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Friday, 28 Oct 2011
US Data Comes into Focus after GDP Release
The economic calendar will be balanced between data out of the Japanese economy early on in the day, and the US economy in the afternoon. The US economy will be strongly in focus with reports on consumer prices, as well as personal spending and income.
USD - US Dollar Gains ahead as GDP Data Supports Growth
The US dollar was seen trading moderately higher yesterday as traders began to reevaluate the recent bump in early fourth quarter GDP numbers. The EUR/USD was seen meeting resistance near 1.4040 yesterday and flopping towards 1.3980 in late trading. The greenback saw similar movements against most other currency pairs as well.
A short series of data released yesterday painted a somewhat stronger picture for the US economy's growth. Weekly unemployment claims saw a worse than forecast rise, hitting 402,000 for the past week. A housing report showed a deep decline in pending home sales, which tends to be typical around this time of year, but GDP and the GDP price index were both above market expectations.
With a relatively moderate news day expected Friday, dollar traders should be anticipating some moderate currency movements brought about by average end-of-week liquidity. The economic calendar carries mild focus on the US with several other reports coming from Japan, Switzerland, and the euro zone. The US economy will be strongly in focus with reports on prices, and personal spending and income.
EUR - Declines in Global Stocks Weighing on EUR
The euro was seen trading lower yesterday in light of data releases suggesting stagnation in Germany. The lackluster performance of global stocks also drove many regional investors away from the EUR despite the relative potential it has for making gains should more investment flee the United States.
While growth variances between the US and Europe came into view this past week, the higher yielding assets like the GBP and EUR appeared positioned to lose as traders turned away from risk. The growth in risk aversion may have many investors choosing to store their value in lower yielding currencies, like the USD and CHF as the week comes to a close. Nevertheless, the greenback is on the rise once more.
As for Friday, the euro looks to be anticipating an evaluation of its recent downturn against the other major currencies with mild bias further leaning to the downside. The euro zone will be publishing one economic report on today's calendar. Traders should try and follow the significant publications emanating from the American and Japanese economies today as a moderate string of significant reports are expected from both.
JPY - JPY Direction Less Certain
The Japanese yen (JPY) was seen trading with mixed results versus most other currencies this week after news began to shift many traders back into safe-haven assets. The yen has been a top performer these past several months considering many traders bank on the Japanese carry trade during times of intense risk appetite and move towards the JPY in times of risk aversion, making it an appealing currency in these recent times of ominous debt talks.
The JPY was in a position to take losses yesterday as economic reports began to counteract the fundamentals behind the meteoric rise of the yen's value. Moves toward riskier currencies halted as pessimism took hold and drove much of yesterday's trading liquidity towards traditional stores of value. As such, traders appear to be anticipating an uptick in the JPY prior to this week's close, though the sentiment is being matched by pressures generated by other economic factors.
Crude Oil - Oil Price Still Holding Near $93
Crude Oil prices held fast yesterday, sticking near the support line of $93 a barrel in late trading. Growth differentials between the Atlantic states have risen into view this week while manufacturing output and service data revealed growing weakness in Europe. This has so far led several large investors and analysts to consider a shift away from the EUR and other risky assets in exchange for the safety of the USD and JPY, despite the inherent weakness growing in the American economy due to the recent ratings downgrade.
As investors sought safety, the value of crude oil, which has been seen holding steady through most of the week, remained as such near $92.50 a barrel. A boom in dollar values due to this week's risk sensitive environment has helped many investors move hesitantly away from assets like gold and silver, with crude oil also appearing to get touched by this sentiment. Oil prices appear to have reached the decision point alluded to all week, with a strong bearish sentiment taking hold, though pressures are mounting to keep the price stable.
The EUR/USD has moved above its consolidation pattern from the previous week and has a technical retracement towards 1.4040, the 50% Fibonacci retracement off of the move stemming from the 1.4940 high in May to the October low of 1.3145. Both daily and weekly stochastic oscillators are moving higher and as such further resistance is located near 1.4100 where the 100 and 200-day moving averages rest. To the downside support is seen at last week's low of 1.3650.
Cable has jumped out to new 6-week high to its 50% Fibonacci retracement at 1.6010 from the move lower covering the April high to the October low. A break of this retracement level would put in play the 1.6110 resistance from the August low followed by the 61% retracement level at 1.6180. 1.5850 can be eyed as the first significant support line followed by 1.5630.
Last Friday the sleepy USD/JPY awakened from its slumber and quickly set a new all-time low of 75.78, triggering a plethora of stops before moving back above the 76 yen mark. While the range trading environment may continue, a quick move below the 75 yen level could invite an additional round of intervention from the Ministry of Finance which would likely take out the initial resistance levels at 77.85. The post intervention high of 80.25 may find willing sellers of the pair at more attractive levels.
The one way price move in the USD/CHF has ended with the pair forming what looks to be a falling wedge pattern. The chart pattern typically brings about a breakout to the upside but forex traders should follow the price action. The consolidation pattern has resistance at 0.9025, a level that coincides with the rising trend line from the August low which was broken last week. Additional resistance is located at 0.9340-0.9315. Support is found at 0.8640 and 0.8550.
The Wild Card
The Swedish krona (SEK) has resumed its downtrend with a breach of its 200-day moving average and the 9.0650 support level, pushing as low as 9.0000. On the daily chart forex Forex may notice the lack of support available until the 8.8600 level from the September low.