Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).
Economic News
USD – US Dollar Loses Ground, but Descent Limited
The US dollar (USD) was seen trading mildly bearish early Monday as traders viewed comments by the Fed as a sign of potentially impending hawkish moves on the policy front. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted following fears of bank interventions in Japan and a string of reports out of the euro zone today which could reverse much of the markets recently acquired short-term stability.
Data from the American housing market yesterday also signaled a downturn in home sales from the previous month, revealing a slump in housing demand, potentially linked to a string of foreclosures expected in September. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets.
As for today, the US economic releases will focus mostly on housing and consumer confidence. Today’s publications, however, will mainly be Britain-centric. Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).
EUR – EUR Bullish from Sudden Risk Appetite Growth
The euro (EUR) is expected to be seen trading with bullish results this morning ahead of a slew of reports from Great Britain, Canada and the United States. Against the US dollar (USD) the euro has been seen trading somewhat bearish as the greenback moves upward against its currency rivals.
Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.
Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data continues to reveal negative market directionality, the EUR is likely to remain bearish.
JPY – JPY Beginning to Feel Pressure as More Intervention Expected
The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending interventions by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.
The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.
Crude Oil – Oil Prices Holding Steady amid Market Turmoil
Crude Oil prices held steady Monday as sentiment appeared to favor a mild uptick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are beginning to generate some risk taking after statements by the Federal Reserve began to cause investors to seek out higher yields.
An expected dip in dollar values due to this week’s risk seeking environment has helped many investors ram up their long-taking positions on physical assets, but with the USD’s losses not materializing in large enough numbers, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.
Technical News
EUR/USD
Last Friday’s candlestick posted an outside day up, a telling bullish signal. The EUR/USD has followed up this price action by breaking out above the falling resistance line off of the May high and triggering stops that were lurking above the 1.4520 area. Initial resistance for the pair comes in at 1.4540. A close above 1.4700 would signal an end to the sideways price action and open the door to the May high of 1.4940. To the downside the euro may find willing buyers at 1.4325 where the 20-day moving average is located. Further support is found at 1.4260 off of the rising support line from the July low as well as the long term trend line at 1.3940.
GBP/USD
After failing to make a close above the 1.6550 resistance level sterling was sold only to find support at its 55-day moving average near 1.6210. Rising daily stochastics hint at an additional test of the range between 1.6550 and 1.6615. A break here may have scope to the April high of 1.6745. Should the 55-day average fail to contain the pair support is found at 1.6110 where the 200-day moving average is floating. 1.6000 may also prove to be supportive.
USD/JPY
The doji candlestick reversal has bought the yen some temporary respite from the selling pressure at the 76 yen level as the pair failed to test the all-time low last week. However, falling stochastics appear on both the weekly and monthly charts and hint at additional declines in the USD/JPY. A lack of support on the charts makes it difficult to find a target to the downside. A move higher could see resistance at last week’s high of 77.70 followed by 78.50 and the post intervention high of 80.20.
USD/CHF
The reversal of the USD/CHF continues and the pair is beginning to show additional bullish signs. Traders should eye the close of the monthly candlestick. As it stands now the candle is set to close on hammer pattern, a potential reversal pattern that hints at additional gains. The pair is testing the falling trend line from the February high at 0.8090 and if broken could turn into support as often occurs with previously broken trend lines. Additional resistance is found at 0.8270 followed by the 100-day moving average at 0.8340.
The Wild Card
NZD/USD
The kiwi has performed well over the past three trading days but has ran into resistance at its previously broken trend line from the mid-March low which comes in today at 0.8520. Forex traders may watch for a break here as there is limited resistance on the daily chart to prevent the pair from reaching its August 1st high of 0.8840. Support is seen back at 0.8160 and 0.7960.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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