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Tuesday, 20 Apr 2010
Will the EUR's Bearish Trend Continue this Week?
Last week marked a sharp drop in the EUR's value, especially against the USD and the JPY. The biggest question for this week is whether the EUR will continue to see bearish trends against the major currencies, or reverse. It seems that the upcoming data from the European economy will play a main role in this week's trading, and traders are advised to follow these main publications closely.
USD - USD Regains Safe Heaven Status
The U.S. dollar gained against the EUR in early trading yesterday as investors sought safety in the low-yielding, stable currencies after fraud charges were lodged against Goldman Sachs Group and concerns arose about a delayed meeting to deal with Greece's debt. As a result, the EUR/USD fell over 50 pips before correcting itself. Currently the pair is trading around the 1.3490 level. Similarly, USD/JPY rose almost 80 pips, pushing the oft-traded currency pair to 92.00 level.
Financial markets were rattled after the U.S. Securities and Exchange Commission charged Goldman Sachs with fraud on Friday in connection with a debt product tied to sub-prime mortgages. Global stocks fell while benchmark government bonds and less-risky currencies, rose.
Looking ahead, the U.S is set for relatively quiet day, considering that only Fed Chairman Bernanke's testimony is the only significant indicator. However, Europe and Canada appear to be releasing the bulk of today's news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations.
EUR - German ZEW Economic Sentiment on Tap
The EUR fell in early trading yesterday, on concerns about how Greece will service its debt, while the dollar and the yen gained as drops in equity markets led investors to cut positions in riskier currencies. Concerns remain about how the deal will work in practice however, and the premium demand to buy Greek government bonds rather than German bonds rose further.
Investors may look for the unusual price volatility to continue in EUR/USD as the pair attempts to stabilize and find new support and resistance lines. Large price jumps such as these are not common place and present terrific opportunities to take advantage of the price swings for profitable gains.
Looking ahead to today, the most important economic indicators scheduled to be released from Europe is the German ZEW Economic Sentiment at 9:00 GMT. Traders will be paying close attention to today's announcement as a stronger than expected result may boost the EUR in the short-term.
JPY - Yen Rises to a 2 Week High vs. the EUR
The yen hit a two-week high against the EUR on Monday as fears over fraud charges against Goldman Sachs and concerns over a delayed EU/IMF meeting on Greece fuelled inflows into the low-yielding currency. The EUR/JPY fell as low as 123.16, down more than 1 percent on the day before correcting itself. Currently the pair is trading around 1.2460.
JPY's trends will be affected by the rallies of its primary currency pairs today. It seems that USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close watch on the news coming from the U.S. and Europe as these economies will be the deciding factors in JPY's movement today, especially the German ZEW Economic Sentiment at 9:00 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
Crude Oil - Crude Oil Falls 2.7%
Crude oil prices tumbled on Monday for the third straight day as a flight from risk amid fraud charges against Goldman Sachs pressured commodities and boosted the Dollar even as Europe's closed air space curbed jet fuel demand.
Prices had meandered within a tight range for weeks before Friday's fraud charges against Goldman Sachs help send them down 2.7% in a day. That being said, while crude is down nearly 4% over the past week to their lowest levels since early March, prices are still 61% higher than a year ago.
Most technical indicators show the pair currently trading in neutral territory, indicating that a slow trading day may be ahead of us today. That being said, the Stochastic Slow on the daily chart shows that EUR/USD is currently trading in oversold territory indicating that a bullish correction may be on the horizon.
The Relative Strength Index (RSI), on the 1-hour chart shows the pair currently trading in overbought territory which usually means a bearish correction might take place. At the same time, most other indicators show GBP/USD in neutral territory. Traders may want to take a wait and see approach for this pair today.
The Relative Strength Index (RSI), on the 1-hour chart clearly shows the pair in overbought territory. This sentiment is supported by the Stochastic Slow on the 2-hour chart, indicating that a downward correction will likely take place in the near future. Traders are advised to go short with tight stops today.
Practically all indicators show the pair currently trading in neutral territory. This usually indicates low volatility for the pair. Traders are advised that erratic price movements could occur as a result. A wait and see approach is advised for the day.
The Wild Card
Dow Jones Industrials
The Relative Strength Index (RSI), on the 1-hour chart clearly shows the CFD trading in overbought territory. This sentiment is supported by the Stochastic Slow on the 2-hour chart, indicating a bearish correction is on the horizon. CFD traders are advised to go short with tight stops today.
|22:30||AUD||AIG Manufacturing Index||46.9||-||-|
|23:30||AUD||MI Inflation Gauge||m/m||0.0%||-||-|
|01:35||JPY||Final Manufacturing PMI||52.1||52.1||-|
|08:00||EUR||Spanish Unemployment Change||-64.4K||-32.4K||-|
|08:15||EUR||Spanish Manufacturing PMI||53.8||54.2||-|
|08:45||EUR||Italian Manufacturing PMI||48.4||49.3||-|
|09:00||EUR||Final Manufacturing PMI||51.0||51.0||-|
|13:30||USD||Core PCE Price Index||m/m||0.0%||0.0%||-|
|14:45||USD||Final Manufacturing PMI||53.7||54.1||-|
|15:00||USD||ISM Manufacturing PMI||55.5||54.9||-|
|15:00||USD||ISM Manufacturing Prices||38.5||40.1||-|