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Wednesday, 8 Jul 2009

Risk Aversion Continues to Dominate Trading

Risk appetite among investors continues to fade ahead of the second quarter earning season. With growing fears over disappointing earnings numbers due too weak consumer consumption, investors continue to turn to the safe haven USD and JPY and away from riskier currencies. The strong Dollar and falling equities continue to hurt Oil, with Prices reaching $62 a barrel.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupdowndownupdown
Weekly Trendupupdowndownupdown
Resistance1.40100.619595.251.09800.79700.8740
1.39801.616594.951.09500.79360.8705
1.39491.613594.651.09200.79050.8675
Support1.38851.607094.001.08550.78400.8610
1.38551.604093.701.08250.78100.8582
1.38251.600893.401.07950.77800.8550

Economic News

USD - Dollar's Recovery Continues

The U.S Dollar rose broadly yesterday against the EUR and GBP, as uncertainty about the global economic outlook and forthcoming U.S. corporate earnings increased the safe-haven appeal of the USD. By yesterday's close, the USD rose against the EUR, pushing the often traded currency pair to 1.3890. The Dollar experienced similar behavior against the GBP and closed at 1.6085.

Yesterday was a quiet news day from the U.S. as there were no major economic data releases on the calendar. However, Traders are bracing for second-quarter U.S. corporate earnings, which will be released in the coming weeks. Analysts said poor results, especially from financial institutions, would likely crank up Dollar demand. Analysts are also keeping an eye on this week's G8 summit that starts in Italy today. Moreover, China, Russia and Brazil have said they will push their view that the world needs to start seeking a new global reserve currency as an alternative to the Dollar, though they admitted such a shift would take time.

Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Crude Oil Inventories at 14:30 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the USD in the short-term. Traders are also advised to follow the FOMC Member Evan Speech at around 16:55 GMT. This speech is very likely to Impact the Dollar volatility. Traders are advised to watch closely, as this is likely to set the pace of the Dollar going into the rest of the day's trading.

EUR - The EUR Loses Momentum

The EUR finished yesterday's trading session with mixed results versus the major currencies. The 16-nation currency extended gains versus the Sterling Pound on Tuesday, to trade above 0.8633 amid a broad sell-off in the GBP. The EUR did see bearishness as well, as it lost over 150 pips against the JPY and closed at 131.85.

A leading indicator released yesterday from Europe was the German Factory Orders report. Germany holds the largest and strongest economy in the Euro-Zone, and thus the relevant publications from this economy usually have a hefty impact over the EUR. Data showed orders in Germany rose at the strongest monthly pace in nearly two years in May, but economists said the yearly comparison would remain weak for some time yet. Moreover, a European Commission study warned that Europe's economy might shrink further due to the economic crisis if the right policies were not implemented and if Europe failed to resolve problems in the financial industry.

Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the German Industrial Production at 10:00 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term. Traders are also advised to follow the Halifax HPI figures coming out of Britain at 8:00 GMT, as these results may set the EUR's main currency crosses going into next week.

JPY - Yen Climbs against Majors

The Yen advanced to near the strongest level versus the Dollar in more than a month on speculation U.S. corporate earnings will drop, prompting Japanese investors to sell overseas assets and take money home. The Yen has also gained sharply against the EUR and GBP during yesterday trading session, hitting its highest level in five weeks against the Sterling at 152.30 and two week high against the EUR at 131.50.

The Yen crosses have fallen since early June, after rallying from January to multi-month highs, as the sentiment about global recovery prospects that had driven them up deteriorated.

Traders today have very little fundamental news emanating from Japan as the only indicator being released is the Economy Watchers Sentiment report. Analysts forecast the figure to increase from its previous reading. This indicator typically generates small amounts of volatility. However, the EUR and the USD appear to be clutching the reins of today's market. Traders would be wise to note their future direction as it usually carries a heavy impact on the other currencies.

Crude Oil - Another Day of Falling Crude Oil Prices

Oil prices fell for the seventh straight day yesterday, with a barrel costing $10 less than it did just one week ago when crude hit a new high for the year. Oil prices had already begun to slide after peaking last Tuesday, and dismal jobs numbers last week from both the U.S. and Europe have hastened the decline.


Optimism about a quick economic recovery and a rebound in energy demand, were dampened after the Labor Department reported last Thursday that U.S. economy lost a larger than expected 467,000 jobs in June. On the same day, a report from Europe indicated that unemployment in the 16 countries that use the EUR spiked to a 10-year high in May. However, the release of Crude Oil inventory today is likely to help determine the market's next direction for Black Gold. Therefore, traders are advised now to make some profits as the price of Crude Oil is set to remain volatile in the short-medium term.

Technical News

EUR/USD

The Bollinger Bands on the daily chart appear to be tightening, signaling that a volatile movement may be imminent. However, all oscillators show the price floating in neutral territory, and the 4 hour chart indicates a clear range-trading pattern in a bearish channel. Buying on lows and selling on highs within this channel might be a wise choice today.

GBP/USD

This pair's recent drop in value continues to hold the price in the over-sold territory on the RSI of the 4-hour and daily charts, signaling upward pressure. While the momentum appears to remain downward, we may likely see a number of upward corrections throughout the day. Buying on the lows and selling on the highs of these fluctuations will be a good strategy today

USD/JPY

The bearish momentum the pair has shown since the breach of the channel on the daily chart continues. The 4-hour chart's Slow Stochastic is showing the continuation of the trend, and the hourly studies also confirm the bearish notion. Going short might be the right choice today.

USD/CHF

After peaking at the 1.0960 level, the pair has halted its bullish momentum and is now trading around 1.0933. The RSI on the hourly chart is located around the 60 level, suggesting that the bullish move has more room to go. Going long might be the right strategy today.

The Wild Card

Gold

There appears to have been a violent breach of the upper border of the Bollinger Bands on both the hourly and 4-hour charts, signaling moderate downward pressure on the price of this commodity. However, the price currently floats in the over-sold territory on the 4-hour chart's RSI which supports the notion of a possible upward correction in the near future. forex traders can benefit from this potential trend reversal by setting early buy positions and riding out the upward movement.

Current Time: 12/20 05:33 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
12/21
21:00NZD+ Westpac Consumer Sentiment116.7--1
12/22
05:00JPY+ BoJ Monthly Report---1
15:00EUR+ Consumer Confidence-12-11-1
15:00USD+ Existing Home Sales5.26M5.21M-3
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