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Friday, 25 Mar 2011

U.S. Dollar Afloat from Rising Uncertainty

A consensus seems to be forming that risk aversion is returning to the market. Despite the sporadic release of positive data in various parts of the world, the overall trend appears to indicate a slow-down in recovery and growth. This has led to an increase in fears about the potential for a speedy recovery, which in turn has fueled the mass flight away from riskier assets and into the safety of the U.S. dollar and Japanese yen.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupdownnodownupup
Weekly Trendnodownnoupupup
Resistance1.42551.618581.800.91701.03050.8880
1.42351.616581.600.91501.02850.8860
1.42051.613581.300.91201.02550.8830
Support1.41451.607580.700.90601.01950.8770
1.41151.604580.400.90301.01650.8740
1.40951.602580.200.90101.01450.8720

Economic News

USD - USD Gaining vs. Currency Rivals; EUR Resilient

The U.S. dollar has been on the upside since yesterday. Against its primary rivals, the greenback has made modest growth. The EUR/USD remains the exception, rising from its recent dip towards 1.4050 to currently trade just over 1.4200. Against the British pound, the dollar has made remarkable gains to push the pair back towards 1.6100 from recent highs around 1.6400.

A consensus seems to be forming that risk aversion is returning to the market. Despite the sporadic release of positive data in various parts of the world, the overall trend appears to indicate a slow-down in recovery and growth. This has led to an increase in fears about the potential for a speedy recovery, which in turn has fueled the mass flight away from riskier assets and into the safety of the U.S. dollar and Japanese yen.

Today's news events from the United States are focused primarily on the Final GDP figures and consumer sentiment. Both of which are forecast to show not a decline, but a stabilizing of their values, which will likely feed the sentiment of risk aversion currently dominating trading, pushing the USD higher against its rivals.

EUR - Euro Positive amid Market Uneasiness

The euro has recently made an upward movement against many of its currency rivals. The 17-nation single currency gained over 160 pips against the British pound, and is currently trading at 0.8800. Against the greenback, the EUR is up from a recent low of 1.4050, presently trading at 1.4230.

While the euro appears to have made some solid gains this morning, many analysts do not expect the momentum to hold. Sentiment in the euro zone has taken a dive from recent estimates showing an expected stall in regional and global growth. These pessimistic reports have begun to weigh on the euro, and this morning's gains should be understood in that context.

Today's news cycle appears to have only two important economic events emanating from the euro zone. The first is the German Ifo Business Climate figure, which is expected to highlight a minor downturn in consumer optimism. The second is the M3 Money Supply figure which is forecast to show an increase in the European money supply, which may weigh on the currency's value before the weekend. This news only highlights the recent weakness of the EUR and potential for a reversal of recently earned gains.

JPY - Do JPY Gains Raise Chances of a BOJ Intervention?

The Japanese yen has made strong gains against all of its currency rivals these past few trading days. This growth is likely due to the sudden spike in risk aversion, similar to the growth being witnessed in the US dollar currently. Market forecasts, which have been consistently predicting a global slow-down, have scared investors away from riskier assets and back into the safety of the dollar and yen.

The result of this risk flight has been to pull the JPY in the direction of record highs against its counterparts, which only increases the possibilities of a Bank of Japan (BOJ) intervention. Speculation is running high at the moment, but with little news being released from Japan speculation seems to be the only game in town. For the time being, risk aversion and the safe-haven status of the yen appear to be in control of the JPY's value.

Crude Oil - Oil Prices Stable Near $105.50 a Barrel

Crude oil prices were little-changed on Thursday as Japan's turn toward economic recovery and ongoing fighting in Libya gave few new signals to traders, while US economic data disappointed bulls. The crude oil dropped to an intra-day low of $104.75 a barrel before rebounding to the settlement level of 105.40, which was little changed compared with the previous week sessions.

Crude oil prices have surged more than 20% since mid-February, when pro-democracy movements reached Libya, Africa's third-largest oil producer.

As for today, the U.S Final GDP report will likely determine the crude's next moves, with any mildly positive elements within them likely to keep the crude price on its upwards direction.

Technical News

EUR/USD

The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily 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 might be the right strategy today.

GBP/USD

The price of this pair appears to be floating in the over-sold territory on the 4-hour chart's RSI indicating an upward correction may be imminent. The upward direction on the daily chart's Slow Stochastic also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

USD/JPY

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

USD/CHF

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bullish cross forming on the weekly chart's Slow Stochastic indicating a bullish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.

The Wild Card

AUD/USD

This pair's sustained upward movement has finally pushed its price into the over-bought territory on the 8 hour chart's RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Current Time: 09/20 19:23 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
09/21
ALL+ G20 Meetings***5
23:00NZD+ Westpac Consumer Sentiment121.2--3
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