Month: March 2011

By Chris Vermeulen, thegoldandoilguy.com

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX. Main focus of the markets today is the ongoing crisis in Japan and the strengthening of the yen against the dollar.

By Russell Glaser

The Swiss franc continues to benefit from the disaster in Japan. Last night’s sharp decline in the value of the EUR/CHF took the pair close to the 2010 low. Following today’s SNB decision to keep rates on hold, the euro has received a bounce to a technical level and could see further gains before the downtrend resumes.

In addition to the yen, the Swiss franc has been one of the strongest performers in response to the natural disaster in Japan as traders flock to the franc as a safe haven play. In overnight trading the pair plummeted lower, falling to 1.2416, a level near its 2010 low of 1.2400.

The franc has also benefited from the flare up of euro zone fiscal problems. Over the past two weeks Greece, Portugal, and Spain have faced new their sovereign debt downgrades by the major debt rating services. A failure by Ireland to reach a deal to restructure the terms of its bailout also does not bode well for the euro.

Today, as expected, the Swiss National Bank kept interest rates steady at 0.25%. In a written statement, the SNB increased their 2011 inflation forecasts to 0.8% from 0.4% while noting inflation expectations have not risen substantially. Growth forecasts were also raised to 2.0% from 1.5%. The SNB has also stated the Swiss economy shows continued signs of improvement.

While the stronger Swiss franc has helped keep inflation in Switzerland under control, a continued recovery and stronger growth may add inflationary pressures. Today’s release of stronger than expected industrial production numbers is one sign of the strengthening Swiss economy. 4Q 2010 industrial production rose by 7.4%, an output significantly stronger than the 4.7% economists forecasted.

In early morning trade the EUR/CHF recovered to 1.2650, a level that coincides with a 38.2% retracement from the mid-March high to yesterday’s low. Strong selling in the pair could resume at 1.2730 near the 50% retracement level. Stops may be found above the resistance at 1.2830.

Should the EUR/CHF collapse once again, a move below the 1.2400 level (the pair’s all-time low) would trigger stops and could send the pair further into unchartered territory.

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 shift in global risk sentiment has driven many currency pairs into above-average volatility. Japan’s nuclear crisis is undermining the global recovery by forcing a policy reevaluation by central banks regarding risk exposure.

The currencies experiencing the sharpest change in value are the Swiss franc (CHF), Japanese yen (JPY), US dollar (USD) and Australian dollar (AUD).

The Aussie, in particular, has witnessed a wide swing in value over the past few weeks. As we can see in the charts below, the AUD/JPY dropped almost 1,000 pips, a change of 11%, while the AUD/USD fell over 400 pips before retracing some of these losses.

What is striking about both pairs is the apparent deceleration of the AUD’s uptrend versus both safe-haven currencies.

Against the yen, the Australian dollar has just breached its trend-line but has yet to close below that significant support level. What this means is that the pair has suffered a downturn, but a trend reversal remains beyond the scope of this analysis for the time being.

However, the trend-lines have become flatter since last June, suggesting that the pair’s bullish strength is beginning to wane under shifts in risk appetite.

AUD/JPY – Weekly Chart

Pairing the AUD with the US dollar also shows a similar shift in sentiment. Most visibly, though, is the AUD/USD’s more pronounced deceleration and possible head-and-shoulders formation on the weekly chart.

The AUD/USD pair shows a similar attempt at a head-and-shoulders reversal between August 2009 and June 2010, but the “head” fell short of its shoulder levels, undercutting the formation’s technical strength.

We can see with the recent candlestick formation, between October 2010 and March 2011, that the “head” was indeed able to break above the shoulder line and we are beginning to see the technical downturn. If the pair can close below its support level near 0.9800 this should signal for a mass sell-off by technical traders, pushing the pair towards the 0.9400 level and perhaps beyond.

AUD/USD – Weekly Chart

A similar sentiment may be expressed in regards to the AUD/JPY. If the yen continues to strengthen unabated, with no currency intervention by the Bank of Japan (BOJ), then we could see a break below the 38.2% Fib line, with a more than 50% chance of a retracement to the 23.6% level just above 67.20.

It doesn’t seem likely that either Australia’s or Japan’s central bank would allow such a change in value for their respective currencies, but technical forces may push against their respective plans.

Going short on the AUD appears like a solid choice for the foreseeable future as a result.

By GCI Forex Research

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)

USD

USDJPY recovered during the Asia session as liquidity conditions improved, but not before a new all-time low was reached at 76.36 (according to Bloomberg data). Japanese government officials also downplayed expectations that domestic insurers may be forced to repatriate assets to cover the cost of insurance payouts. EURUSD traded 1.3867-1.3968, USDJPY 76.36-80.28. Concern remains over the status of malfunctioning nuclear reactors in Japan, although the Nikkei-255 pared initial losses, and managed to close down only -1.4%. US economic data was mixed, with weaker housing starts and building permits and higher y/y headline and core PPI prints. But as has been the case the past few days, much of the data has been shrugged off as market participants await any new developments from Japan. CPI and initial jobless claims are due but any impact for the dollar could be overshadowed by continued risk aversion.

EUR

The euro weakened too during the flight to safe havens. Rate expectations for the ECB have slightly pared back since the tragedy in Japan and so ECB speakers are garnering more attention as market participants want to see how central banks might react. Bank of Finland Governor and ECB governing council member Liikanen suggested an April rate hike remains in the cards but the path thereafter remains uncertain. He says it is too early to say how the Japan situation will affect policy and deflects it to say future meetings will take into account what information/data is available at the time. He also said the bank’s stance had not changed much since the March 3 meeting.

Eurozone February headline CPI was as expected at +2.4% y/y and core was slightly below consensus at 1.0% y/y.

JPY

USDJPY set an all-time low of 76.36, according to Bloomberg. USDJPY collapsed in a matter of minutes on the back of continued headlines related to the nuclear reactors in Japan, which eventually triggered a cascade of stops.

GBP

UK February claimant count was better than expected at -10.2k. This is the biggest monthly drop since June 2010. The unemployment rate was unchanged at 4.5%. ILO jobless numbers rose +27,000 in 3 months to Jan, the rate of 8.0% is the highest rate since January-March 2010. Our analysts note that the data is unlikely to have a material impact on the MPC decision in April or May; events at the global stage are overshadowing most local data.

CHF

We expect no change at today’s SNB policy meeting, in line with the other 19 economists surveyed by Bloomberg. But we do look for some material adjustments to the SNB’s growth outlook and also think the latest CPI in February suggests risks are to the upside for the SNB’s near-term inflation outlook. The SNB adjusted growth forecasts higher at their September 2010 assessment but lowered their long-term inflation expectations at the same time. We don’t expect that to be the case for this decision but just be aware that there is precedent. And even if forecasts are raised, recent currency strength could cause the SNB to err on the more dovish side.

TECHNICAL OUTLOOK
EURUSD BULLISH Remains below 1.4013/36 resistance area, move above this would open way towards 1.4086. Initial support lies at 1.3855.
USDJPY BEARISH The pair defined an all time low at 76.36. Initial resistance is at 80.22, previous low.
GBPUSD BEARISH Focus is on support zone 1.5977/64; break of this would confirm the bear trend and open up 1.5845 next. Near-term resistance lies at 1.6200.
USDCHF BEARISH The pair cleared 0.9014 and 0.8951; next support at 0.8795. Initial resistance is at 0.9198.
AUDUSD BEARISH Break below 0.9804 key support has opened up the way towards 0.9625 and 0.9537. Initial resistance lies at 0.9963.
USDCAD BULLISH Initial resistance is at 0.9974, move above this would open 1.0011/58 area. Near-term support is at 0.9807.
EURCHF BEARISH Fall through 1.2727/06 support zone has exposed 1.2402, key low from Dec 30. Resistance at 1.2706, previous low.
EURGBP BULLISH Upside potential, the cross targets 0.8787 Fibonacci level ahead of 0.8818. Near-term support is at 0.8626.
EURJPY BEARISH Sudden sell-off today found support at 106.61 ahead of 105.80/44 support zone. Near-term resistance is at 111.31.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By GCI Forex Research

USDJPY Movement

For the 24 hours to 23:00 GMT, USD weakened 2.68% against the JPY and closed at 78.66, as fears over the nuclear crisis in Japan deepened more and amid speculation that the Japanese government may interfere to control the rise in currency.

In Japan, yesterday, tertiary industry index rose by 2.1% (M-o-M) in January, compared to decline of 0.9% in December.

In the Asian session at 4:00GMT, the pair is trading higher from the New York close, by 0.41%, at 78.98.

The first short term resistance is at 81.15, followed by 83.31. The pair is expected to find support at 76.66 and the subsequent support level at 74.33.

Investors are eying monetary policy meeting minutes in Japan to be released later today.

The currency pair is trading just below its 20 Hr and 50 Hr moving averages.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: ForexYard

The yen saw huge gains against virtually all of its main currency rivals just before the start of the overnight session, as the fallout from last week’s tsunami continue to boost the safe-haven currency. The USD/JPY fell over 300 pips in a matter of minutes and reached a new record low before bouncing back throughout the night. Currently the pair is trading at the 79.50 level.

Economic News

USD – Dollar Sees Correction against Yen in Overnight Session

The US dollar continued to make gains against the euro in the overnight session, as investors continue to seek out safe haven currencies in the aftermath of last week’s devastating Japanese earthquake and tsunami. While the EUR/USD is once again above the 1.3900 level, the pair has dropped close to 100 pips in the last 24 hours.

Meanwhile, the dollar was able to rebound against the yen after tumbling late last night. The USD/JPY reached a new record low at 76.40 before staging a correction throughout the overnight session. Currently the pair stands at 79.50.

Today, traders are advised to follow the continuous developments coming out of Japan. In particular, the threat of a nuclear disaster continues to exert great influence over the markets. Rumors of possible Japanese government intervention to stabilize the yen have caused pairs like the USD/JPY and GBP/JPY to stabilize. At the same time, further turmoil in Japan is likely to cause the dollar to fall again today.

In addition, traders will want to pay attention to the latest US Unemployment Claims figure set to be released at 12:30 GMT today. While investors are primarily focused on what is going on in Japan, a drop in US unemployment over last week may lead to short term gains for the dollar.

EUR – Risk Aversion Sends Euro Plummeting

The euro took heavy losses against virtually all of its main currency rivals during the Asian session, as risk aversion continues to dominate the marketplace. The ongoing crisis in Japan is sending investors toward safe haven assets, like the US dollar, Japanese yen and Swiss franc.

In addition to the EUR/USD falling toward the 1.3900 level, the EUR/CHF dropped well over 100 pips last night, and is currently trading right around the 1.2525 level. The EUR/JPY fell an astounding 400 pips last night, but has gradually recovered since. Currently the pair stands at the 110.20 level.

Turning to today, the news out of Japan is likely to dictate the direction the euro goes. Traders will want to pay attention to two possible developments. First, the ongoing threat of a nuclear disaster is likely to drive riskier currencies like the euro farther down. Second, rumors of Japanese government intervention in the currency market, should the yen get too strong, may turn out to be beneficial for the 17-nation common currency. Should the Bank of Japan decide to intervene to stabilize the markets today, the euro may be able to recoup some of its losses.

JPY – Nuclear Threat Sends Yen Soaring

The aftermath of last week’s Japanese earthquake and tsunami continue to drive investors to the safe-haven yen. The currency saw huge gains against the US dollar, euro, UK pound and Swiss franc last night before correcting itself during the overnight session.

Analysts attribute the yen’s extreme bullish behavior to the ongoing threat of a nuclear disaster in Japan that has caused investors to flock to more stable assets. At the same time, rumors that the Bank of Japan will soon move in to halt the yen’s upward momentum have caused some stability to return to the marketplace.

Today, traders will want to carefully watch for any developments in the ongoing fight to contain the potentially significant nuclear threat in Japan. With the full scope of the devastation in the country still unknown and new problems appearing all the time, markets are expected to remain erratic for the time being.

Crude Oil – Crude Oil Resumes Bearish Behavior

Following a steep increase in the price of oil at the beginning of the day yesterday, the commodity turned bearish by afternoon trading and has yet so stop dropping in price. Currently oil is trading at $97.55 a barrel, down from $99.57 yesterday.

Analysts attributed the bearish behavior to the latest US Crude Oil Inventories figure, which came in at 1.7M, released yesterday. The high figure signaled that demand is weakening in the world’s biggest oil consuming nation. As a result, prices began to fall.

Turning to today, traders will want to pay attention to any developments in Japan that may affect the marketplace. As investors continue to abandon riskier assets due to the turmoil in Japan, commodities such as oil are likely to drop further.

Technical News

EUR/USD

The Relative Strength Index and Williams Percent Range on both the 8-hour and daily charts show this pair floating in neutral territory. With technical indicators not showing a specific direction for the pair today, traders may want to take a wait and see approach today.

GBP/USD

The Williams Percent Range on the daily chart shows this pair in oversold territory, indicating that a bullish correction could occur today. This theory is supported by the RSI on the 4-hour chart. Going long with tight stops may turn out to be the preferred strategy today.

USD/JPY

Virtually all technical indicators show this pair in oversold territory, meaning that an upward correction is likely to take place today. The Stochastic Slow on the 8-hour chart has formed a bullish cross, while the 4-hour chart’s RSI has moved into the oversold zone. Opening long positions may pay off today.

USD/CHF

A bullish cross has formed on the 8-hour chart’s Slow Stochastic, indicating upward movement is likely to occur in the near future. Furthermore, the Bollinger Bands have begun to widen on the same chart, meaning a price shift is expected. Going long seems to be the preferred strategy today.

The Wild Card

AUD/USD

The Williams Percent Range on the daily chart has just crossed into the oversold zone. Meanwhile, the 4-hour chart’s RSI is hovering just above the lower support line. Should it cross into oversold territory, forex traders will have a great opportunity to open long positions and take advantage of the impending bullish move.

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 USD/JPY fell to a record low during the start of the overnight session, as the aftermath of last week’s devastating earthquake and tsunami in Japan continue to generate extreme volatility in the marketplace. The pair dropped over 300 pips in a matter of minutes, reaching as low as 76.40 before bouncing back up to its current rate of 79.45. While several potentially significant US news events are scheduled to be released today, traders are warned that any developments out of Japan are likely to have the highest impact on the market.

Here is a roundup of the day’s main economic indicators:

12:30 GMT-US Core CPI

The Core CPI figure measures the change in price in goods and services, excluding food and energy, over the last month. This is considered a vital gauge of inflation in the US, and tends to have a direct impact on the value of the dollar.

Today’s CPI is forecasted to come in at 0.1%, which if true, would signal a slight drop over last month’s. The USD has been extremely bearish as of late. If today’s figure comes in at 0.1%, the currency is likely to take further losses.

12:30 GMT-US Unemployment Claims

The weekly US Unemployment Claims figure is considered one of the more significant news events on the forex calendar. Analysts are predicting a slight drop in the number of people filing for first time unemployment insurance this week. If the predicted figure of the 388K turns out to be true, the dollar may be able to pull in some short term gains during the afternoon session.

Last January 24, I posted my stock analysis on First Philippine Holdings or FPH in the Philippine Stock Exchange and mentioned that there was symmetrical triangle pattern forming (kindly check here). I was leaning towards a breakout from the triangle rather than a breakdown since the usual bias for such pattern is with the trend. However, what seemed to be a bullish pattern was indeed a reversal that brought down the 2-year uptrend. Upon the breakdown, my minimum downside target of 51.00 Philippine Peso was reached.

FPH is currently moving in a 2-month descending channel. From PHP69.50 at the start of 2011, it closed today at PHP52.85 which is a -23% loss for the stocks. Within the channel, there could be an inverted pennant formation as well. Some of you wouldn’t agree with this inverted pennant that I’m seeing since its consolidation phase is not represented by a decline in volume. But yeah, I’ve seen similar pennants in the US stock market and forex and many times, the volume didn’t count so I’d take this as one. Anyway, if  FPH breaks down from this inverted pennant,  it could decline to the PHP48.00 area or at the descending channel’s support. However, the PHP51.00 support and the PHP50.00 psychological level could be the biggest hurdles of the bears. On the upside, FPH needs to break above the descending channel’s resistance to get back on the bull track. If it does and moves higher, it could encounter some resistances at PHP55.00 and PHP58.00.

The stocks of First Philippine Holdings may be bearish chart-wise but it doesn’t mean the company isn’t doing well. In fact, this is one of many blue chips I’d prefer getting into given the company’s strong fundamentals but still, I’d only enter when the chart shows me a buy signal. Above all, as long as the 2-month descending channel remains intact I’m bearish with the stocks of FPH in the short term. I’m also bearish in the long term as long a the the price is moving below the 100 and 200-period moving averages. Although, I might consider entering around the PHP50.00-51.00 level and place my stop loss below PHP50.00.

More on LaidTrades.com …

Last Friday, an 8.9 magnitude shocked the northeast coast in Japan which generated a gigantic tsunami that swept cities and killed thousands. We, at LaidTrades.com, offer our prayers to Japan especially those who are gravely affected by the disaster.

Such acts of God also have some impact on the financial markets. In fact, Friday’s calamity also jolted the financial markets, particularly the USDJPY pair. As you can see from the chart above, the Japanese yen gained a total of 110 pips in one swift move against the US dollar when the pair fell and closed to 81.82 from an opening of 82.92. You see, the USDJPY has been trading within a symmetrical triangle that is off a downtrend for a little over 4 months now. Friday’s currency exchange actually pushed the pair to the brink of another breakdown.

Concerns about the tragedy’s economic impact on Japan and of course its trading partners continued to linger this Monday causing the Dow Jones Industrial Index, for one, to slip. Meanwhile, the Japanese yen continued to falter when it opened lower at 81.29, causing a breakdown from the symmetrical triangle. Presently, the USDJPY is trading right at the triangle’s support. If this support acts as a resistance then the pair could fall at least back to its previous low at 80.33. Worse, it could even go lower and aim for its downside target 77.50.

Anyway, a lot of you maybe asking why the Japanese yen still gained despite the adversity that Japan suffered. Well, it’s because of risk aversion. You see, traders and investors flee to the safety of the Japanese yen and away from the US dollar in times of adversity. In case you do not know, the Japanese yen has an ultra low interest rate of 0.10% against the US dollar which has 0.25%, giving the former a “safety” feature.

More on LaidTrades.com …