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Friday, 18 Feb 2011
Swiss Franc Turns Bullish as Investors Look for Safe Havens
The combination of Middle East tensions, renewed euro zone debt concerns and a poor US Unemployment Claims figure have led to substantial gains for the Swiss franc over the last 24 hours. It appears that the safe haven CHF will likely remain bullish as long as these three factors continue to dominate the headlines.
USD - Dollar Likely to Remain Bearish to Close Out the Week
The US dollar tumbled against virtually all of its main currency rivals yesterday and in the overnight session, following the release of a disappointing Unemployment Claims figure. Losses were particularly sharp against the Swiss franc, which has recently gained traction as investors search for safe haven assets. Currently the USD/CHF is trading around the 0.9500 level, down over 100 pips in the last 24 hours.
Against the euro, the greenback lost around 70 pips yesterday before staging a minor correction during Asian trading. Currently the pair is hovering just below the 1.3600 level.
As we close out the week today, traders will want to pay attention to economic news out of the UK to judge where the USD will be heading. The UK Retail Sales figure is expected to come in at 0.6% which, if true, would signal a substantial increase over last month. Sterling has recently turned bullish against the dollar and if today's indicator comes in as predicted, it will likely extend that trend.
In addition, traders will want to focus on a speech expected from the Fed Chairman, set to occur at 13:00 GMT. Should Bernanke decide to comment on yesterday's unemployment figure, investors are likely to continue shifting their assets to the USD's main currency rivals. The dollar is therefore unlikely to reverse its losses before markets close for the weekend.
EUR - Debt Concerns Continue to Weigh Down on the Euro
While the euro was able to make moderate gains against the US dollar yesterday, the currency was virtually flat against the Japanese yen and British pound. Furthermore, against the Swiss franc the EUR saw a steep decline throughout the day.
Analysts attributed the euro's sluggish behavior to a combination of global events that are keeping investors away from riskier assets. Chief among these events is the prolonged doubt the euro zone will be able to effectively tackle its sovereign debt woes.
Today, a lack of significant news from the euro zone is unlikely to help draw investors back to the troubled currency. Still, traders will want to pay particular attention to the speech from the US Federal Reserve Board Chairman, Ben Bernanke. If he sounds a pessimistic note with regards to the US economic recovery, the dollar is likely to drop in value. This may give the euro an opportunity to extend its current bullish trend against the greenback.
JPY - Yen Sees Mixed Results Yesterday
The yen saw moderate gains against the greenback yesterday following a disappointing US Unemployment Claims figure. The USD/JPY dropped over 50 pips following the release of the figure, reaching as low as 83.15. The pair was able to stage a slight upward correction during the Asian session, and is currently trading just above the 83.30 level.
Against the Swiss franc, the yen remains decidedly bearish. Investors have been turning to the franc as a safe haven due to a number of global events. In the last 24-hours, the CHF/JPY has shot up close to 70 pips, and is currently trading right around the 87.70 level.
Today, traders will want to pay attention to a speech from the US Fed Chairman. While it is not known exactly what he will say, any mention of the poor state of the employment sector in the US will likely lead to further downward movement for the USD/JPY pair.
Crude Oil - Middle East Concerns Drive Oil Prices Higher
The price of crude oil took off yesterday, as turmoil throughout the Middle East has increased worries about whether supplies will be in any way affected. Over the last 24 hours, the price of crude has gone up almost $2, and the commodity is once again trading about the $89 a barrel level.
Today, crude oil traders will want to continue to pay attention to any news out of the Middle East. Major oil producing countries like Libya and Iran have been rocked by protests in recent days. If these protests continue, the price of oil is likely to continue to rise as investors continue to worry about production capabilities.
Most technical indicators are showing that this pair is overbought, and is likely to see a downward correction in the near future. On the 8-hour chart, the Williams Percent Range has crossed into the overbought zone, while the daily chart's MACD shows a bearish cross has formed. Going short appears to be the wise choice today.
The Stochastic Slow on the 4-hour chart has formed a bearish cross, indicating that downward movement is likely to occur. This theory is supported by the Williams Percent Range on the 8-hour chart, which is currently well into overbought territory. Traders will likely want to short this pair today.
Technical indicators are showing mixed signals for this pair. While the daily chart's Relative Strength Index is in overbought territory, the 4-hour chart's Stochastic Slow has formed a bullish cross. Traders may want to take a wait and see approach today, as a clearer direction is likely to present itself later on.
Virtually all technical indicators are showing this pair in oversold territory, meaning an upward correction is likely to occur in the near future. The Williams Percent Range on the 8-hour chart is at -90 while the Stochastic Slow on the 4-hour chart has formed a bullish cross. Going long may be the preferred strategy today.
The Wild Card
The Williams Percent Range on the 8-hour chart of this pair is currently in oversold territory, indicating that an upward correction is likely to take place. This theory is supported by the Stochastic Slow on the same chart, as well as the 4-hour chart's Relative Strength Index. Now may be a great time for forex traders to open up long positions before the upward breach occurs.
|22:45||NZD||Overseas Trade Index||q/q||1.3%||-2.5%||-|
|23:30||AUD||AIG Manufacturing Index||50.2||-||-|
|USD||Total Vehicle Sales||18.2M||18.0M||-|
|02:35||JPY||Final Manufacturing PMI||52.8||52.8||-|
|04:30||AUD||RBA Rate Statement||-||-||-|
|04:45||JPY||10-y Bond Auction||0.32|2.8||-||-|
|08:00||GBP||Bank Stress Test Results||-||-||-|
|08:00||GBP||BoE Financial Stability Report||-||-||-|
|09:15||EUR||Spanish Manufacturing PMI||51.3||51.9||-|
|09:45||EUR||Italian Manufacturing PMI||54.1||54.3||-|