By Zac, CountingPips.com
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Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.
At lunchtime during the European trading session the US dollar was sliding versus the euro and the pound while rising versus the yen. Stronger than expected inflationary data supported the pound versus the dollar but sterling’s gains versus the euro have been rolled back.
The GBP/USD was higher at 1.6230 from 1.6193 after this morning’s UK CPI report showed higher than expected inflationary pressures in the UK with y/y inflation rising 4.5%. Economists expected the data to show rising price pressures to the tune of 4.2%. Forecasts are for the Bank of England to increase rates between 2 and 4 bps. However, BOE Governor Mervyn King has been adamant in his opinion that the inflationary pressures in the UK economy are temporary increases due to the higher VAT and rising commodity prices. Thus may explain sterling’s inability to hold gains versus the euro.
The EUR/GBP fell as low as 0.8681 from 0.8745 before recovering to 0.8730. Markets appear unconvinced the BOE will be increasing rates in the near terms and this may explain sterling’s weakness. EUR/GBP support comes in at 0.8670 with a break here possibly triggering declines to 0.8620 where the 200-day moving average resides. Cable has resistance at 1.6515 with support coming in at 1.6300.
The dollar is mixed versus the remaining majors with the EUR/USD higher at 1.4180. Event risk remains for the euro as European finance ministers continue their second day of meetings surrounding the European debt crisis. The euro could receive support if a new aid package for Greece is announced. Initial resistance for the EUR/USD is found at yesterday’s high of 1.4240 followed by 1.4340.
The Japanese yen is on its back foot as the USD/JPY has reached its highest level since the beginning of the month. Supporting the rise in the pair were comments from Bank of Japan Governor Shirakawa who suggested further monetary easing measures could be enacted. The USD/JPY is up at 81.60 from 81.13. Resistance is found at 82.05 where the 55-day moving average lies, followed by 82.80. Support comes in at 80.60 at the bottom of the consolidation pattern from the May 4th low.
Traders are now anticipating US building permits this afternoon as well as increased utilization rates.
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This morning’s ZEW economic sentiment reports out of Germany and the broader euro zone came in below expectations, but so far the news has had little effect on the value of the EUR.
Traders had turned their attention on the interest rate differential between the euro zone and the United States yesterday following the publication of solid CPI figures in Europe and soft investment data in the US. The result had been for the EUR/USD to move back into a bullish posture from last week’s downturn.
So far this week, the EUR/USD pair has shifted from its recent low of 1.4050 to its current price of 1.4205. The EUR/GBP has witnessed similar behavior, with the pair shifting back into a minor bullish uptick from 0.8670 to its current value near 0.8740.
The ZEW reports are leading indicators of economic health. They are based on a diffusion index of surveyed analysts and investors across the region. The number released in the report is a gauge of consumer sentiment. Above 0.0 represents optimism, below that mark represents pessimism.
While the report showed continuation of optimism in Germany and the euro zone, the number is rapidly approaching the zero mark. Debt woes from Greece and Portugal have been striking front page headlines these past several weeks and many investors have shown a tendency to move into the safer USD and Swiss franc (CHF) as a hedge against uncertainty.
The EUR does not appear to have been affected too strongly by this shift in sentiment, though the release of afternoon data from the United States could be enough. Forex traders will definitely want to be active on their trading platforms today.
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Source: ForexYard
The euro zone published its consumer price index (CPI) reports yesterday which showed solid, stable inflationary growth, year-on-year. The core data also showed better growth than was expected. This data generated a heightened intrigue in the comparative interest rates between America and Europe as risk sentiment got shifted. The result was for the interest rate bulls to outpace the debt woe bears in yesterday’s session, driving the EUR higher versus the USD.
The US dollar opened this week moderately stronger versus the euro yesterday as traders continued last week’s shift into safer assets. As of late trading yesterday, however, the EUR/USD pair seems to have shifted back into a bullish posture as traders return to interest rate differentials between the Atlantic rivals. After briefly touching 1.4050, the pair found support and is currently moving towards 1.4175.
Soft economic data out of the American economy yesterday had many investors seeking market direction elsewhere. TIC long-term purchases for April came in much lower than expectations and the NAHB housing indicator was in just below forecasts. The Empire State manufacturing index also fell to 11.9 from last month’s 21.7. Alternately, CPI figures from the euro zone showed stable growth. This data together helped turn many investors’ attention back towards the interest rate differentials in the US and Europe, which caused a shift away from the greenback.
As for today, the euro zone will be absent as its ministers congregate for another meeting of the Economic and Financial Affairs Council (ECOFIN) in order to discuss the region’s finances. The US, on the other hand, is scheduled to release several housing and industrial reports. If forex traders witness another day of soft data, the weakness of the USD in recent trading may become exacerbated as more traders shift into the higher yielding euro.
The euro rose versus the US dollar yesterday during New York trading hours, with the pair’s price reaching near 1.4160 as of this morning. Soft data out of the American economy yesterday forced a reevaluation by many investors who went long on the USD following the European Central Bank’s (ECB) cloudy rate statement two weeks back.
Yesterday’s significantly weaker fundamentals out of the American economy were only one part of the story, however. The euro zone published its consumer price index (CPI) inflationary reports which showed solid, stable growth, year-on-year. The core data also showed better growth than was expected. This combination of data from these two economic rivals generated a heightened intrigue in the comparative interest rates as risk sentiment got shifted. The result was for the interest rate bulls to outpace the debt woe bears in yesterday’s session, driving the EUR higher versus the USD.
As for today, the euro zone will be absent from the calendar as its ministers congregate for another meeting of the Economic and Financial Affairs Council (ECOFIN) in order to discuss the region’s finances. Hawkish statements could hint towards a tightening monetary policy in the near future, but traders should be wary of a return to risk aversion should the meeting produce less-than-stellar commentary. In the latter case, the EUR could see its bearishness return, especially since it has yet to outpace the strength of its regional rival, the Swiss franc (CHF).
The Japanese yen (JPY) has been trading with somewhat mixed results since early last week, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to make gains today as investors seek safety from recent turmoil and as the Bank of Japan (BOJ) published several reports yesterday morning which could help the island economy make gains. The dominant stance of risk aversion overarching last week’s trading environment has many traders moving towards the yen against the higher yielding currencies like the euro and British pound.
The USD/JPY was seen trading somewhat higher this morning, finding support near 80.70 and moving up towards 80.90 at today’s opening Asian sessions. Japan’s core machinery orders report was published this morning and revealed a modest uptick which may help the island currency in today’s market hours. Market news released out of the US today will likely be the driving force behind JPY values, though, and traders would be wise to watch the US industrial production figure since it has a strong correlation with Japanese growth.
Oil prices fell below $98 a barrel this morning, surprisingly after the euro took off against its primary rival, the US dollar. US oil stockpiles rose over 3 million barrels for the second week in a row last week, which had harangued the price of oil in last week’s later sessions. The sudden plummeting value of the dollar had many analysts assuming that oil would find support in this morning’s trading, but that seems to not be the case.
With this morning’s downward movement there is a chance that yesterday’s decision point was reached today and oil bears are winning out. Whether oil traders decide to lift oil prices back from this recent plunge is yet to be determined, especially considering the strangeness of the inverse relationship to the USD yesterday. The greenback’s decline may have a delayed effect today and oil traders may see the price bouncing back if that is the case.
The EUR/USD cross has experienced a bearish trend for the past week. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the over-sold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.
The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The USD/CHF has gone increasingly bearish yesterday, and currently stands at the 0.8845 level. The daily chart’s Slow Stochastic supports this currency cross to fall further today. However, the 2-hour chart’s RSI signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
Crude oil prices have dropped significantly yesterday and peaked at $97.24 a barrel. However, on the daily chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.
Forex Market Analysis provided by ForexYard.
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Philex Mining Corporation (PX) was one of the main guys in today’s top gainers list with a significant amount of volume traded along with Lepanto Consolidated Mining Corporation (LC) and Manila Mining Corporation (MA). These 3 companies were suspended in the Philippine Stock Exchange yesterday because of the agreement for the exploration and joint development of the “Kalayaan” mining site but resumed trading a while ago. The PX stocks dipped by more than 3% in the first few minutes right after the suspension was lifted when weak hands exited. Fortunately, as the market came to an end, it recovered and even rose by 6.5% to PHP19.72.
Chart-wise, PX had awesome technical setups when it was still around PHP14.00 like the 7-month symmetrical triangle when it was still consolidating (kindly check here). At the same time, this happens to be the “handle” of the 1-year cup and handle pattern. Within a month, it flew. It formed a bullish pennant (kindly check here) then broke out once more all the way to its current price of PHP19.72. Since my PHP19.00 target price for the symmetrical triangle has been achieved earlier, our next target could be PHP23.00 which I got by adding the size of the “cup” to the breakout point. But before it reaches that level, it first needs to clear out the PHP20.00 all-time high where some selling pressure could be experienced. On the downside, the immediate support could be the 1-month uptrend. If that breaks, the next support could be the 7-month uptrend.
More on LaidTrades.com …
Looking over the fundamentals tells the story of an ascendant Scandinavia in the currency world. The Swedish krona (SEK) and Norwegian krone (NOK) are among the globe’s highest yielding currencies from a fundamental standpoint. But why then does the technical data read differently? Are we witnessing the wind being taken out of the sails of the Norwegian and Swedish kroner?
Against the US dollar, both the SEK and NOK have pushed strongly bullish to the point of record highs. Several analyses herald the Swedish krona in particular as being among the top performers in the forex market since early 2010. The Riksbank is even on schedule to lift its short-term lending rate at each policy meeting this year.
Norges Bank is also considering monetary policy tightening in 2011, though it has been far more reluctant than its Swedish neighbor in doing so. Growth in Norway has been only mildly limited in comparison but by no means insufficient for such a move by its central bank.
The linkage of the NOK to Crude Oil prices may also have something to do with recent stagnation in the Scandinavian currency as oil has been trading flat within a tight range recently.
Technical Data Supporting Reversal?
Regardless of this fundamental data supporting a strengthening SEK and NOK, on the technical charts what we see is a consolidation on both pairs against the USD and a heavy push-back by the greenback.
According to reports from several currency strategists, a material base may be forming just above the 6.20 level on the USD/SEK, with a confirmation of a trend reversal potentially found slightly above 6.50. The USD/NOK is forming a similar base near 5.45 with a confirmation point found a similar distance near 5.73.
If the pairs move above their confirmation point, as opposed to dropping back within their heavily bearish trend, there is a chance the market will adjust its sentiment and begin shorting the Scandinavian currencies in expectations for a mid-year flop. Both pairs are approaching a decision point and it will be interesting to watch their next move unwind.
Being contained by the resistance of the upper border of the price channel on 4-hour chart, USDCHF pulled back from 0.8945. Key support is now at 0.8795, a break below this level will indicate that the uptrend from 0.8553 had completed at 0.8945 already, then deeper decline towards 0.8553 previous low could be seen. However, as long as 0.8795 support holds, the fall from 0.8945 could possibly be consolidation of uptrend, one more rise towards 0.9000 is still possible after consolidation.
The markets started the day lower and rallied sharply higher as the Dollar fell. However, continued fear over Europe and the global economy has sent many buyers into hiding.
