Month: February 2011

Following the protests in the Middle East during the past month, demand for gold as an alternative investment is reaching new highs. As a result, gold climbed from $1,307 an ounce to the $1,410 level in about four weeks. Due to a mild correction, gold is now trading at $1,402 an ounce, however, what seems to be a rounding bottom pattern in the making indicates that gold might cross the $1,410 level shortly.

• The chart below is the spot gold 2-hour chart by ForexYard.
• There is a very distinct bullish channel formed on the chart, which has reached its peak a couple of days ago, at the $1,410 level.
• The Slow Stochastic continues to point up, despite its high location – above the 80-line. This clearly indicates that the bullish momentum has more steam in it.
• The MACD is on the verge of completing a bullish cross. If the bullish cross will indeed take place, this may verify the bullish notion.
• In addition, a rounding bottom pattern appears to be forming on the chart (highlighted in the blue line). This pattern means that gold is likely to climb back towards the $1,410 level.
• The pattern also indicates that gold has potential to cross the $1,410 resistance level, with potential to reach $1,420 an ounce.
• The next resistance levels are located at $1,410, $1,420 and $1,431.
• The next support levels are at: $1,394, $1387 and $1,375.

The US dollar posted slight gains on Tuesday versus its major counterpart currencies as investors got a bit optimistic about the single currency on expectations of increase in key interest rates by European Central Bank.

The dollar index DXY which measures the US dollar’s performance versus its six major rival currencies gained to 77.784 on Tuesday as compared to 77.739 on Monday’s European trading session.  The dollar index moved up to 78.326 in yesterday’s Asian trading session however later settled around 77.578.

The Euro surged to 1.3705 versus the US dollar but later on settled to 1.3661 as compared to 1.3666 on Monday. The single currency along with Swiss franc remained strong due to remarks of Mersch supporting tightened monetary policy by European Central Bank.

Swiss Franc moved mainly on the political unrest in Libya which has resulted in soaring oil prices making investors shift their focus away from the greenback.

The Pound Sterling also plunged to 1.6141 versus the US dollar on Tuesday as compared to 1.6221 on Monday.

The US dollar remained under selling pressure versus some currencies despite the latest data of US home price which declined in December as per wide expectations. The US dollar declined versus the Japanese Yen to 82.74 on Tuesday as compared to 83.18 on Monday.

The New Zealand dollar plummeted due to major earthquake which killed more than 60 persons and almost destroyed Christchurch, New Zealand second largest city. The US dollar surged 2.2 percent versus the New Zealand currency to 1.3392 on Tuesday. Australian dollar also gained 0.5 percent to 1.3365 against New Zealand dollar however declined 0.9 percent to 99.78 versus the greenback.

About the Author

Daily forex trading news written by Rehan from DailyForexTrade.com

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

An uneasy calm descended over FX markets during the Asia session, and risk currencies managed to hold their ground despite continuing concerns about Libya. The dollar fell further against the yen, but has steadied against the Swiss franc. EURUSD traded 1.3649-1.3712, USDJPY 82.53-82.89. AUDUSD crept back above parity although there seemed to be little conviction behind the move. NZDUSD continues to languish sub-0.75. The euro remains supported on expectations of a hawkish ECB press conference next week. The S&P 500 fell just over 2%, registering its worst one-day fall since August. WTI and Brent are $95.57 and $106.45, respectively, and gold is $1399.83 at the time of writing. On the US data front, both consumer confidence and the Richmond Fed manufacturing survey showed upside surprises. S&P/Case-Shiller data registered another decline in house prices. With few top-tier data releases in the US ahead, external events will remain the larger driver of risk sentiment and we should continue to see a bifurcation of dollar performance, as it benefits as a safe haven versus the higher-beta currencies but struggles against the Swiss franc and the yen as market participants remain undecided on US recovery prospects.
EUR

The euro was supported by hawkish comments from the ECB’s Mersch. While his tone was not particularly surprising, comments indicating the possibility of hiking rates with temporary liquidity measures still in place and the specific mention of the March 3 ECB meeting piqued interest. We believe the ECB will also have updated forecasts at that meeting and Mersch said the ECB may warn of “upside inflation risks” then. S&P later cautioned that Spain still has significant downside risks to its AA credit rating and could face further problems in obtaining financing in the markets. S&P also said Spain has not done enough to “radically overhaul [its] labour market.” S&P has the lowest rating on Spain among the three major ratings agencies but the euro nevertheless managed to hold on to some of its earlier gains.
German Chancellor Merkel said the EU may consider extending the period for the Greek bailout plan. She said any extension would have to be part of a larger, more comprehensive solution and that Germany would present initial proposals at the specially called March 11 EU summit.
GBP

The BoE’s Posen and Tucker were on the newswires yesterday. Posen again sounded dovish as he said it would be a mistake to raise the BoE policy rate just “for the sake” of it and he did not rule out the possibility of deflation should the BoE raise rates right now. Tucker said the recovery could take a while longer and the BoE faces a dilemma on interest rates. He said inflation is a worry and that the BoE would need to raise rates rapidly in order to get CPI down quickly.
Up next are the BoE MPC minutes from the Feb 10 meeting. The vote split will be the focus, as at least one other member is likely to have joined Andrew Sentance and Martin Weale in voting for a rate hike. But even if there is no shift in the voting stance, the commentary will likely suggest that many members were close to voting to raise interest rates. While a third hawkish voter would not tip the scales overwhelmingly in favour of an imminent policy rate hike, continued hawkish overtones should keep sterling supported in the near term, especially as BoE hiking expectations remain elevated.
AUD

RBA Governor Stevens repeated that AUD strength should help contain inflation. He added that, although he is uncertain how long the boom in the terms of trade will last, it does seem persistent.
NZD

Prime Minister Key has declared a national state of emergency following yesterday’s earthquake in Christchurch.
Finance Minister English said the RBNZ may consider the impact of yesterday’s earthquake in its rate decisions. RBNZ Governor Bollard issued a statement on the disaster but made no mention of monetary policy.
Moody’s said the quake would have no immediate impact on New Zealand’s Aaa rating, but warned that the country is at risk of moving back into recession.

TECHNICAL OUTLOOK
EURJPY 114.94 resistance.
EURUSD BULLISH The pair targets 1.3744, break here would expose 1.3826. On the downside, initial support is at 1.3525 intraday low ahead of 1.3463.
USDJPY BULLISH As long as 82.34 continue to cap the downside risks, expect recovery towards 83.98.
GBPUSD BULLISH Stalled in front of 1.6279/99 resistance zone. Support is defined at 1.6076.
USDCHF BEARISH Focus is on 0.9329/01 support area. Initial resistance at 0.9539.
AUDUSD BULLISH Initial resistance lies at 1.0158 ahead of 1.0200 while near-term support is defined at 0.9944.
USDCAD BEARISH Initial support is at 0.9816 ahead of 0.9745/12 area.
EURCHF NEUTRAL 1.3029 and 1.2774 mark the near term bull and bear triggers respectively.
EURGBP BEARISH Break of 0.8356 would open way towards 0.8332/13 support zone. Resistance is at 0.8514.
EURJPY BULLISH Support at 112.09 holds, while a break above 114.94 would expose 115.42/68 zone.

Forex Daily Market Commentary provided by GCI Financial Ltd.

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By Anton Eljwizat

A bearish movement of the USD/CHF cross hasn’t received much support as of late. Below, I will demonstrate that the USD/CHF pair has already commenced an upward trend for today, as a bullish cross has taken place on the Slow Stochastic and MACD. In addition, the Williams Percent Range indicates that the price of this cross currently floats in the oversold territory, signaling up pressure. Traders are strongly advised to take advantage of the trend at an early stage. Therefore, why not open long positions at an excellent price?

The next resistance level is located at the 0.9430 level.

Forex Market Analysis provided by ForexYard.

© 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

Following yesterday’s devastating earthquake in New Zealand, the NZD/USD dropped close to 200 pips, reaching as low as 0.7430 before staging a slight correction in the Asian session. The pair is currently trading just above the 0.7500 level. Meanwhile the price of crude oil remains close to a 30-month high due to the widespread unrest in Libya.

Economic News

USD – Dollar Remains Bearish Against Franc and Yen

The US dollar continued to fall against the safe haven yen and Swiss franc in overnight trading, as the widespread political unrest in Libya has driven investors away from riskier currencies. Confidence in the pace of the global economic recovery has been severely dampened, causing the dollar to drop against several of its main currency rivals. The USD/JPY has fallen almost 75 pips from yesterday’s high of 83.40. Currently the pair is trading around the 82.60 level. The USD/CHF has dropped well over 100 pips in the last 24 hours, and is currently trading around the 0.9370 level.

Turning to today, a lack of significant news out of the US means the dollar is forecasted to remain bearish. That being said, traders will want to pay attention to the US Existing Home Sales figure, set to be released at 15:00 GMT. Analysts are predicting today’s figure to be slightly below last month’s. If true, investor confidence in the US economic recovery may remain low, and the greenback could take further losses in afternoon trading.

In addition, traders will want to pay attention to any news out of Libya, as the conflict there continues to impact investor attitudes toward the current state of the global economy. Further unrest in the Middle East is likely to cause the dollar to tumble further.

EUR – EUR Once Again Above 1.3700 against Dollar

Hawkish comments from the European Central Bank yesterday continued to boost the euro against the US dollar during the Asian trading session. The EUR/USD is once again trading above the 1.3700 level, up from 1.3650 early last night.

While the euro has moved up against the dollar, it has remained largely bearish against the Swiss franc. Investors worried about the current state of the global economic recovery have turned to the CHF as of late, enhancing the currency’s safe haven appeal. The EUR/CHF dropped well over 100 pips yesterday before staging a slight upward correction. Currently the pair is trading right around the 1.2830 level.

Today, EUR traders will want to pay attention to a speech from ECB President Trichet scheduled to take place at 17:00 GMT. Any comments from Trichet regarding a future euro-zone interest rate hike may cause investors to shift their assets toward riskier currencies and boost the euro as a result.

JPY – Yen Sees Small Gains against USD during Asian Session

The USD/JPY dropped over 30 pips during the Asian session, as investors appear to be flocking to the yen as a safe haven currency amid the recent turmoil in Libya. It appears that as long as the recent wave of unrest in the Middle East continues, safe haven currencies like the yen are likely to remain bullish. The USD/JPY is currently trading around the 82.60 level, down from 82.90 earlier tonight.

Today, yen traders will want to pay attention to any news regarding the ongoing conflict in Libya. Investors are likely to remain with the yen until some semblance of order is brought to that country. Furthermore, the US Existing Home Sales is forecasted to come in slightly below last month’s figure. If true, the yen could see more gains.

Crude Oil – Crude Oil Remains Close to Record High

Investor fears that crude oil supplies could be damaged as a result of the recent wave of political turmoil in Libya drove the commodity to a 30-month high in trading yesterday. After falling slightly during the evening, the price of oil began to go up once again during the overnight session, and is currently trading around $95.75 a barrel.

Today, oil traders will want to pay attention to any news out of Libya. Analysts are largely in agreement that unless some measure of order is brought to the country, the price of crude oil is likely to remain at its current high. Until investors are confident that stockpiles in the Middle East are secure, prices are unlikely to come down.

Technical News

EUR/USD

The Williams Percent Range on the 8-hour chart has crossed into the overbought zone indicating that a bearish correction is likely to occur. In addition, a bearish cross has formed on the daily chart’s Stochastic Slow. Going short may be the preferred strategy for today.

GBP/USD

The daily chart’s MACD has formed a bearish cross, indicating that downward pressure is likely to occur in the near future. At the same time, the Relative Strength Index on the hourly charts are in neutral territory. Traders may want to take a wait and see approach for this pair today.

USD/JPY

The Williams Percent Range on the 4-hour chart has crossed into the oversold region, indicating that bullish movement could occur in the near future. This theory is supported by the Relative Strength Index on the 8-hour chart. Opening long positions may pay off for this pair today.

USD/CHF

A bullish cross on the daily chart’s Slow Stochastic is indicating that upward movement could occur later today. The Relative Strength Index is also in oversold territory. Traders will want to open long positions for this pair today.

The Wild Card

EUR/CHF

The Williams Percent Range on the 8-hour chart is in oversold territory. In addition, the daily chart’s Stochastic Slow has formed a bullish cross, indicating upward movement is likely to occur. Now may be a great time for forex traders to open up long positions before the upward breach occurs.

Forex Market Analysis provided by ForexYard.

© 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.

The US markets remained closed yesterday on observance of President’s Day holiday. In United Kingdom industry data on house prices was reported yesterday.

Today in United Kingdom official report on public sector net borrowing is released while United States will publish its consumer confidence report and data on house prices. Manufacturing activity in Richmond will also be reported today in United States.

On Wednesday February 23rd, 2011 minutes of recent meeting for Britain’s future monetary policy outlook will be reported by Bank of England. UK’s official report on mortgage approvals will also be published by British Bankers Association. In United States industry data on home sales will be reported on Wednesday.

On Thursday February 24th 2011 official data on retail sales will be reported in United Kingdom while United States will report its data on jobless claims, new home sales and durable goods orders.

On Friday United Kingdom will report it gross domestic product for the fourth quarter and will also publish data on initial business investments. Moreover official data on UK’s consumer confidence will be reported by Gfk. In United States key economic indicators such as GDP for fourth quarter and consumer sentiment and inflation expectation reports will be released.

About the Author

Daily forex trading news written by Rehan from DailyForexTrade.com

EURUSD is facing 1.3743 resistance again, a break above this level will indicate that the fall from 1.3861 had completed at 1.3428 already, and the bounce from 1.3428 could be treated as resumption of uptrend from 1.2874 (Jan 10 low), then the following upward move could bring price to 1.4000 zone. However, as long as 1.3743 resistance holds, the rise from 1.3428 is treated as correction of downtrend from 1.3861, and another fall towards 1.3300 is still possible.

Daily Forex Analysis

By Zac, CountingPips.com

Today, I am pleased to share a forex interview and commentary on this week’s major events and forex trends with currency analyst at DailyFx.com, Michael Wright. Michael specializes in fundamental and technical analysis and is an active trader in currencies, stocks and options. Michael authors articles ranging from Fundamentals Versus Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast for DailyFx and FXCM in New York.

Q: Of the major data releases and events on the schedule this week, what do you feel may turn out to be the most important event to watch for concerning the forex markets this week?

The currency markets may witness whipsaw price action this week as the economic docket is filled with event risks. Following Monday’s muted trade in light of President’s Day in the U.S., market participants were faced with New Zealand’s 2 year inflation report on Tuesday which was released in line with expectations. However, the spotlight was placed on the region’s deadliest earthquake in 80 years which rattled the kiwi and lead risk aversion to regain its footing. Besides the developments in New Zealand, market participants will closely monitor the Bank of England Minutes which will be released on Wednesday at 9:30 GMT.  The minutes are of particular importance due to the fact that the split amongst committee members is expected to widen as the economic outlook remains uncertain, while inflation is stubbornly high. Other key events that will be important for the forex markets will be U.S. durable goods orders, new home sales, economic activity and the University of Michigan confidence reports.

Q: In the case of further Mid East turmoil, what currency pair or pairs do you see as being the most sensitive to those events?

Tensions in the Middle East will largely affect the Canadian dollar in addition to other high yielding currencies such as the Australian and New Zealand dollar’s as traders seek safety amid global instability. As of late, these three currencies have pushed lower against the greenback and are expected to continue their south bound journey as the unrest in Iran, Yemen, and Algeria continue. If protests escalate further, I do not rule out a risk off environment which will lead the Aussie, Kiwi, and loonie to extend their decline.

Q: The Bank of England minutes are out this week. Is a hawkish stance on interest rates likely Pound positive or is this information potentially already priced into the currency?

The hawkish stance on interest rates amongst policy makers is positive for the British pound. Heading into the Bank of England minutes, policy makers Andrew Sentence and Martin Weale are pushing for a rate hike of twenty five basis points as consumer prices remain stubbornly above the central bank’s target. As inflation is expected to increase from 4.0 percent amid the rise in value added tax (VAT) measures, traders should not rule out a vote by another policy member, calling for a rate hike. This result will likely push the pound to new highs. Meanwhile, Adam Posen continues to push for additional asset purchases due to the uncertain economic outlook in the region. With the region’s largest spending cuts since the Second World War expected to weigh on growth, Mr. Posen will likely remain firm and if another MPC member joins him, the pound may revisit the 1.60 area. All in all, the stance amongst Andrew Sentence, Adam Posen, and Martin Weale is priced into the currency, but a shift by another member will dictate GBP price action.

Q: The AUD/USD pair last week regained some momentum higher and the pair trades over parity at time of writing. Do you think it is likely we see a retest or surpass the 1.0255 all time high made in late December?

Following the recent flood, cyclone, and earthquake in Australia, the aussie is unlikely to regain its high of 1.025 as economic activity slows on these negative developments. Also worth noting is the fact that Middle East tensions and debt concerns in the 17 member euro area are leading investors to seek safety, which weighs on the aussie. From a technical standpoint, indicators are pointing to further downside risks in the high yielding currency. The MACD has yet to reverse course after signaling for losses February 10th, while the slow stochastic indicator remains bearish.  Looking ahead, a break and a close below the 100-day simple moving average will validate my bearish bias and expose the 0.98 area.

Q: The Swiss franc bounded back with strength last week particularly versus the Euro, Yen and Dollar. Do you feel this is a resumption of the downtrends for these currencies against the Swissy?

The Swiss franc rallied against the Euro, Dollar, and the Japanese yen as of late due to the uncertain economic outlook in these regions. It is important to note and relate the Swissie’s rally to its safe haven appeal rather than its own fundamental developments. The Swiss Franc is known as a safe haven currency due to the fact that the Swiss National Bank keeps a large part of its reserves in gold. Therefore, as fears rattle the markets, the franc gains ground against its counterparts on the back of safety demand. In turn, I do feel that this is the resumption of the downtrends in yen, euro, and greenback. Specifically, debt concerns in the euro may lead the EURCHF to retest 1.26, while Moody’s downgrade of Japan’s credit rating combined with its decade of deflation reaching into 2011 could lead the CHFJPY to push higher. Furthermore, slack in the recent fundamental developments in the world’s largest economy to regain its footing may extend USDCHF losses. All in all, I do not rule out CHF gains against most major currencies as concerns in the global economy remain.

Thank you Michael for taking the time for participating in this week’s forex interview. To read Michael’s latest currency analysis and trading strategies be sure to visit DailyFx.com.

By CountingPips.com

The US dollar has gained today on the Canadian loonie in forex trading as the USD/CAD has traded at its highest level since February 11th. This currency pair has been trading in a fairly tight range since February 13th through February 21st with the top of the range being roughly 0.9900 and the bottom close to 0.9800.

Today’s move may potentially position the pair to gain some upward momentum and break this persistent range in the coming days if the dollar can remain in favor.

The USD/CAD is currently trading around 0.9905 level and has ascended above the 20-day moving average (in red). Further upside movement may see resistance at the 23.6 Fibonacci level (on the down move from 1.0372 to 0.9862) and near this month’s high point at very close to parity level.

On the downside, the 0.9850 level has been previously significant support while 0.9825/00 has also provided support recently.

By CountingPips.com

The US dollar has been trading lower today against the Japanese yen in forex trading on risk aversion due to the conflict in Libya. The dollar/yen pair had closed higher in yesterday’s trading after falling lower to finish last week. Today’s decline that has brought the USD/JPY down to the 82.70 exchange rate.

The USD/JPY had been on an upswing for most of February with a top culminating at the 83.96 exchange rate on February 16th. The pair tested (for the first time since June 2010) but failed to close above the 200-day moving average (in black) and instead bounced off and decreased lower.

The pair currently trades just above a previous support line near the 82.50 level after today breaking through the 50.0 Fibonacci retracement level (on the move down from 85.92 to 80.17). Further bearishness could bring a test of the 38.2 Fibonacci level at 82.35 while upside barriers are present at the 50.0 Fibonacci retracement level near 83.00 and resistance around 83.50.

The MACD indicator signals a potentially imminent bearish cross, suggesting further bearish price action could be in store.

USD/JPY Daily Forex Chart