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Monday, 1 Nov 2010

US Dollar Spikes and Recedes at Start of Non-Farm Payroll Week

The US dollar experienced a rapid spike in this morning's trading hours following the opening of Asian equity markets. The spike initially drew concern that an intervention by the Bank of Japan (BOJ), selling their currency against the dollar, had brought about the sudden change in value, but the rapid retracement of the USD's gains made many analysts reconsider this position. Today's news events will help set the market back into order by injecting much-needed liquidity to this morning's thin conditions.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupdowndowndownupup
Weekly Trendupdowndownnonoup
Resistance1.41001.616581.500.99250.99900.8810
1.40651.613081.150.98900.99550.8780
1.40301.610080.800.98600.99200.8745
Support1.39601.602080.100.97900.98500.8680
1.39251.598579.800.97550.98150.8650
1.38901.595079.500.97200.97800.8620

Economic News

USD - Cause of USD Spike Uncertain; Dollar Still Bearish as Week Begins

The US dollar experienced a rapid spike in this morning's trading hours following the opening of Asian equity markets. The spike initially drew concern that an intervention by the Bank of Japan (BOJ), selling their currency against the dollar, had brought about the sudden change in value, but the rapid retracement of the USD's gains made many analysts reconsider this position.

Alternate approaches to the spike appear to either be the actions of a single hedge fund, or a trading glitch occurring during the thin market conditions of early morning trading. The issue will likely be cleared as the day wears on, but for the moment it appears unclear as to the cause of the jump.

At exactly midnight, GMT-time, the greenback rose as high as 81.41 against the Japanese yen; 1.3895 against the euro; and 1.5989 versus the British pound. Similar gains were seen elsewhere, but these three represent the largest and most significant spikes experienced this morning. What was more significant was the almost instant retracement of these gains over the hour which followed, which, as mentioned, has fueled speculation that it wasn't the BOJ acting behind the movement.

Today's news events will help set the market back into order by injecting much-needed liquidity to this morning's thin conditions. Today's PMI figures from Britain and the United States will kick-off what is always the heaviest news week of the month. This week's interest rate decisions and employment data, particularly Friday's Non-Farm Payroll figures, are of the utmost importance.

EUR - EUR/GBP Breaks Uptrend; Finds Strong Support at 0.8700

The euro continues to trade higher against most of its currency counterparts. Despite a mild setback against the USD this morning, the 16-nation single currency appears to have regained all that was lost versus the greenback immediately after the sudden dip in price.

The EUR/USD pair appears poised to breach the 1.4000 mark again and this week's news may provide enough bullishness to sustain a price above the mark. The EUR/CHF has risen sharply over the past few days as well, and seems to be hours away from breaking above 1.3800. The British pound has regained predominance over the EUR and remains one of the few currencies to have recently broken the euro's rise. The pair trades at 0.8711, down from last week's high of 0.8940.

The euro zone will be oddly absent from today's economic calendar. Both Britain and the United States will be releasing highly impactful PMI data. French banks will be closed today due to the celebration of All Saints Day, which could mean somewhat thinner conditions than usual during today's mid-day trading hours.

JPY - Was the BOJ Responsible for this Morning's USD Spike?

The sudden spike in the value of the US dollar during Asian trading hours this morning have raised questions about possible intervention moves by the Bank of Japan (BOJ). However, the pace at which the move was rescinded has many analysts positing that it may not have been the BOJ, but rather a lone hedge fund, or even a glitch not dissimilar from that witnessed a few months prior.

Of course the question of currency intervention ahead of this week's meeting of the US Federal Reserve Board has many concerned that the US and Japan may continue in their currency devaluation war despite commitments not to do so at the latest round of G20 meetings. The Fed's QE move may already be priced in, but countermoves by the BOJ remain elusive and unpredictable. Traders will need to keep a close eye on comments emanating from Japan this week to get a more accurate read on where these two currencies are heading.

Crude Oil - Oil Prices Appear to be Consolidating Near $81.50

Despite the rumblings taking place throughout the forex market this morning, the price of Crude Oil appears little touched. Crude Oil has been experiencing a price consolidation trend towards the level of $81.50 a barrel. The trend appears to have become clearer over the last few trading days as the commodity has continued to trade in an ever narrowing range between $80 and $84 a barrel.

Oil prices respond rapidly to valuations in the US dollar, but this morning's spike carried little to no impact on the value of oil. This wasn't surprising, however, since the move was not large enough, nor sustained long enough to substantially affect commodity prices. This week's data, on the other hand, has the potential to shift commodity prices markedly, particularly Friday's Non-Farm Payroll figures, which always carry a large impact on the value of the buck.

Technical News

EUR/USD

There appears to be a fresh bearish cross on the weekly chart's Stochastic (slow), suggesting a reversal may be in the works. A series of doji candlesticks on the weekly chart appear to confirm this potential change of direction. Going short with tight stops may turn out to be preferable this week.

GBP/USD

Many indicators on this pair appear to be floating in neutral territory. However, there does appear to be a recent bearish cross on the weekly Stochastic (slow), suggesting downward pressure is building. The daily Stochastic (slow) also shows the price entering the over-bought region, building towards an impending bearish cross. This pair may be hitting a significant resistance line and could end up being worth shorting this week.

USD/JPY

The weekly RSI has this pair's price floating within the over-sold region and turning bullish, which suggests upward pressure is mounting. The recent bullish cross on the weekly Stochastic (slow) supports this notion. Going long as the pair hits the psychological barrier of 80.00 may be a wise strategy this week.

USD/CHF

This pair appears to have conflicting indications. The daily RSI has the price deep in the over-bought region while the weekly RSI shows the price just exiting the over-sold region. These competing bits of data could mean the pair is consolidating near the 0.9850 mark in anticipation of a deeper change in value. It appears the consolidation price could also represent a significant pivot point for the pair to either break out of its long-term downtrend and turn bullish, or reverse back into its bearish pattern with a target near 0.9600.

The Wild Card

Gold

Gold's recent movements appear to have recently pushed the price into the over-bought region on the weekly RSI, suggesting downward pressure. Recent bearish crosses on the weekly Stochastic (slow) support the notion of a downward correction. The price of this commodity may very well correct downward if the USD can find support this week and forex traders have a great opportunity to catch this wave by going short at this great entry price.

Current Time: 04/24 08:04 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
04/24
09:00EUR+ German Ifo Business Climate110.7110.5111.25
10:00EUR+ ECB President Draghi Speaks***5
11:00GBP+ CBI Realized Sales1318-3
13:30USD+ Core Durable Goods Orders m/m0.1%0.6%-5
13:30USD+ Unemployment Claims 304K309K-5
13:30USD+ Durable Goods Orders m/m2.2%2.1%-3
15:30USD+ Natural Gas Storage 24B--1
00:30JPY+ Tokyo Core CPI y/y1.0%2.8%-3
00:30JPY+ National Core CPI y/y1.3%1.4%-1
04/25
05:30JPY+ All Industries Activity m/m1.0%-0.5%-1
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