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Wednesday, 5 Aug 2009

USD's Bearishness at an End? Today's News May Tell

With a chain of bearish trading sessions, the US Dollar has been bouncing the forex market up and down lately. With increased risk appetite and growing market optimism, market conditions are allowing traders to pull away from the safety of the USD. On the other hand, however, today's housing, manufacturing and employment data from Britain and the United States will provide enough market news to halt current trends and create short-term reversals, or push current trends even further. If we see negative data across the boards, the USD may very well return to a bullish posture as risk aversion returns.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupnodowndownnoup
Weekly Trendupupupdownupdown
Resistance1.44751.703595.751.06750.85000.8600
1.44501.700095.501.06500.84750.8565
1.44251.696595.251.06250.84500.8540
Support1.43751.690094.751.05750.84000.8485
1.43501.687094.501.05500.83750.8450
1.43251.684094.251.05250.83500.8420

Economic News

USD - USD Bearish Sentiment Continues Prior to Employment Data

While the aggressive Dollar sell-off which started Monday stalled slightly Tuesday, the USD continues trading near the weakest level against the EUR this year ahead of the release of the Non-Farm Employment Change report, which is predicted to show U.S. companies eliminated fewer jobs in July, reiterating that the recession is coming to an end. The Dollar is trading at 1.4410 per EUR as of this morning, and is at 95.00 Yen, down from the 95.37 Yen seen on Monday.

Investors' risk appetite persists as the flow of better than expected economic data continues. Tuesday's release of the Pending Home Sales report showed an increase of 3.6% in June, which was much better than the 0.7% expected by economists. This shows that the housing market, which was at the center of the turmoil, is stabilizing, signaling an impending economic recovery in the U.S.

Looking ahead to today, the release of the ADP Non-Farm Employment Change report at 12:15 GMT, and the ISM Non-Manufacturing PMI at 14:00 GMT, is expected to have great affect on Dollar sentiment; with better than expected results likely intensifying the current bearish trend for the USD.

EUR - Signs of Global Recovery Continue to Boost the EUR

While the EUR lost tiny amounts of its gains since Monday, it still maintains most of its bullish momentum. Tuesday afternoon, the EUR was at $1.4400 from a 2009 high of $1.4445 seen Monday afternoon. The Pound was at $1.6936 from $1.6928.

The rally continued despite stock markets remaining flat throughout most of the day as investors continued seeing strong enough signs of a global recovery and maintained demand for riskier currencies.

Looking ahead to today Britain will dominate the news releases from Europe with the Halifax HPI due to be released at 6:00 GMT and the Manufacturing Production and Services PMI at 8:30 GMT. Better than expected results might be able to push the Pound above $1.7000.

For the EUR, $1.4500 should be the goal, as breaking this level might spur another rally; with no major news releases from the Euro-Zone, the EUR movements will largely depend on news releases from the U.S., Britain, as well as equity markets.

JPY - Yen's Bearish Sentiment Continues

The Yen received a slight boost Tuesday as a drop in global equities ahead of the New York session spurred demand for the safety of the Japanese currency. However, following a release of better than expected U.S Pending Home Sales data the optimistic mood returned, as did demand for riskier assets.

A late rally in the stock markets further enhanced risk appetite and the sell-off of the JPY. The Yen traded at 137.08 against the EUR and was little changed at 95.22 versus the Dollar.

With the release of several economic indicators today which are expected to show continuous improvement in global economic conditions, the bearish sentiment on the JPY is likely to continue.

Crude Oil - Crude Prices Rise as Stocks Rally for 4th Consecutive Day

Crude Oil for September delivery rose as much as 45 cents, or 0.6%, to $71.87 a barrel following a late rally in U.S stocks after pending sales of existing homes increased more than forecast in June. Oil also benefited from the weak USD as Oil prices tend to have an inverse relationship with Dollar strength.

A drop in the U.S. currency boosts the appeal of commodities as a hedge against inflation. Furthermore, the release of U.S Crude Oil Inventories today at 14:30 GMT is expected to show a decline in Crude stockpiles. Along with this inventories data, oil price movements will continue to depend largely on equity levels since this rally largely depends on equities maintaining their current momentum.

Technical News

EUR/USD

This pair's continued bullish movement has resulted in a number of mid- and long-term indicators pointing in the direction of a downward correction. With a bearish cross on the daily Slow Stochastic, the 4-hour RSI in the over-bought territory, and the impending bearish cross on the 4-hour MACD, the notion of a downward move indeed seems to be in the making. A good strategy today may be waiting for the downward breach then joining the trend as early as possible.

GBP/USD

There is a fresh bearish cross on the daily Slow Stochastic, signaling a bearish correction may be in the making. The price currently floats in the over-bought territory on the 4-hour RSI, and the 4-hour MACD has a fresh bearish cross as well. Going short might not be a bad choice today.

USD/JPY

This pair appears to be providing mixed signals today. The hourly chart has an impending bullish cross on the Slow Stochastic and the price has just entered the over-sold territory on the hourly RSI. On the other hand, the 4-hour Slow Stochastic shows a bearish cross, signaling an impending downward move. Waiting for a clearer signal may not be a bad move today.

USD/CHF

With bullish crosses on the hourly and 4-hour MACD, and daily Slow Stochastic, this pair shows very clear signs of an impending bullish movement. The 4-hour RSI also shows the price floating in the over-sold territory, supporting the upward notion. Going long appears to be today's preferable strategy for this pair.

The Wild Card

Gold

A bearish cross has recently occurred on the daily Slow Stochastic for this commodity, highlighting an impending downward movement. The bearish cross on the hourly MACD, and impending bearish cross on the 4-hour MACD both support this notion. Gold and forex traders would be unwise to miss out on an opportunity to capture profits from this volatile commodity. The signs are clear that Gold is anticipating a bearish movement; going short may be a good idea today.

Current Time: 11/27 13:15 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
11/27
13:00EUR+ GfK German Consumer Climate8.58.68.73
14:30CAD+ Current Account-11.9B-10.3B -8.4B3
22:45NZD+ Building Consents m/m-12.2%--3
11/28
00:30JPY+ Household Spendingy/y-5.6%-4.8%-3
00:30JPY+ Tokyo Core CPI y/y2.5%2.3%-3
00:30JPY+ National Core CPI y/y3.0%2.9%-1
00:30JPY+ Unemployment Rate3.6%3.6%-1
00:50JPY+ Prelim Industrial Production m/m2.9%-0.4%-3
00:50JPY+ Retail Sales y/y2.3%1.5%-3
01:00NZD+ ANZ Business Confidence26.5--5
01:05GBP+ GfK Consumer Confidence-2-1-1
01:30AUD+ Private Sector Credit m/m0.5%0.5%-1
06:00JPY+ Housing Startsy/y-14.3%-14.5%-1
08:00EUR+ German Retail Salesm/m-3.2%1.7%-3
08:00GBP+ Nationwide HPIm/m0.5%0.4%-3
08:45EUR+ French Consumer Spending m/m-0.8%0.2%-3
09:00CHF+ KOF Economic Barometer99.8100.1-3
10:00EUR+ Italian Monthly Unemployment Rate12.6%12.6%-1
10:00EUR+ Italian Quarterly Unemployment Rate12.5%12.4%-1
11:00EUR+ CPI Flash Estimate y/y0.4%0.3%-3
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