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Tuesday, 31 May 2011
US Back Online, Consumer Confidence on Tap
With the United States economy coming back online following yesterday's holiday break, the US government is scheduled to release a few minor data sets. The most impactful figure being published will be the Conference Board's (CB) consumer confidence report, set to be released at 15:00 GMT. The data should be a rock-steady gauge from which to view the impending employment reports coming out Wednesday and Friday.
USD - Investors Seeking High Yields Run from US Dollar
The EUR/USD rose to a three-week high Monday, reaching towards 1.4375 before settling slightly lower. The GBP/USD witnessed a similar upward jump, climbing to a four-week high of 1.6553. The shift into riskier assets supports a variety of analyses which have called for a solid return to growth in the early summer months of Europe and North America, which is leading the way into these investment shifts.
The US dollar has continued to plummet since Friday as dollar bears continue to move out of the greenback in exchange for higher yielding currencies. The Fed's record low interest rates will likely persist for the foreseeable future, according to recent FOMC reports, and the dollar is expected to see little support this week as a result.
Today, with the United States coming back online following yesterday's holiday break, the US economy is scheduled to release a few minor data sets. The most impactful figure being published will be the Conference Board's (CB) consumer confidence report, set to be released at 15:00 GMT. The data should be a rock-steady gauge from which to view the impending employment reports.
EUR - EUR Moves Strongly Bullish vs. USD and JPY
The euro has been a top performer against the US dollar following last week's detrimental downshift in greenback values. The EUR began the middle of last week strongly bullish and was revealing a modicum of weakness yesterday but has since taken off. Against the USD, the pair is pushing to a three-week high near 1.4375, while against the yen the 17-nation common currency is reaching up to 116.20, a six-day high.
With Great Britain and the United States on holiday yesterday, currency traders witnessed a relatively thin trading environment. Though debt concerns still loom in the euro zone, the higher yielding assets like the GBP and EUR appear positioned to gain despite these poor fundamentals. This trend appears to have little opposition as dollar traders shift substantial value into other assets in search of higher yields. The safer dollar and yen are under pressure as a result.
As for Tuesday, the euro looks to be continuing its gains against the greenback. A busy trading session in the Pacific economies caused a stir early on, but traders appear to still be favoring a move into higher yielding assets. Europe's publications today are strewn across issues of unemployment and retail sales and consumer spending levels. If positive, the data could send the EUR even higher. Look for long positions on the EUR to continue through this week unless this week's employment figures yield surprising results.
JPY - Japanese Yen Flat as Investors Weigh Risk Sentiment
The Japanese yen has been trading relatively flat recently as investors flee the greenback in search of higher yields. After reaching upwards of 82.21 last Tuesday, the USD/JPY appears to be holding near a two-week low of 80.80 for the second consecutive day. Japan's economy has published several positive figures over the last week, much of which has helped establish the yen's recent bullishness. Whether it will be enough to reverse much of the negative sentiment surrounding Japan is yet to be determined.
Yen traders have been weighing risk sentiment lately, attempting to decipher the direction of the economy during this news heavy week. With Friday's Non-Farm Payrolls (NFP) ahead, much can be said about the increase in speculative shifts taking place in the market right now.
The yen suffers from Japan's economic concerns, while shifts in consumer sentiment have helped lift yen values against a number of its rivals. Last week's data, however, provided a ray of light which caused a secondary shift towards the yen for reasons other than safety. The USD/JPY looks to be continuing this movement for the foreseeable future as a result, especially given the massive shift away from the US dollar which is helping to lift the island currency.
Oil - Crude Oil Prices Holding at $100
Oil prices held steady for a second consecutive day today, with the $100 price level acting as a firm footing for this commodity. The price of black gold has been trading within a consolidation pattern these past several days and traders are beginning to anticipate a breach sometime this week. Yesterday's flat movements help reveal the pressure mounting on oil prices, with buyers and sellers coming in with even trades.
The value of the US dollar versus the euro in recent trading has also continued dropping since yesterday, pushing towards a three-week low of 1.4375, which has helped hold oil prices from falling. With today's steady sideways movement, traders appear likely to see oil reaching a decision point sometime this week. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or pull away from oil out of a perceived glut, is something traders will bear witness to this week.
Early in the Asian trading session the EUR/USD broke above its 50-day moving average. The Momentum-14 indicator shows short term momentum is moving to the upside as the pair rises above its two week consolidation pattern. Resistance is found at 1.4490 followed by the May high at 1.4940. 1.4340 should serve as the initial support level followed by 1.4205 and the 100-day moving average at 1.4035.
Cable received a strong bounce higher at a level that coincided with the rising trend line off of the May 2010 low. As such, momentum has swung back in favor of the pound and rising weekly stochastics support further gains. Resistance is found at 1.6520 followed by the April high at 1.6750. A breach here would target the August 2008 high at1.7040. To the downside, support comes in at 1.6330 and 1.6000, followed by the trend line at 1.6120. Below the trend line the March low at 1.5935 comes into play.
The yen's rally failed to breach the 82.25 resistance as well as the 100-day moving average before the pair turned sharply lower while making a significant close below the rising trend line from the May low. Falling daily stochastics point to further declines in the pair. Therefore traders should be short on the USD/JPY with initial support at 80.70 and 80.35, followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10. A move to the upside and the pair may encounter initial resistance at the previous trend line which comes in at 81.95, followed by 82.25, and retracement targets from the April to May move at 82.50 and 83.25.
In almost textbook like fashion, the USD/CHF rose as high as 0.8890, a level that coincides with the trend line off of the February high only to encounter resistance and plummet, ending the week at a new all-time low at 0.8464. This level should serve as initial support for the USD/CHF, followed by 0.8400. A retracement back to the falling trend line would offer traders better levels at which to enter the trend with a stop above one of the resistance levels near 0.8890 and 0.8945.
The Wild Card
Earlier today the NZD/USD broke above a 3-year high at 0.8214, soaring to an all-time high at 0.8261. The pair is now trading in unchartered territory and therefore, forex traders should be long on the pair with an initial target at the big round number of 0.8300.