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Wednesday, 17 Aug 2011

US Producer Price Index on Tap

The US economy will be publishing reports on PPI and crude oil inventories. Should today's news disappoint, there is a possibility that more investment will get pushed towards the safety of the USD.

Daily Trendnonodowndownnono
Weekly Trendupupdowndownupup
1.45751.6550 80.200.82001.08000.9080
1.44501.6475 78.500.8080 1.05700.8880
Support1.44001.6090 76.250.78001.03900.8730
1.42601.6000 0.75900.99250.8650
1.3945 1.59350.97000.8610

Economic News

USD - USD Sees Mild Rise as Euro Zone Slides

The US dollar (USD) was experiencing mild upswings yesterday as investors took recent signs of sluggish growth in Europe to mean a ramp up in the intensity of risk aversion. A weakened stock market yesterday was also behind the fueling of the USD's gains seen against most major currency pairs.

With several reports from the American housing market being released yesterday, traders have begun to see a return of strength in the core assets of the American economy. Though housing comprises only a portion of US economic strength, it does impact the value of much else by way of home furnishings, retail sales, loans, lending, consumer sentiment and economic outlook. As such, yesterday's uptick helped the greenback make gains during its already-growing value due to risk aversion.

With a heavy news day expected today, traders are sure to see a growth of portfolio adjustment as volatility becomes elevated. The US economy will be publishing reports on PPI and crude oil inventories. Should today's news disappoint, there is a possibility that more investment will get pushed towards the safety of the USD.

GBP - British Unemployment Set for Review

The British pound (GBP) was seen trading with largely bearish results so far this week as traders continue to assess risk sentiment across the region. The Cable was seen trading bearish in late trading as shifts into the greenback, due to a swing away from global stocks and higher yielding assets helped lift the value of traditional safe havens.

News of debt contagion spreading across the euro zone also has several economists worried that a toppling of consumer confidence may be up next. Whether Great Britain is affected by this regional tug is a matter for speculation at the moment, however. Should today's reports on inflation indicate a downturn in growth, and thus demand, there is a chance that traders will take the news to mean the pound sterling will meet further resistance in the near future.

On tap today, traders will witness the release of the significant reports on unemployment and hourly wages. The UK Claimant Count Change indicator measures the monthly change in the number of Britons applying for unemployment insurance for the first time. Alongside this indicator, the Bank of England (BOE) will release the latest results of a vote on monetary policy. Also, the quarterly report on average earnings will underline the employment data with the shift in personal income. Should these reports display dismal results, the GBP will likely fall through the remainder of the week.

AUD - AUD Still Bearish as Market Participants Seek Shelter

The Australian dollar (AUD) was trading mostly weaker versus its currency counterparts yesterday after data releases have begun to shift traders back into safety. The Aussie has been losing momentum these past few weeks as risk aversion becomes predominant in the global market. Fears emanating from the current market environment have led many to seek safety.

This movement has gouged the AUD against all of its currency rivals, especially against safe-havens like the Swiss franc (CHF) and Japanese yen (JPY). With significant reports being released this morning, forex traders are likely to see heavy movement by the Aussie in today's trading hours. News out of Japan Monday is also expected to hike volatility throughout the Pacific countries of China, New Zealand and Australia. Pacific traders should be cautious in this week's trading.

Oil - The Price of Crude Oil Dips Further

Crude Oil prices dipped slightly Monday as sentiment appeared to favor a mild downtick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected rise in dollar values due to this week's risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains not materializing in large enough numbers, sentiment appears to have the price of crude oil falling mildly late Monday. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week; direction is still unclear regarding the swing.

Technical News


Despite the increased volatility the EUR/USD continues to trade in a defined range between 1.4400 and 1.4050. Falling monthly stochastics suggest any approaches to the 1.4400-1.4500 levels may be sold into. Initial resistance comes in at last week's high of 1.4400 followed by the falling resistance line from the May high at 1.4450. A close above 1.4700 would signal an end to the range trading environment. To the downside support is found at 1.4050 followed by the 200-day moving average at 1.3945 and the rising trend line from June 2010 at 1.3875.


Last week's declines found support near the previously broken trend line from the April high and the pair looks to move higher. Resistance comes in at 1.6475; a level sterling has failed to breach three times. A move above here and the technical picture would likely turn bullish with further resistance at 1.6550 and 1.6745. The 200-day moving average at 1.6090 could keep any declines in check with further support at 1.6000 and 1.5935.


The yen has made two attempts to break through the all-time low that was set in mid-March near 76.25. Rising stochastics on the daily and weekly charts point to potential gains in the pair but short term momentum studies look to have more room to fall before the pressure is relieved. Therefore, a break of 76.25 is favored. After this level there is a lack of support on the monthly chart. To the upside initial resistance is found at last week's high of 78.50 followed by the post intervention high of 80.20.


In an amazing run the USD/CHF has gone from a complete free-fall to trade above its 20-day moving average, a level the pair has not seen since early July. After gapping above its initial resistance at 0.7800 the pair could run into resistance at 0.8080 which is also near the 38% retracement from the February high, followed by the trend line that falls off of the February high at 0.8200. This may provide traders better reentry levels into the long term downtrend of the pair. A further resistance level is found out at 0.8550.

The Wild Card

S&P 500

A crossing of the 50-day moving average below the 200-day moving average is an ominous technical signal known as the “Death Cross” and hints at further bearishness in the stock index. Its counterpart the “Golden Cross” is a bullish signal and last occurred in mid-September, a prelude to a 6-month bullish run. Forex traders should note support is found at last week's low of 1,076.75 followed by the August 2010 low of 1,037.

Current Time: 11/25 19:57 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
21:45NZD+ Trade Balance-1222M-1000M-5
USD+ Bank Holiday---1
00:30AUD+ Private Capital Expenditure q/q-4.0%-2.8%-5
09:00EUR+ M3 Money Supply y/y4.9%4.9%-3
09:00EUR+ Private Loans y/y1.1%1.2%-1
12:00EUR+ GfK German Consumer Climate9.49.2-1
13:30CAD+ Corporate Profitsq/q12.9%--1
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