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Monday, 4 May 2009

The Greenback is Trending Lower on Global Recovery

The U.S. dollar approached a 3 week low against the EUR as better economic data worldwide saw investors grow increasingly confident that the worst in the global economy may be past, boosting risk appetite. The Dollar recent losses however, may be tempered before the Federal Reserve and U.S. banking regulators reveal the results from stress tests on the nation's 19 biggest banks this week. The results of the U.S. banks' stress tests may pose downside risks for the markets, and as such, the dollar may garner support as a safe- haven currency.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupupdownupdown
Weekly Trendupupupdownupdown
Resistance1.33851.5015100.051.13990.73980.8952
1.33661.499799.801.13850.73830.8930
1.33401.497199.671.13570.73670.8915
Support1.33161.494099.301.13170.73450.8890
1.33001.492299.181.12940.73200.8877
1.32781.491099.001.12770.73030.8856

Economic News

USD - Bank Stress Test may Suppress USD

A deeper look into forex market activity since Friday indicates two primary forces driving the USD in today's early trading hours. The first is news that the recent bank stress test results will be published later this week, the second is the continuation of the swine flu epidemic of fear that has apparently gripped the attention of many investors. Losing ground against most of the major currency counterparts, the USD could potentially dig itself deeper in the hole in the coming weeks.

After the market opened for today's early trading session, the USD apparently dropped towards 1.3330 against the EUR and as low as 1.4960 against the Pound Sterling, breaking last week's low against that pair. As many analysts are anticipating results from the bank stress test to show that the USD is not as safe an investment as many think, traders could see a sudden flight from the greenback in the coming weeks as banks attempt to determine its true value. Just how low will the Dollar drop in such a situation?

Considering that much of the economic data being released from the United States has been relatively positive, it seems strange that an out-flux from the USD will occur, but if market forecasters foresee doom in the Dollar's future, the predictions of a 1.4500 mark against the EUR and 1.5100 mark against the Pound, may very well be reached in the weeks ahead. Other data, if it continues to show positive results, may also signal a flight from the forex market in exchange for the higher yielding assets of the stock markets, thus resulting in further depreciation in common safe-havens such as the greenback.

EUR - EUR Benefits from Recent Market Fears

The EUR may well have been last week's victor in the forex market, making solid gains against all of its currency rivals. The EUR started this week up against the USD near the 1.3330 price level, and started climbing back towards 0.8950 against the GBP in today's early trading hours.

As fear of the international swine flu outbreak proceeds, investors are finding ways out of their typical safe-haven assets as they appear to be the primary targets of investment flight. Also, with the US releasing information about its recent bank stress test this Thursday, market analysts are predicting a heavy downfall for the US Dollar, the typical safe-haven of choice for many investors. As Euro-Zone economic data has shown lately, its economy may be on a more solid track to recovery than many had anticipated. This unexpected result has made the EUR the primary beneficiary of safe-haven flight. Many expect this to continue through this week as well.

One of the main beneficiaries for the 16-nation currency this week is the fact that it has a very low news week ahead, and most news emerging from the Euro-Zone's primary contender - the United States - is forecast to show negative results. Typically a low news week damages a currency as other markets take the wheel, but a dead news week in light of the US's bank stress test may very well prove positive for the EUR. Traders may want to look to an appreciating EUR over the coming week; a price level near 1.3600 against the greenback may not be wholly unrealistic.

JPY - Yen's Fate may be Tied to USD; Bad News Ahead?

The Japanese Yen has taken a heavy toll against all of its currency rivals over the previous few trading days. The market shows the Yen near the 100.00 mark against the USD and the 132.60 mark against the EUR, an ominous signal for the island currency. As Japan's economy continues to shrink, and as investors flee from traditional safe-havens in light of the outbreak of swine flu internationally, the JPY may be taking the worst beating of all. Many wonder how long this negative turn can last for Japan's currency.

With the US set to release data on its recent bank stress test the bad news for the Dollar which many expect may take some of the downward pressure off of the Japanese Yen, but even this is doubtful. With hardly any economic news coming out this week, the JPY may be tied to the fate of the US Dollar. If the greenback indeed depreciates in the days ahead this could signal a tidal shift away from common safe-havens and a reinvestment into less traditional banking systems, such as those in Europe recently. Whatever the outcome, many traders appear ready to sell the JPY this week.

OIL - Crude Price Goes Up as USD Comes Down

As last week's trading session came to an end, the price of Crude Oil appeared to make a rather abnormal upward turn. Starting near $50.50, the price rose just above $53.00 during the last remaining trading hours on Friday. As today's trading session began, the price of oil appeared to remain in place above the $53 mark. What may have caused such a movement?

Glancing over the fundamentals doesn't appear to provide a clear-cut indication for this upward movement. However, there does appear to be one trend which may have pushed the price of oil higher: the USD's depreciation. Crude Oil is sold in US Dollars, which means the two are negatively correlated. As the USD depreciated from numerous factors, such as the swine flu outbreak and increase in risk appetite, the price of Crude Oil likewise moved positive. However, the price has yet to breach any real significant barriers. If Crude Oil's price moves beyond the $54 mark in this week's trading, investors may look to buy this commodity as it discovers its new price level. Also, if the USD does go weaker in the days ahead, traders should look to buy Crude Oil as a relatively safe investment.

Technical News

EUR/USD

The price of this pair is floating near the upper border of the Bollinger Bands on the hourly and 4-hour charts, signaling moderate downward pressure. With the price currently floating in the over-bought territory on the hourly chart's RSI, the notion of a downward correction appears to be getting stronger. Going short with tight stops might be a wise choice today.

GBP/USD

There is a very accurate bullish channel forming on the 4 hour chart as the pair is now floating in the middle of it. However, the hourly chart's RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. Going short with tight stops appears to be preferable strategy

USD/JPY

The sustained upward movement of this pair has begun to push the long-term oscillators, such as the 4 chart's RSI, into the over-bought territory. This appears to be putting downward pressure on the price of this pair as it has begun to level off. As momentum shifts into a downward posture, going short with tight stops might be a good strategy.

USD/CHF

The pair has been range-trading for a while now, with no specific direction. The hourly chart's Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today

The Wild Card

EUR/GBP

After a sharp bearish move that took place last weekend, the pair is showing potential for a reversal. The bullish momentum was originated at the lower border of the Bollinger Bands, meaning that there is still more room left for this trend. forex traders might have a great opportunity to enter the trend at a very convenient entry price.

Current Time: 11/01 12:58 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/03
JPY+ Bank Holiday1
01:30AUD+ ANZ Job Advertisementsm/m0.9%3
01:30AUD+ Building Approvals m/m3.0%-0.9%-5
03:45USD+ Final Manufacturing PMI56.256.1-1
04:00USD+ ISM Manufacturing PMI56.656.5-5
04:00USD+ Construction Spending m/m-0.8%0.8%-1
04:00USD+ ISM Manufacturing Prices59.558.3-1
04:00USD+ Total Vehicle Sales16.4M16.6M-1
06:30AUD+ Commodity Prices y/y-16.8%--1
09:15USD+ Spanish Manufacturing PMI-52.6-52.4-3
09:30CHF+ SVME PMI50.451.3-1
09:45EUR+ Italian Manufacturing PMI50.750.6-3
10:00EUR+ Final Manufacturing PMI50.750.7-1
10:30GBP+ Manufacturing PMI51.651.55
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