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Thursday, 15 Jul 2010

Weak U.S. Retail Sales and Slowing Growth Shake Markets

Despite enthusiasm over the start of earnings season markets paired gains yesterday. Retails Sales in the U.S. came in lower than expected for the second consecutive month. Investors responded by sending equities lower. In the currency markets the Euro continued to head higher against the USD, explained by reasonably better macro data released by Europe.

Markets recovered during the mid NY trading session, just to pair gains again after the FOMC meeting minutes were published, eventually ending the NY session flat. Fed minutes released later revealed more concern over the economic recovery. The Fed stated that, for the time being, there is no need for new steps to boost the economy. However, in case the economy continues to slow, it might take the necessary measures to accelerate growth.

EUR/USDGBP/USDUSD/JPYUSD/CHFAUD/USDEUR/GBP
Daily Trendupupdownupdowndown
Weekly Trendupupdowndownupdown
Resistance1.28461.536989.041.06130.88920.8409
1.28151.533988.701.05820.88610.8388
1.27801.530688.391.05500.88300.8365
Support1.27191.524487.841.04890.87800.8322
1.26911.521287.511.04570.87590.8298
1.26601.518087.291.04200.87350.8269

Economic News

USD - Retail Sales and Fed Minutes Sent USD Lower

U.S. Retail Sales and Fed Minutes released yesterday sent the greenback lower against its major counterparts. The EUR/USD pair continued the recent rally for another day. The rally gathered momentum as European macro data was better than the disappointing figures released in the U.S. The U.S. economy is signaling that the economic recovery may be slower than previously thought. The fed sees rising risks and growth at a slowing pace.

The U.S. Dollar is currently trading at 1.2750 against the EUR during early trading today.

Looking ahead to today, more macro releases will influence the greenback. Data is expected to be lower than previous months but in case economic growth is indeed slowing, data might turn even worse than expected. In this case the U.S. Dollar might continue to decline against its major counterparts.

EUR - Weak U.S. Figures Send Euro Higher

The Euro continued its rally against the U.S. Dollar for the second day, although the pair traded higher most of the day it ended almost flat. The EUR reached $1.2776, thereafter it paired some of it gains, while concerns over the European economy remains.

The EUR remained almost unchanged versus the British pound. The EUR/GBP is currently trading at 0.8342, however the EUR traded lower against the Japanese yen currently at 112.58, as investors return to buy safer assets.

Looking ahead to today, there are no major news events to be released in Europe. Therefore U.S. macro data may influence investors' appetite for riskier assets. In case figures turn worse than expected, investors would continue to prefer the EUR and GBP over the greenback. The Japanese yen, unlike the USD, could turn stronger against the Euro and British pound, as it still considered a safer asset.

JPY - Remains a Safe Heaven Currency

The JPY strengthened against the U.S. dollar as investors expressed their concerns about the U.S. economy by selling the U.S. dollar and buying the Japanese yen. The yen traded higher against most its counterparts, aided by lower likelihood of currency intervention from Japan's policymakers. It strengthened against the British pound, the euro the Canadian dollar and the Australian dollar.

Looking ahead to today traders should pay attention to the support line at 88.00. A below this level might take the USD/JPY pair even lower. Some analysts estimate that that the yen could even reach as low as 85 in the following months.

OIL - Worries about Double Dip Hit Crude Oil price

Crude Oil price ended flat yesterday after Fed Meeting Minutes signaled slower growth than previously expected. Crude Oil traded higher above $78 before NY trading session only later to pare its gains after disappointing U.S. Retail Sales, declining further after the Fed published its monthly minutes.

Crude Oil prices have risen sharply since last Tuesday from $71.46, currently trading at $77.25. Having little effect on price, Crude Oil stockpiles decreased by 5.1 Million barrels according to the weekly EIA report published yesterday. Distillate stocks rose by 2.9 million barrels, analysts expected, on average a rise of 800K barrels.

Crude Oil prices may decline further in the short term if economic figures continue to deteriorate. Investors are worried about a possible double dip, or a renewed recession. The Fed at this stage will not take steps to accelerate the economy.

Technical News

EUR/USD

Yesterday the EUR/USD rose as high as 1.2776 but found resistance at the upper line of the pair's rising price channel. The close was also above the resistance line at 1.2750 and the long term downward trend line that began in December of 2009. Traders may want to target the next resistance line at 1.3100. This level also coincides with a 76.4% Fibonacci retracement level from the pair's bullish trend in 2009.

GBP/USD

The pair ran into technical resistance yesterday, rising to a high just shy of 1.5300. This price level is reinforced by the long term downward sloping trend line that began in July of 2008. The price level also coincides with a 23.6% Fibonacci retracement level of the same long term bearish trend. A breach of this price could send the pair to the resistance levels of 1.5380 and 1.5520 in the short term, with a long term target at 1.6425.

USD/JPY

The brief bullish correction has ceased in the pair as yesterday the price fell to the support level of 88, the significant resistance level reached on the same day of the "flash crash". Falling momentum may push the pair lower as the 10-day Momentum Indicator is falling below the 100 level. The price has also failed to make a significant breach of the 20-day simple moving average. The next target for the pair could be the support of line at 87.

USD/CHF

Yesterday the pair pulled back to the 61.8% Fibonacci level at 1.0610 before heading lower to the daily low set on Tuesday. A breach of the 1.0480 support level could send the pair lower towards the 76.4% Fibonacci retracement level from the previous bullish trend at a price of 1.3050.

The Wild Card

Oil

Rising prices have been accompanied by increasing momentum as the 14-day Momentum indicator is sloping sharply higher. Yesterday the price of the commodity rose to a high of 78.12 before falling back for a slight gain. CFD traders may want to continue to be long on spot crude oil with a near term price target of $80.

Current Time: 07/23 21:21 GMT
# Time $€£¥ Event Per. Prev. Fore. Act. Imp.
07/23
22:00NZD+ Official Cash Rate3.25%3.25%-5
22:00NZD+ RBNZ Rate Statement***5
23:45NZD+ Trade Balance285M--5
00:50JPY+ Trade Balance-0.86T--3
07/24
02:35JPY+ Flash Manufacturing PMI51.5--1
07:00EUR+ Spanish Unemployment Rate25.9%--3
08:00EUR+ French Flash Manufacturing PMI48.2--5
08:00EUR+ French Flash Services PMI48.2--3
08:30EUR+ German Flash Manufacturing PMI52.0--5
08:30EUR+ German Flash Services PMI54.6--3
09:00EUR+ Flash Manufacturing PMI51.8--3
09:00EUR+ Flash Services PMI52.8--3
09:00EUR+ Italian Retail Salesm/m0.4%--1
09:30GBP+ Retail Sales m/m-0.5%--5
13:30USD+ Unemployment Claims 302K--5
14:45USD+ Flash Manufacturing PMI57.3--3
15:00USD+ New Home Sales504K--5
15:30USD+ Natural Gas Storage 107B--1
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