With the Greece parliament voting on its newly proposed austerity budget today, most traders will be fixated on the outcomes in order to adjust their investment portfolios accordingly.
Economic News
USD – USD Trading Higher as Greece Austerity Vote Approaches
The US dollar experienced broad bullishness yesterday as traders began to seek shelter in expectations of heightened risk aversion surrounding today’s vote in the Greek parliament over its austerity budget. The EUR/USD was seen moving towards 1.4305 yesterday evening, however, before settling below this mark at day’s close and moving bearishly upon the opening of the early Asian sessions.
Yesterday’s bearish consumer confidence data out of the American economy has so far helped to lift the value of safe-haven assets as investors look for ways to store value ahead of any additional downward shifts in sentiment. The headline news today, however, will undoubtedly be the Greece austerity budget vote which may overshadow almost all other data releases, no matter how significant.
With a heavy news day expected, traders are sure to see heightened volatility. Most significantly for the United States, beyond the Greece vote, will be its housing figures and Crude Oil Inventory report. As with yesterday, risk sentiment surrounding euro zone debt concerns has gripped the market and many traders are casting economic data to the wind ahead of today’s vote. The news is certain to cause a shift in global investment portfolios.
EUR – Greece Austerity Budget Vote on Tap Today
The euro (EUR) was seen trading with mixed results yesterday following news of heightened risk aversion across the region. With the Greece parliament voting on its newly proposed austerity budget today, most traders will be fixated on the outcomes in order to adjust their investment portfolios accordingly. Prior to the vote, the EUR/USD – the leading currency pair in the forex market – was seen trading higher, edging above $1.43 for the first time in a week.
Debt concerns across the euro zone still linger and many investors have taken reports from the manufacturing and industrial sectors these past two months as an indication that the economy is slowing over the second quarter. Adding to these strains is the near-uncertainty and persistent rumor mill revolving around the Greece austerity vote. The hysteria caused by recent panics about European debt has pulled down heavily on global risk sentiment and consumer confidence.
Though Italian banks will be on holiday today, the rest of the euro zone will be active and traders will likely be moving in and out of the market today at faster speeds due to the risk sensitive nature of today’s vote. This increase in activity will likely generate several massive swings in value for the EUR today, and retail traders would be wise to enter the market with caution as this maelstrom unfurls.
JPY – Japanese Industrial Production Expected to Rise 5.6%
The Japanese economy has witnessed a sharp downturn in industrial output since back in April, when it dropped over 15%. Much like the recent reports on retail sales, however, the Japanese economy has recovered much of these losses and begun to move towards growth. Today’s preliminary industrial production data is set to release a similar publication.
Analysts are forecasting a strong jump in industrial output from the Japanese economy, with a target of 5.6% coming into view. Market pessimists decry such estimations as premature despite being turned around on Japan’s retail sales figures yesterday. Should Japan be able to publish such bullish figures, it may very well lead the nation’s currency, the yen (JPY), towards Bank of Japan (BOJ) intervention levels against the US dollar (USD).
Oil – Crude Oil Price Finds Weak Support at $92 a Barrel
Crude Oil prices dropped sharply towards $92 a barrel Monday morning as sentiment appeared to favor a downturn in global industry and manufacturing. The sudden halt to this downward movement came as a result of several forces Tuesday morning. Primarily leading the rebound in oil prices was a sense that risk aversion was on the rise and a favorable vote for an austerity budget in Greece could whip traders back into a buying session on industrial growth corollaries like oil.
Faltering dollar values may have also helped many investors pause on their short-taking positions on physical assets. With US Crude Oil Inventories getting released today, one week after the Obama administration announced a plan to release massive amounts of its strategic reserves to combat rising prices, traders appear to be anticipating a technical sell-off immediately after the inventories data; driving the price higher to capture the swing. Should sentiment hold steady this week, oil prices may fail to find support and begin to move back towards $90 a barrel.
Technical News
EUR/USD
Momentum has now turned lower as falling stochastics appear on the monthly, weekly, and daily charts. Initial support comes in at the June low of 1.4075 and the May low of 1.3970. A break here and technical traders will target the 200-day moving average at 1.3860. While the 8 cent decline from the May high is a sharp drop, traders should keep in mind that the correction the pair is currently undergoing is just that, a correction. Buyers may be lurking at the rising trend line from the June 2010 low. Resistance comes in at the recent high of 1.4440 where the 50-day and 20-day moving averages are floating.
GBP/USD
The pair has broken a significant technical barrier at the neckline from a head and shoulders pattern which measures a target at 1.5370. Monthly and weekly stochastics are turning lower so traders may expect further declines. Support is located at the March low at 1.5935 followed by the late January low at 1.5750. To the upside the neckline from the head and shoulders pattern at 1.6120 could offer traders a level to enter short as many times in a head and shoulders chart pattern the pair will revert back to the neckline only to head lower from there.
USD/JPY
Yen bears are making a stand at the 80 level. A previously broken trend line from the April high comes in at this level and will also support the bears. However, once this last bastion of support is broken the fallout could be similar the price action in March. Should the move higher continue, resistance is found at 81 and 81.75.
USD/CHF
The previous resistance at 0.8550 held and the all-time low at 0.8325 is continually being pressured so a break here may be in the works. An absence of supports or trend lines below this level makes it difficult to predict how low the pair could go.
The Wild Card
NZD/USD
The kiwi looks to be on a verge of a breakout higher from a bullish flag pattern. Current resistance is located at 0.8140 where the 20-day moving average lies. The pattern shows a potential measured move of roughly 300 pips from the spot of the breakout. forex traders should be patient and wait for confirmation of the breakout to the upside. Resistance is located at 0.8190 and the swing high at 0.8300 with support at 0.8000 and 0.7970.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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