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Thursday, 1 Sep 2011
Risk Aversion Growing as Employment Data Slumps
Economic news this week has pushed traders into a position of market pessimism. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing Friday's NFP report before jumping into more significant investments.
USD - USD Sideways as Sentiment Bearish Across the Board
The US dollar (USD) was seen trading sideways at yesterday's close after a day of mixed news from the global economy. Mixed sentient towards risk this week was muddled even further as employment data in the United States disappointed traders with oddly bearish results.
Economic news this week has pushed traders into a position of market pessimism; though trading early in the week was acting as though no safe-haven could be found. Little news has emerged which put a dent in the amount of pessimism surrounding the forex market, traders are now eyeing Friday's NFP report before jumping into more significant investments.
With a heavy news day expected from almost every major economy, traders will be witnessing abnormal volatility combined with reluctance among investors prior to Friday's ever-important NFP publication. Following yesterday's pessimistic data from ADP's Non-Farm Employment Change report on the private sector, today's unemployment claims will offer another piece of info regarding the employment sector of the US economy. Should it also support pessimism, traders may return mildly to safer assets and away from the USD until more light can be shed.
EUR - EUR Mixed as Bearish Sentiment Increases
The euro (EUR) was seen trading with largely mixed results yesterday as traders moved into and away from riskier assets across the region. Against the US dollar (USD) the euro was seen trading sideways in late trading as shifts away from the greenback, due to uncertainty about the US employment sector, caused several market participants to opt for other stores of value.
The mixed reports out of Europe yesterday have appeared to confound traders who were anticipating a string of bearish results. Though debt concerns still loom in the region, optimistic data has had the impact of muting the EUR's losses against its primary basket of currencies. With a heavy news day expected today, traders should see some added volatility in today's EUR market.
On tap today, traders will witness the release of a highly significant report from Switzerland and Great Britain, as well as several minor figures from the euro zone. Should the data come in bearish, we could see heftier shifts to safer assets in the days and weeks ahead. This would likely push the value of the EUR lower over the long-haul as traders flee risk.
AUD - Australian Data Expected to be Bearish
The Australian dollar (AUD) was weighed down yesterday, as market reports showed contraction across the boards. Piling atop recent reports on Australia's shrinking housing sector, today's publication of Australian retail sales show a broadening contraction striking several sectors of Australia's economy.
Expectations for the retail sales report was for a modest growth of 0.3% from last month's contraction of 0.1%. The actual report has led many investors to pull away from the Australian dollar (AUD) in recent trading. National data on housing and employment has also driven many investors away from the once-burgeoning AUD. This data, combined with dismal HPI and building approvals reports, has so far dragged the Aussie lower and looks to continue doing so this week.
Crude Oil - Crude Prices Holding Steady in Mid-$80s
Crude Oil prices held steady Wednesday as sentiment appeared to favor a downturn in global stocks ahead of a speculated double-dip recession. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and manufacturing demand.
An expected jump in dollar values due to this week's risk averse environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains not materializing, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by the week's end.
Last Friday's candlestick posted an outside day up. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.4520 area. Initial resistance for the pair comes in at 1.4540. A close above 1.4700 would open the door to the May high of 1.4940. To the downside the euro may find willing buyers at 1.4325 where the 20-day moving average is located. Further support is found at 1.4260 off of the rising support line from the July low as well as the long term trend line at 1.3940.
After failing to make a close above the 1.6550 resistance level sterling was sold only to find support at its 55-day moving average near 1.6210. Rising daily stochastics hint at an additional test of the range between 1.6550 and 1.6615. A break here may have scope to the April high of 1.6745. Should the 55-day average fail to contain the pair support is found at 1.6110 where the 200-day moving average is floating. 1.6000 may also prove to be supportive.
The doji candlestick reversal has bought the yen some temporary respite from the selling pressure at the 76 yen level as the pair failed to test the all-time low last week. However, falling stochastics appear on both the weekly and monthly charts and hint at additional declines in the USD/JPY. A lack of support on the charts makes it difficult to find a target to the downside. A move higher could see resistance at last week's high of 77.70 followed by 78.50 and the post intervention high of 80.20.
The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line from the February high at 0.8090 and if broken could turn into support as often occurs with previously broken trend lines. Additional resistance is found at 0.8270 followed by the 100-day moving average at 0.8340.
The Wild Card
Similar to gold silver prices have bounced from their lows near $38.70 after falling from a high of $44.20. However, unlike gold, spot silver prices failed to break below its rising trend line from July 1st which shows that the current uptrend remains intact. Forex traders should note that initial resistance is found at $44.20, followed by the high near $50. To the downside support comes in at the trend line near $39.00 and the August low of $37.
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