banks Pass Stress Tests
The EUR remained within its trading range as results from the stress tests continued to reassure investors. The common currency traded within a cent of the 10-week high of $1.3029 reached July 20; however, it has since returned to trade around $1.3015.
The EUR rose to ¥112.97, up from ¥112.11, after reaching ¥113.48, the highest level since June 3rd. The British pound also rose to $1.5490 from $1.5425 after briefly reaching above $1.55, the highest levels since late April.
The Pound advanced after a July 23rd announcement that HSBC Holdings Plc, Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc passed the European bank stress tests.
JPY - Yen Drops as Demand for Safe-Haven Currencies Diminishes
The Japanese yen fell versus all 16 major counterparts after the release of better than expected US New Home Sales data. The yen's safe-haven appeal also diminished as global equities gained and boosted demand for riskier currencies.
The JPY is currently trading at 113.07 per EUR as of today's early Asian trading, from 112.89 in New York yesterday, when it touched 113.48, the lowest since June 3. The yen is at 86.95 per USD, up slightly from 86.88.
Traders should follow the release of today's economic data from the US and Europe as positive news will likely dampen demand for the yen further.
Crude Oil - Crude Remains around $79 a Barrel
Better than expected economic data from the US and advancing global equities helped support oil prices around $79 a barrel. Crude oil for September delivery traded at $78.85 a barrel, down 13 cents in electronic trading on the New York Mercantile Exchange
Oil seems to remain between $70 and $80 as future demand remains unknown and above average stockpiles are keeping Crude from breaching higher. For the time being, oil futures continue to trade on economic data as well as movements in equities.
Traders should follow the release of today's US CB Consumer Confidence report at 14:00 GMT as better than expected results might help push oil prices closer to the $80 resistance level.
The price has broken out from the rising channel pattern on the daily chart for the second time; making a solid close above the upper line of the channel. A pullback into the channel pattern would signal a false breakout, as was the case last in last week's trading. A rise to the 38.2% Fibonacci retracement level at 1.3110 would signal a confirmation of the breakout pattern.
The pair rose as high as the resistance line of 1.5520, found the May high before falling back to close up at 1.5494. Momentum appears to be behind the price move as the 14-day Momentum indicator is sloping higher at 103, indicating further appreciation may be in store for the pair. The next significant resistance level comes in at 1.5820.
The bullish correction the pair experienced in the later half of last week came to an end yesterday. The price rose as high as the 20-day simple moving average before heading sharply lower. The inability for the pair to breach this resistance level indicates a sharp downtrend in the pair. Traders should be short with a first target at the support level of 86.25.
Shorter-time frame charts on this pair don't seem to be hinting too strongly at an impending direction. The hourly and 4-hour Stochastic (slow) and RSIs show upward mobility, but have not yet entered signal territory. We can see, however, that the weekly chart's Stochastic (slow) is giving off what appears to be a recent bullish cross. It seems upward pressure is mounting on this pair and we may see traders taking long positions as a result.
The Wild Card
After a few days of trading sideways, this pair now seems to be giving off some clear buy signals. The 4-hour Stochastic (slow) appears to be approaching the beginning of a bullish cross, indicating future upward movement. The daily and weekly Stochastic (slow) also seem to indicate an impending bullish cross. The daily RSI also appears to be floating in the over-sold territory, indicating further upward pressure. Forex traders may want to take advantage of this information and enter a short-term long position on this pair for quick daily profits.
|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%||-||-|