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Friday, 17 Sep 2010
US Economic Recovery Not So Bleak, Data Shows
This past week's news has given some investors hope that an economic recovery is indeed underway in America, even if recent news has begun to comment about a pause. The US IBD/TIPP Economic Optimism gauge on Tuesday was 1.2 points higher than expected, while American retail sales also beat forecasts. Wednesday saw a minor slowdown in industrial production, but yesterday's PPI, unemployment claims, and TIC long-term purchases reports all showed forecast-beating growth in the US economy.
USD - USD Declines as Data Shows Growth and Risk Appetite Returning
The USD appears to have declined against the bulk of its currency counterparts, with a few exceptions. The EUR/USD has climbed above 1.3100 as of late-Asian trading, while the GBP/USD is climbing towards 1.5650. It appears as if the stronger currencies of the early months of summer are now seeing an autumn correction. The dollar, Swiss franc, and Japanese yen are all losing ground while riskier assets are on the rise.
This past week's news has given some investors hope that an economic recovery is indeed underway, even if recent news has begun to comment about a pause. The US IBD/TIPP Economic Optimism gauge on Tuesday was 1.2 points higher than expected, while American retail sales also beat forecasts. Wednesday saw a minor slowdown in industrial production, but yesterday's PPI, unemployment claims, and TIC long-term purchases reports all showed forecast-beating growth in the US economic recovery.
If inflationary figures and economic optimism continue into today's reports of the same nature, we should see current USD trends continue. Expected today is the US release of its Consumer Price Index (CPI) data, measuring the growth of consumer inflation. If the CPI data is released in-line with yesterday's Producer Price Index (PPI) growth, then we should see riskier assets continue to rule the market.
The University of Michigan (UoM) is also set to release its Preliminary Consumer Sentiment report which is expected to show confidence on the rise in the United States, fueling the return of risk appetite further.
EUR - Poor European Data Offset by Japanese Currency Intervention
Since the start of the Asian trading session this morning, the EUR has climbed against 15 of its 16 major counterparts. The only currency appearing to outpace the EUR's recent ascent has been the Australian dollar. Against the US dollar, the euro has soared above 1.3100 and looks to have the momentum to carry on higher. Against the Japanese yen, the 16-nation single currency has risen to as high as 112.35 in late-Asian trading.
Europe's light news week has helped other economies take the lead in global currency valuation. The United States has released a heavy stream of economic reports which appeared to have dominated market attention. The trend in America seems to be a modest return to growth, for this week's data at least, while in Europe the few reports published appear to have been far worse than expected.
The shocking drop in the ZEW economic sentiment reports on Tuesday pushed many traders in the direction of safe-haven investments. But the euro was able to rebound sharply following Japan's intervention in the currency market, devaluing one of the primary global safe-havens, and after the US released report after report showing positive growth. The result was an offsetting jump in the value of riskier assets such as the EUR, despite its own economic woes.
JPY - JPY Plummeting; Will There Be Further Intervention from BOJ?
The Japanese yen remains under the pressure of Wednesday's intervention by the Bank of Japan (BOJ). The JPY fell to a 5-week low against the US dollar, hitting just below 86.00 after appreciating 71 pips. Against the euro, the JPY has seen a much sharper drop, falling 181 pips to a recent low of 112.35; the GBP/JPY, likewise, has climbed modestly, with a current price just over 134.10.
Despite the absence of further intervention by the BOJ, many speculate that the yen-selling by the central bank may not have yet come to an end. Analysts have recommended keeping an eye on JPY pairs for the second sell-wave, which many claim could happen as early as next week.
Crude Oil - Crude Oil Price Pares Losses, Trading Over $76 a Barrel
The start of this past week saw a rather sharp boom in the price of Crude Oil as a pipeline delivering oil from Canada to the American mid-west suffered a leak, forcing the pipe to be shut down. The resulting speculation of a dip in supply, both from the pipeline leak and from hurricanes in the Gulf of Mexico, led to strong support for oil prices. News that the leak would be fixed by the end of this week has resulted in a paring of those gains, however, as concerns of an over-supply are now hitting the market.
Analysts have begun to claim that despite minor setbacks in production, the fundamentals for Crude Oil remain weak. Even with a short-term decline in supply, inventories remain at record highs. This has been the case especially since the world's major energy consumers are experiencing a minor pause in recovery. Without a major shift in fundamentals, few are expecting oil prices to break out of the current range between $72 and $77 a barrel.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart's RSI. Going short with tight stops may turn out to pay off today.
The price of this pair appears to be floating in the over-bought territory on the 4-hour chart's RSI indicating a downward correction may be imminent. The downward direction on the daily chart's Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The USD/JPY cross has experienced a bullish trend for the past 3 days. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the 4-hour chart's Slow Stochastic indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.
The Wild Card
Gold prices rose significantly in the last week and peaked at $1279 for an ounce. However, the 8-hour chart's RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
|15:00||USD||S&P/CS Composite-20 HPI||4.6%||4.7%||5.0%|
|16:00||USD||CB Consumer Confidence||101.3||102.6||95.2|
|16:00||USD||Richmond Manufacturing Index||-8||-2||-3|
|EUR||German Prelim CPI||m/m||0.5%||-0.1%||-|
|03:00||NZD||ANZ Business Confidence||35.8||-||-|
|08:00||CHF||UBS Consumption Indicator||1.19||-||-|
|10:00||EUR||M3 Money Supply||y/y||4.0%||4.3%||-|
|10:30||EUR||Italian 10-y Bond Auction||1.34|1.5||-||-|
|10:30||GBP||10-y Bond Auction||1.68|1.4||-||-|
|12:00||GBP||CBI Realized Sales||18||26||-|
|14:30||USD||Advance GDP Price Index||q/q||0.1%||0.5%||-|