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Monday, 30 May 2011
USD Bearish as America Celebrates Memorial Day
With the United States on holiday Monday, currency traders are likely to witness a relatively thin trading environment. Though debt concerns loom in the euro zone, and industrial production falters globally, the higher yielding assets like the GBP and EUR appear positioned to gain despite poor fundamentals. This trend appears to have little opposition as dollar traders shift substantial value into other assets.
USD - Dollar Traders Weighing Momentum at Start of NFP Week
The US dollar has continued to plummet since Friday as dollar bears continued to move out of the greenback in exchange for higher yielding currencies. The Fed's record low interest rates will likely persist for the foreseeable future, according to recent FOMC reports, and the dollar is expected to see little support this week as a result.
The EUR/USD rose to a nine-day high Friday, reaching towards 1.4320 before settling slightly lower. The GBP/USD witnessed a similar bull run, climbing to an 18-day high of 1.6513. The USD/JPY joined the chorus, despite weak fundamentals in Japan, and fell to a two-week low of 80.80 from the recent high of 82.21 seen last Tuesday.
Today, with the United States on holiday for Memorial Day, the Canadian economy will be one of the few major global economies releasing data sets on Monday. The most impactful figure being published will be the GDP report for America's northern giant, set to be released at 13:30 GMT. With global industry faltering these past few weeks, the GDP report from such industrial economies may get released somewhat below expectations, driving more investors into the safety of the USD. With Non-Farm Payrolls (NFP) this Friday, the week should be exciting for forex traders.
EUR - EUR Continues to Post Gains
The euro has been a top performer against the US dollar following last week's detrimental downshift in greenback values. The EUR began the middle of last week strongly bullish and has since tapered off mildly, but still maintains its momentum; albeit weakly.
With Great Britain and the United States on holiday Monday, currency traders will likely be witnessing a relatively thin trading environment today. Though debt concerns loom in the euro zone, and industrial production falters globally, the higher yielding assets like the GBP and EUR appear positioned to gain despite poor fundamentals. This trend appears to have little opposition as dollar traders shift substantial value into other assets.
As for Monday, the euro looks to be gaining against the greenback as traders are largely absent from the region to shift investments, but global traders are still bullish on Europe as the USD remains in freefall. Canada will publish its GDP data today, which should be the most relevant data release on the day. These factors, however, will likely be outweighed by the shift in sentiment towards the buck. Look for long positions on the EUR to continue through this week unless this week's employment figures or monetary policies yield shocking results.
JPY - Japanese Yen Moving Upward as Data Supports Growth
The USD/JPY has been trading lower recently as investors flee the greenback. After reaching upwards of 82.21 on Tuesday, the pair quickly dropped to a two-week low of 80.80 as of this morning. Japan's economy has published several positive figures over the last week, much of which has helped establish the yen's recent bullishness. Whether it will be enough to reverse much of the negative sentiment surrounding Japan is yet to be determined.
The yen suffers from its own economic concerns, while shifts in consumer sentiment have helped lift yen values against a number of its rivals. Last week's data, however, provided a ray of light which caused a secondary shift towards the yen for reasons other than safety. The USD/JPY looks to be continuing this movement for the foreseeable future as a result, especially given the massive shift away from the US dollar which is helping to lift the island currency.
Oil - Crude Oil Prices Steady Near $100 a Barrel
Oil prices held steady this morning with the $100 price level acting as a firm footing for this commodity. US oil stockpiles rose a half a million barrels last week, beating expectations and helping to hold the value of light, sweet crude steady near its current mark. The price of black gold has been trading within a consolidation pattern these past several days and traders are beginning to anticipate a breach sometime this week.
The value of the US dollar versus the euro in recent trading has also dropped towards a nine-day low of 1.4300, which has helped support oil prices. With today's steady sideways movement, traders appear likely to see oil reaching a decision point this week. Whether oil traders decide to lift oil prices from a buy-in on physical assets, or pull away from oil out of a perceived glut, is something traders will bear witness to this week.
The failure of the EUR/USD to move below its 100-day moving average may be a telling sign that the price declines in May have subsided. While the price action remains capped below the 50-day moving average at 1.4350, a close above this level would put the bulls back in the driver's seat with a target at the May high of 1.4940. However, traders should not overlook the monthly and weekly charts' stochastics which remain rolling lower. A break below two key levels at the 100-day moving average at 1.4020 and the support at 1.3970 could open the door to 1.3860 as well as the 200-day moving average at 1.3705.
Cable received a strong bounce higher at a level that coincided with the rising trend line off of the May 2010 low. As such momentum has swung back in favor of the pound. Rising weekly stochastics support further gains. Resistance is found at 1.6520 followed by the April high at 1.6750. A breach here would target the August 2008 high at1.7040. To the downside, support comes in at 1.6000 followed by the trend line at 1.6120. Below the trend line the March low at 1.5935 comes into play.
The yen's rally failed to breach the 82.25 resistance as well as the 100-day moving average before the pair turned sharply lower while making a significant close below the rising trend line. Falling daily stochastics point to further declines in the pair. Therefore traders should be short on the USD/JPY with initial support at 80.35 followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10. A move to the upside and the pair may encounter initial resistance at the previous trend line which comes in at 81.90, followed by 82.25, and retracement targets from the April to May move at 82.50 and 83.25.
In almost textbook like fashion, the USD/CHF rose as high as the trend line off of the February high only to encounter resistance and plummet, ending the week at a new all-time low at 0.8464. A retracement back to the falling trend line would offer traders better levels at which to enter the trend with a stop above one of the resistance levels near 0.8890 and 0.8945.
The Wild Card
Spot gold prices have come off of their early May lows and continue to rally higher while making a strong close into the weekend. forex traders should be targeting the all-time high at $1,576 with a stop loss order placed below the near-term support level at $1,514.
|07:45||EUR||French Gov Budget Balance||-74.9B||-||-|
|08:00||CHF||Foreign Currency Reserves||437.7B||-||-|
|09:30||GBP||Consumer Inflation Expectations||3.6%||-||-|
|11:00||EUR||German Industrial Production||m/m||-0.6%||0.7%||-|
|13:30||USD||Non-Farm Employment Change||113K||151K||-|
|13:30||USD||Average Hourly Earnings||m/m||0.2%||0.2%||-|
|17:00||USD||FOMC Member Dudley Speaks||*||*||*|