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Monday, 11 Apr 2011
Yen Hits New 11-Month Low against Euro
The JPY started off the week by falling to a fresh 11-month low against the euro, as positive global data has led to increased risk taking among investors. After hitting 123.30 during the overnight session, the EUR/JPY has since dropped to its current level of 122.50. With little in the way of significant news from either the euro-zone or Japan scheduled for today, traders can expect the current trend to continue.
USD - USD Sinks against Majors
The US dollar dropped against most of its major currency rivals during last week's trading session. The greenback fell about 300 pips vs. the euro and the EUR/USD pair reached as high as the 1.4450 level, marking a 16-month high. The dollar fell about 250 pips against the British pound as well.
The dollar's decline in 2011 was driven by interest rate hikes or the expectations of them from European central banks. A sharply divided Washington - which can't seem to agree on budget deficit issues and come up with a credible medium-term plan for fiscal consolidation - also contributed to the decline.
Currency strategists generally agree the weak dollar is a theme that will drive foreign exchange markets for some time, especially as long as the US Federal Reserve keeps the prospect of interest rate hikes at arm's length. But the extent to which the dollar will weaken further is an area of debate in the foreign exchange markets.
Looking ahead to this week, many significant economic releases are expected from the U.S. economy. The most noteworthy reports look to be the Retail Sales, the weekly Unemployment Claims, the CPI and the TIC Long-Term Purchases. Traders are advised to follow these reports as they are likely to have a large impact on the dollar.
EUR - Euro Trades Steady Ahead of Slow News Day
The euro started off the week virtually unchanged against most of its main currency rivals, including the USD and British pound. It appears that the 17-nation single currency may have hit strong resistance following last week's bullish run, spurned by the euro-zone interest rate hike. The EUR/USD is currently trading at 1.4463, down slightly from last Friday's high of 1.4486. The EUR/GBP, currently at 0.8836, is down marginally versus its rate at market closing last week.
The euro was able to make fairly strong gains against the Japanese yen during the overnight session, and the EUR/JPY pair hit a fresh 11-month high before staging a slight correction. The pair is currently trading steadily at 1.2250, down almost 80 pips since it peaked last night.
Turning to today, a slow news day will likely mean that the euro will maintain its current trends. That being said, traders will want to pay attention to any developments out of Japan regarding the ongoing efforts to rebuild the stricken nation. If any further complications arise regarding the nuclear crisis there, the yen is likely to fall further against the euro.
JPY - Yen Falls To a 11-Month Low against the Euro
The yen fell to an 11-month low against the euro and a 2- year trough versus the Australian dollar in overnight trading on Monday, and stayed on a weakening trend as investors piled into carry trades in favor of higher-yielding assets.
The yen has fallen sharply in the wake of joint yen-selling intervention by the Group of Seven industrialized nations in March. The G7 stepped in after the yen hit a record high of 76.25 yen to the dollar on March 17, propelled by speculation that Japanese investors would repatriate their overseas assets after a massive earthquake and tsunami struck Japan's northeast on March 11.
As for this week, traders are advised to follow the Japanese equity market, as the yen is highly affected by its movements. Special attention should also be given to the Monetary Policy Meeting Minutes scheduled for today, as its release is likely to have a significant impact on yen trading.
Crude Oil - Crude Oil Hits a Fresh 2 1/2 Year High amid Mid-East Unrest
The price of oil soared last week, hitting a fresh two-and-a-half year high at $113 a barrel, as investor concerns regarding supplies out of the Middle East continued to affect the market.
Widening unrest in the Middle East and a weakening dollar lent new impetus to a rally in oil markets with Brent crude briefly hitting the $113.18 mark before pulling back slightly on prospects of a peace deal in Libya.
As for today, traders are advised to follow all the developments from Libya, as this conflict is now the main catalyst in crude trading. In the case of any further escalation in the fighting there, oil prices might climb even further.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart's Stochastic Slow signals that a bearish reversal is imminent. . Going short with tight stops might be a wise choice.
The price of this pair appears to be floating in the over-bought territory on the 8-hour chart's RSI indicating a downward correction may be imminent. The downward direction on the daily chart's Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily Chart's RSI is already floating in the over-bought territory indicating that a bearish correction might take place in the nearest future. Going short with tight stops might be the right strategy today.
The cross has been dropping for the past week now, as it now stands at the 0.9080 level. The Slow Stochastic of the daily chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by the RSI of the 8-hour chart. Going long with tight stops may turn out to be the right choice today.
The Wild Card
Oil prices rose significantly in the last week and peaked at $113.18 per barrel. However, daily charts' RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.
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