Month: June 2010

By Dan Eduard – For our technical analysis, we will be looking at the 8-hour chart for the EUR/NOK pair provided by ForexYard. As will be shown, the pair is currently trading in oversold territory and will likely see an upward correction in the near future.

The technical indicators being used are Bollinger Bands, Relative Strength Index (RSI) and Stochastic Slow.

1. As shown on the chart, the pair is currently trading on the border of the lower Bollinger Band. This typically indicates an upward correction is imminent. Furthermore, the Bollinger Bands are beginning to widen, meaning a major price shift could occur in the near future.

2. The RSI shows the pair currently trading around the 20 line, well into oversold territory. When traders see the RSI at such a low point on the chart, they can take it as a sign that bullish movement could occur soon.

3. Traders can see a cross already formed on the Stochastic Slow lines at the bottom of the chart. Typically, when such a cross occurs, the pair begins to see some upward momentum. This further corroborates our original theory that a bullish correction is likely to take place.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The US dollar appears to have lost modest ground against its primary currency rivals during short-covering at the end of last week’s trading. The Bank for International Settlements (BIS) released a statement on Sunday declaring that while European banks have lowered their reliance on dollar-based assets, there is still a strong need to diversify portfolios even further. The call for diversification is not new, but this study may add pressure on the USD which has seemingly been absent during this period of risk aversion.

Economic News

USD – US Dollar under Pressure Following BIS Study

The US dollar appears to have lost modest ground against its primary currency rivals during short-covering at the end of last week’s trading. By Friday’s closing hours the EUR/USD was trading above 1.21, and the USD/CAD was near 1.03. The market appears ready for a correction however, but few news events are expected today which may deliver the pressure needed for such a correction.

The Bank for International Settlements (BIS) released a statement on Sunday declaring that while European banks have lowered their reliance on dollar-based assets, there is still a strong need to diversify portfolios even further. The call for diversification is not new, but this study may add pressure to the USD which has seemingly been absent during this period of risk aversion.

Euro zone countries now worry that an over-reliance on the greenback could cause problems at a later date and are seeking other safe havens. The result should be a sell-off of USD in the forex market, which will no doubt help stabilize the European currencies and lift commodity prices somewhat.

In the meantime, today’s news events are on the light side. The only significant data will be the euro zone’s publication of its industrial production figures. While not typically carrying a heavy impact, they may be the only piece of data the market receives which could influence the majors.

EUR – Euro Benefits from French Risk Appetite and Weaker Dollar

The euro has apparently risen sharply following a period of short-covering and boosted risk appetite. A sudden surge in French risk seeking has helped the 16-nation single currency recover a moderate amount of its previous losses. The EUR rose significantly against both of its primary rivals, the USD and GBP.

Against the dollar, the euro temporarily traded above 1.22 before calming back down towards 1.21. The story was slightly different versus the British pound with a rapid rise from 0.8220 to 0.8350 since last Friday. The price of both pairs has appeared to stabilize as of this morning.

Adding weight to the euro’s recent climb for Monday morning was a report released by the Bank for International Settlements (BIS), which stated that the euro zone was in need of further diversification. While it did not bode well for the region itself, it adds pressure to the currencies which represent the largest rivalry against the euro. This in turn helps return a modicum of value back to the euro.

With the euro zone’s regional industrial production figures due today – and being the only significant report being released – the euro appears to be the headline currency of the forex market. Should these figures turn out positive, we should see some appreciation in the 16-nation single currency as risk appetite continues to grow.

JPY – Japanese Exports and Equities Higher, Yen Trading Lower

The Japanese yen has been on the decline for some time, but there seems to be an upside to this story for the Japanese economy. The decreased value of the JPY has helped lift Japanese exports, which has subsequently helped to temporarily lift Japanese equities. While a weaker currency often spells economic struggle, in the case of Japan it may represent the ability to return to high levels of growth.

The yen has seen significant losses versus a number of the major currencies. Versus the US dollar, the yen has fallen back towards 92.00, while the EUR has actually climbed towards 112.00. Even the British pound has made modest gains, ascending to 134.00 as of this morning. With no major news expected out of Japan today, it seems safe to assume that the present trends may continue throughout the day.

Crude Oil – Oil Prices Moving Erratically on Uncertainty

After peaking around $76 a barrel last week, the price of crude oil has appeared to stabilize near $74.50 as of this morning. The price of oil has continued to fluctuate in more volatile patterns recently due to the political uncertainty surrounding the BP oil spill in the Gulf of Mexico, as well as on the future of economic growth in the euro zone. Both the demand and supply side of the oil equation seem to be less certain and traders are witnessing larger price fluctuations as a result.

The price of oil does have a correlation with the value of the US dollar; therefore, we can make assumptions that crude oil may see an upward movement in the next few days simply because most expectations call for a decline in the USD. Any decrease in the value of the greenback typically results in a boost for oil. Traders should follow the news around the USD this week as it will likely decide the price movements for crude.

Technical News

EUR/USD

The Relative Strength Index on the 8-hour chart shows that the pair is currently trading well in overbought territory, which typically indicates a downward correction is likely to take place soon. This theory is supported by the Stochastic Slow on the 2-hour chart. Traders are advised to go short with tight stops today.

GBP/USD

Practically all technical indicators show the pair trading in neutral territory, with no clear direction on display. The one exception appears to be the Stochastic Slow on the 2-hour chart, which is showing a possible bearish correction occurring soon. Still, traders are advised to wait for a clear direction to show itself before entering into this pair today.

USD/JPY

Technical indicators are showing signals that a bearish correction may take place for the pair today. The Bollinger Bands on the hourly chart, as well as the Relative Strength Index on the 4-hour chart lend support to this theory. Traders are advised to go short with tight stops in trading today.

USD/CHF

Most technical indicators are not showing a clear direction for USD/CHF at this point. With the pair currently trading in neutral territory, traders are advised to take a wait and see approach today, as a clearer indication may present itself later.

The Wild Card

EUR/JPY

Technical indicators across the board are showing this pair trading in overbought territory, indicating a bearish correction is likely to take place today. These include the Stochastic Slow and Relative Strength Index (RSI) on the 8-hour chart, as well as the RSI on the 4-hour chart. Forex traders are advised to go short with tight stops today.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Good day forex poeple! Here’s an update on the USDCHF pair that I last posted back in the 21st of May. As you can see from pair’s daily canvas, the pair broke out from an inverted head and shoulders pattern and has since risen. After hitting a high of 1.1731 on June 1, it has weakened down to 1.1400. Presently, the pair is trading just below 1.1500 and so it seems that it is already losing its upward momentum since it has been unable to mark some new highs for the past week. However, with the stpchstics now in the oversold territory, the USD could once more pick itself up to trump the Swiss franc. In case the pair falls, its next level of support would be at 1.1250. But if it does not, it could revisit its yearly high around 1.1700 or even aim for 1.2000 and 1.2200. Based on the Elliot Wave Theory, wave 5 of the could already be in the making. Here, wave 3 is noticeably the longest one while wave 4 is represented by the pair’s consolidation for the past 2 weeks.

The US dollar’s rise versus the Swissy was halted this week due to some profit taking actions and a couple of upbeat economic events in China and the US. The other day, China reported a 50% year-over-year jump in exports which indicate that the global trade is already improving. Back stateside, the preliminary Consumer Confidence survey from University of Michigan exceeded the 74.5 expectations with a two-year high of 75.5  which also lifted the higher yielding assets including somehow.

Still, such events do not hide the fact the Greece and several other countries in Europe are still facing a huge debt crisis which could implode anytime if any one of them defaults on their upcoming dues. Aside from that, the expected slowdown in Switzerland’s month-over-month PPI (from 0.6% to 0.0%), which will be on deck on Monday, could further weaken the CHF at least in the short term. Moreover, a decision by the Swiss National Bank to hold its interest rate unchanged at 0.25% would naturally be bearish for the currency. By the way, the SNB’s Libor rate decision will be held on Thursday (June 17).

More on LaidTrades.com …

Market Analysis by Finexo.com

USD
The Dollar rose against both the Euro and the Yen on Friday as better than expected data showed that consumer confidence rose in June to its highest level in more than two years.  Moreover, Forex traders responded well to the U.S Fed Chairman Ben S. Bernanke’s statement that despite job growth, the U.S economy is growing and is not at risk for a double dip recession.

This week, is expected to be particularly quite for the U.S with only a few key events standing out. On Wednesday, the census bureau will release the Building Permits figure and on Thursday, forex traders are advised to watch the release of the Core CPI.

On a different note, despite historical low interest rates and billions of dollars of government stimulus, US inflation levels remain low. However, this situation is not expected to remain for an extended period of time, and runaway inflation fears continue.

EUR
The Euro extended last week’s rally, advancing against both the Dollar and the Yen in the early morning trading session. The single European currency rose briefly above the $1.22 mark to touch on a high of $1.2207 – its highest price since June 4th.

The Euro got some much needed support last week as it shook off early losses to move back above $ 1.2000. Lending a helping hand to the currency was a positive ECB meeting in which President Jean Trichet stated that the ECB would continue to lend money to banks to pump liquidity into the EU financial system and prevent further credit problems.

Up ahead, traders will want to watch Tuesday’s German ZEW figures. This survey of German institutional investors and analysts is highly regarded and typically has a strong impact on the Euro. Recently, the Bundesbank (the German banking regulator), has been criticized for being lax with its enforcement of German banks. Therefore, investors will want to watch and see whether the ZEW Business Sentiment numbers have been affected by the growing lack of faith in the Bundesbank.

GBP
Last week, the Bank of England held its benchmark interest rate steady and continued to withhold from widening its quantitative easing policy as newly elected Prime Minister David Cameron prepares the nation for the biggest budget cuts since the 1980’s.

As predicted the Monetary Policy Committee, by BOE governor Mervyn King, kept its bond purchasing program unchanged at £200 billion, while the central bank opted to hold the official interest rate at 0.5%.

Trading in the British currency could prove very volatile this week as the U.K prepares to release its CPI and Retail figures.  Specifically tomorrow, CPI number could lead to some significant movement in the GBP/USD as Forex investors are beginning to believe that the current rise in inflation in not just temporary issue, and that it may extend into the long term.

Forex Market Review & Analysis by Finexo.com

Disclaimer: Trading the foreign exchange (Forex) carries a high level of risk, and may not be suitable for all investors. All information and opinions contained on this website are to be used for general informational purposes only and do not consitute investment advice.

Based on the fiber’s (EURUSD) daily chart, it looks like that the euro is poised for another fall against the greenback. As you can see, the pair has rallied back above 1.2100 after hitting a low of 1.1876 when it broke down from a descending triangle formation. Though if you notice, the triangle’s former support is now acting as a resistance that is preventing the pair from moving higher. In case this support-turned-resistance gets breached, the 3 Fibonacci retracement levels that I marked are still present to possibly halt the euro’s ascent. On the flip side, the pair could revisits its 2010 low or even mark a new one since its minimum downside target from its breakdown from the triangle has not been met yet (check my previous post on the pair here). Since the EUR is on a longer term downtrend, it has a higher chance of moving lower in the next coming days or weeks against the US dollar.

Fundamentally, most of the assets were actually trading in the red in last Friday’s US trading due to the unexpected 1.2% slide in the US’s May headline retail sales. But equities as well as the euro eventually got some support to lose the day back in green from the better than expected University of Michigan Consumer Sentiment report for the month of June. The account came in at 75.5 against the market’s 74.5 forecast. Still, given the uncertainties around the global market particularly in Europe, the riskier assets like equities and the non-dollar currencies like the euro could yet again face some selling pressure. remember that Greece and its neighbor countries are very much far from getting out of the debt woods. Until they do, the euro could conitnue to weaken versus its major peers.

On Tuesday (June 15), Germany’s Zew economic sentiment index for June will be on the deck. The index is seen to reach 48.7from 45.8. But due to the latest debt fears in the euro zone which now inclaudes Hungary, the index would more likely miss its target. If it does, the euro could take a another hit.

More on LaidTrades.com …

By eToro – The force of the swings in market momentum continued to be strong this week as the market was dominated with news that created a lot of volatility. The week was punctuated by a weaker than expected US employment report that pressured the equity indices down to the low end of the weekly trading range.

For the full review please click here

Forex Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

By Elliott Wave International

Telegraph.go.uk, May 26: “US money supply plunges at 1930s pace… The M3 money supply in the U.S. is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”

Deflation is suddenly in the news again. It’s a good moment to catch up on a few definitions, as well as strategies on how to beat this rare economic condition.

And who better to ask than EWI’s president Robert Prechter? He predicted the first wave of deflation in the 2007-2009 “credit crunch” and has written on this topic extensively.

We’ve put together a great free resource for our Club EWI members: a 63-page “Deflation Survival Guide eBook,” Prechter’s most important deflation essays. Enjoy this excerpt — and for details on how to read the eBook in full free, look below.

Following the Great Depression, the Fed and the U.S. government embarked on a program…both of increasing the creation of new money and credit and of fostering the confidence of lenders and borrowers so as to facilitate the expansion of credit. These policies both accommodated and encouraged the expansionary trend of the ’Teens and 1920s, which ended in bust, and the far larger expansionary trend that began in 1932 and which has accelerated over the past half-century. Other governments and central banks have followed similar policies. The International Monetary Fund, the World Bank and similar institutions, funded mostly by the U.S. taxpayer, have extended immense credit around the globe.

Their policies have supported nearly continuous worldwide inflation, particularly over the past thirty years. As a result, the global financial system is gorged with non-self-liquidating credit. Conventional economists excuse and praise this system under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run, the swollen mass of debt collapses of its own weight, which is deflation, and destroys the economy. A devastated economy, moreover, encourages radical politics, which is even worse.

The value of credit that has been extended worldwide is unprecedented. Worse, most of this debt is the non-self-liquidating type. Much of it comprises loans to governments, investment loans for buying stock and real estate, and loans for everyday consumer items and services, none of which has any production tied to it. Even a lot of corporate debt is non-self-liquidating, since so much of corporate activity these days is related to finance rather than production.

Figure 11-5 is a stunning picture of the credit expansion of wave V of the 1920s (beginning the year that Congress authorized the Fed), which ended in a bust, and of wave V in the 1980s-1990s, which is even bigger.

…it has been the biggest credit expansion in history by a huge margin. Coextensively, not only is there a threat of deflation, but there is also the threat of the biggest deflation in history by a huge margin. …

Being contained by 1.4769 previous high resistance, GBPUSD dropped sharply from 1.4758 last Friday, suggesting that a cycle top is being formed on 4-hour chart. The fall from 1.4758 could possibly be resumption of downtrend. Another fall towards 1.4230 previous low would more likely be seen. Key resistance is at 1.4769, only rise above this level will indicate that lengthier consolidation of downtrend is underway, then further rally could be seen to 1.4900 area.

Daily Forex Analysis

By CountingPips.com

U.S. retail sales decreased unexpectedly in the month of May as consumer spending on retail goods pulled back and halted a string of seven consecutive monthly sales increases. Advance estimates of retail sales showed that sales decreased by 1.2 percent to a total of $362.5 billion in May following a revised increase in April, according to the report by the U.S. Commerce Department. April’s retail sales data was revised higher to show an increase of 0.6 percent after the original report had registered a 0.4 percent gain.

The May retail sales results were worse than the 0.2 percent increase for the month that the market forecasters were expecting.

On an annual basis and despite the monthly decrease, the May sales level was 6.9 percent higher than the May 2009 sales level following an annual gain of 9.0 percent in April.

Core retail sales, excluding automobile sales and parts, decreased by 1.1 percent in May after core sales rose by 0.6 percent in April. On an annual basis, core sales increased by 6.1 percent in May from May 2009 following an annual gain of 7.8 percent in April.

Contributing to the decreased retail sales numbers for May was a notable 9.3 percent decline in building material, gardens and supplies dealers. Also showing decreases for the month were gasoline station sales with a decline of 3.3 percent, automobiles sales with a 1.7 percent shortfall, clothing & clothing accessories stores with a 1.3 percent decline and general merchandise stores which saw a decrease of 1.1 percent for the month.  Positively contributing to retail sales last month were nonstore retailers, food & beverage stores, sporting goods, hobby, book & music stores and furniture & home furnishings stores.

UMichigan/Thomson Reuters Sentiment Survey rises in June.

The preliminary consumer sentiment survey produced by the University of Michigan and Thomson Reuters showed that the consumer’s outlook on the economy has improved and rose to its best level since January 2008. The consumer survey rose to a 75.5 score in June from a 73.6 score in May to surpass economic forecasts expecting the score to decrease to approximately 74.8.

The expectations index, which measures future economic sentiment, increased from 68.8 in May to 70.7 in June while the current conditions index increased from 81 in May to 82.9 in June.

US Dollar trades mixed in Forex Markets

The U.S. dollar has been mostly higher in forex trading today against the other major currencies after the U.S. economic news releases. The dollar has made gains today versus the euro, British pound, Swiss franc, Canadian dollar and a slight gain against the Japanese yen. Meanwhile, the American currency has been falling against the New Zealand dollar and trading almost unchanged versus the Australian dollar at time of writing.

The U.S. stock markets have been negative so far today with the Dow Jones decreasing by over 40 points, the Nasdaq down by about 1 point and the S&P 500 lower by over 4 points before noon in the U.S. trading session. Oil has edged down by $1.51 to the $73.97 level while gold has been virtually unchanged at the $1,221.00 per ounce level.

USD/CAD 1H Chart – The US Dollar increasing versus the Canadian Dollar today in forex trading.  The USD/CAD fell to a short-term low yesterday and oversold levels on the RSI around the 1.0285 exchange rate before breaking out higher in today’s trading action and trading at the 50-hour moving average in purple.

By Adam Hewison – The battle between the Bulls and Bears continues with very choppy trading action. The rally from a potential double bottom is cause for concern for the Bears, however the Bulls are in a similar situation as they have to prove their case with sustained market action.

In my new video, I outline some of the key levels that I think are important in the S&P 500 market. Volume continues to to be light and that is why the markets are moving around and are so volatile at the moment.

Watch the New Video Now…

This is my first video since returning from holiday in France, but expect many more as the market rotates.

Don’t miss my special risk-free trial offer to MarketClub, my premium charting service, offered at the end of this video.

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub

To see more of Adam’s Videos click here or sign up for Adam’s Free 10-part Professional Trading Course.