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Monday, 7 Jun 2010
The Euro Sees 9-Year Low Vs. The Yen
Following the U.S. Non-Farm Payrolls publication on Friday, the Dollar and the Yen resumed their bullish trend. As a result, the Euro saw a 9-year low against the Yen, as the EUR/JPY pair dropped to the 108.06 level. This week's trading will continue to be influenced by the European debt crisis that doesn't provide signals of recovery. Can the Euro drop further?
USD - Positive Employment Data Strengthens the Dollar
The Dollar rallied vs. most of the major currencies during last week's trading session. The Dollar continues to soar vs. the Euro, and the EUR/USD pair has dropped below the 1.900 level. The Dollar strengthened against the Yen and the Pound as well.
The most significant data that was published from the U.S. economy during last week has referred to the jobs sector. The Non-Farm Employment Change failed to reach expectations for a 521,000 rise, yet the end result was still extremely positive. The report showed that the payrolls in the U.S. have climbed by 431,000 on May, marking a 10-hear high. In addition, the Unemployment Rate dropped back to 9.7% during May. These two employment indicators have proven that the U.S. economy is recovering despite the European debt crisis. In addition, the housing sector continues to show recovery signals as well. The Pending Home Sales report, which measures the change in the number of homes under contract to be sold, have rose by 6.0% during April. It seems that as long as the leading economic indication, such as housing and employment, will continue to deliver positive data, the Dollar will continue to strengthen.
As for this week, many interesting publications are expected from the U.S. economy. The most significant news is expected close to the weekend when the Trade Balance, the Unemployment Claims, the Retail Sales and the Consumer Sentiment reports will be published. If the reports will continue to provide recovery signals, the Dollar is likely to strengthen further against the major currencies.
EUR - Euro Weakens to a 9-Year Low against the Yen
The Euro's freefall continued during last week's trading session. The Euro dropped about 400 pips against the Dollar and about 300 pips against the Pound as well. Yet the most significant slide took place vs. the Yen, as the EUR/JPY pair dropped to the 108.17 level, marking a 9-month low.
The reason for the Euro's bearish trend remains the Euro-Zone's debt crisis. This week's catalyst for the Euro's slide was the concerns regarding the Hungarian sovereign debt. There are concrete concerns in Europe that the European sovereign debt crisis might spread to Eastern Europe as well. The main concern revolves around insuring the losses of these countries, and the Euro-Zone's ability to sustain such losses. In addition, the economic data from the Euro-Zone has weakened the Euro as well. The European Retail Sales dropped by 1.2% on April, failing to reach expectations for a 0.1% rise. The combination of deep concerns regarding the Euro-Zone's future and the negative economic data are weakening the Euro and have potential to weaken it further.
As for the week ahead, the most significant news publication seems to be the Minimum Bid Rate, which is the European Interest Rates announcement for June. Analysts expect the Bank of Europe to leave rates at 1.00%, however any rates manipulations is likely to have a sharp impact on the market. Traders should also follow every publication regarding the European debt crisis as this issue continues to be the main reason for the weak Euro.
JPY - EUR/JPY Drops to a 9-Year Low
The Yen saw mixed results against the major currencies during last week's trading. The Yen began last week with sharp drops vs. the Dollar, the Euro and the Pound. However as the week progressed, the Yen managed to correct most of its losses, and even mark a 9-Year high vs. the Euro.
The Yen tumbled at the beginning of the previous week due to a political turmoil, which eventually led to a new Japanese Prime Minister - Nakoto Kan. As long as there was uncertainty regarding the Japanese leadership, the Yen declined. However, once the political turmoil was over, the Yen managed to rebound and to recover most of its losses. Currently, the European debt crisis continues to strengthen the Yen. The debt crisis is creating high-uncertainty in the market, and the Yen is considered to be a safe asset. As a result, many investors open long positions on the Yen, in order to avoid large risks.
Looking ahead to this week, a batch of data is expected from the Japanese economy. Traders are advised to follow the Core Machinery Orders and the Final Gross Domestic Product (GDP) reports. If the end result will reach expectations, the Yen is likely to be supported as a result.
Crude Oil - Crude Oil Drops Below $70 a Barrel
Crude Oil dropped once again during last week's trading session. Crude Oil dropped about 400 pips from $74 a barrel to less than $70 a barrel as the trading week opened Sunday night.
Crude Oil continued to drop during last week's trading on concerns that the Euro-Zone's debt crisis will lead to a decline in demand for energy. In addition, the European woes are leading to high-uncertainty in the market that drives investors to look for safer assets. Another reason for the slide of Crude Oil is the strong Dollar. Crude oil is traded in Dollars, and thus whenever the Dollar rally, Crude Oil tends to drop in response. It now seems that as long that the European debt crisis will continue to have a large impact on the market, Crude Oil has potential to drop further.
As for this week, traders are advised to follow the leading publications from the Euro-Zone and the U.S. as this seems to have the largest impact on Crude Oil. In addition, traders should follow the U.S. Crude Oil Inventories report on Wednesday as this publication tends to have an instant impact on the market.
The pair may see a much needed correction today as the RSI for the pair is floating in the oversold territory on the hourly, 2 hour, 4 hour, 8 hour and daily charts. A bullish cross is evident on the 2 hour, 4 hour and 8 hour charts' Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the daily chart. Going long for the day may be advised.
The RSI for the pair is floating in the oversold territory on the 2 hour and 4 hour charts. A bullish cross is evident on the 4 hour and 8 hour charts' Slow Stochastic as well as the hourly MACD. Going long for the day may be a good option.
The RSI for the pair is floating in the oversold territory and a bullish cross is evident on the 4 hour chart's Slow Stochastic. Going long for the day may be a good option.
The RSI for the pair is seen floating in the overbought territory on the 2 hour and 4 hour charts. A bearish cross is evident on the 2 hour, 4 hour and 8 hour charts' Slow Stochastic. Going short for the day may be advised.
The Wild Card
An upward correction may be expected for the pair today as the RSI for the pair seems to be floating in the oversold territory on the 2 hour and 4 hour carts with a bullish cross evident on the 2 hour, 4 hour and 8 hour charts' Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the 4 hour and 8 hour charts. Forex traders may be advised to go long for the day.
|10:00||EUR||M3 Money Supply||y/y||4.6%||4.9%||5.3%|
|11:00||EUR||Italian Prelim CPI||m/m||0.3%||0.1%||0.2%|
|14:30||USD||Prelim GDP Price Index||q/q||-0.1%||-0.1%||-|
|16:00||USD||Revised UoM Consumer Sentiment||95.9||90.0||-|
|16:00||USD||Revised UoM Inflation Expectations||-||2.5%||-|