Mercaforex Analysis

[mercaforex]

Bulls Run On Wall Street Again

The USD lost value against the EUR and the GBP on Wednesday as equities markets pushed up further bringing along investors with risk appetite. The USD has had an extremely strong correlation with the results from Wall Street in an inverse manner since the financial crisis broke out last fall. Yesterday’s trading on the Dow Jones and S&P came about as Intel posted better than expected quarterly earnings on Tuesday night. Today the corporate reports will continue with JP Morgan and IBM and with others following suit. Based on the performances turned in yesterday, positive sentiment may be enough to keep this mini-rally going one more day if no major surprises break out. Regarding economic data from the U.S., the Empire State Manufacturing turned in a number of minus -0.6, which was better than the expected decline of -5.3. Industrial Production statistics were also released and it showed a slight improvement.
Today the weekly Unemployment Claims figures will be released and a better outcome is anticipated with a number of 550k compared to last week’s result of 565K. Employment statistics remain a critical lynchpin for investor sentiment but the numbers could be overshadowed today by corporate reports. Tomorrow important housing data will be brought forth. Both Building Permits and Housing Starts data are on the calendar. Considering the rally in the equities markets this week it may sound foolhardy to point out that clouds remain on the American horizon. However, a storm may be brewing around the corner with the news that CIT Corporation, which funds many middle sized and small businesses in the U.S., may be filing for bankruptcy after its talks with the U.S. government broke off last night. Also foreclosure statistics in the U.S. have hit a record pace. Thus the equity rally may prove to be a short term gift to traders who have had the stomach to participate in shares, but this could sour on negative data down the road. The USD has reacted true to form this week, going lower as Wall Street has shown brighter. We may see the stock markets continue their positive run today, which means the USD could weaken again.

EUR:
The EUR had a strong day on Wednesday climbing off the weaker part of its range against the USD as positive trading on the European bourses continued. The European Union released its CPI statistics yesterday and they highlighted that inflation remains nearly non-existent and that the underlying threat is deflation. The Italian Trade Balance figures will be brought forth today along with the French CPI data. The Italian figures will not be enough to stir the currency markets but for those interested is expected to post a result of minus -0.07 billion. Tomorrow the broad Trade Balance statistics will be published for the European Union but should prove insignificant. The real catalyst for the EUR like the other major currencies will be the results from the international equity markets. The EUR has improved its footing the past few days against the USD but it this has come under the auspice of a rally in equities that may not continue forever.

GBP:
The Sterling had another positive day of trading on Wednesday as conflicting U.K. data actually was published. Claimant Count Change figures turned in a better than expected number with a result of 28.3K compared to the forecast of 41.4K. However the Unemployment Rate in the U.K. climbed from 7.2% to 7.6%. There will be no significant economic releases today or tomorrow, but news may continue to come from the regulatory front as information continues to be reported about new restrictions that will be placed on financial institutions. The GBP has had another turnaround this week and has climbed towards the stronger side of its range against the USD, after taking a turn for the worse last week. The results from the Sterling have certainly received a better footing from the solid performance on the FTSE.

JPY
The JPY continued to lose steam to the USD on Wednesday as equity markets continued to turn in good results. The JPY and USD pair has experienced a well traveled range the past few months, as investors have weighed their capital management based on their taste for risk. Gold enjoyed another climb yesterday as it settled near 936.00 USD, proving again that it is trading in an inverse manner with the greenback.

Technical Analysis

EUR/USD:
The pair made a bullish correction breaching the resistance level of 1.4000 the Bollinger bands are tightened indicating that this pair could trade in a tight range today. However the daily chart supports a bullish move. It seems that going long with tight stops will be preferable.

GBP/USD:
This pair is now trading near the upper barrier of a tight bearish channel. Indicators are relatively neutral on the daily chart. However the 4 Hour chart support a bullish movement. Therefore, a long position will be preferable.

USD/JPY:
The pair is still floating within the bullish channel as the direction is unclear. No significant breach has been made, however both the daily and the 4 hour chart support the bullish move. It seems that going long with tight stops might be smart today.

USD/CHF:
On the daily chart the Slow Stochastic and the RSI indicates that we are in oversold territory. In addition the daily chart also gives bullish signals. The preferred strategy today will be a long position.

The Wild Card
Gold:
The Gold is now showing bearish momentum as seen by the hourly oscillators. Both the daily and hourly charts support the bearish move. Therefore, it seems that Forex traders will be able to maximize gains today by entering a short position.

 

[mercaforex]

S&P Companies Will Play Their Part Again

The USD had a day of mixed trading, which was a mirror image of the results from the U.S. equities markets. The USD lost value most of last week and as it went into the weekend it appeared to be on the back of its heels versus the EUR and GBP. The S&P and Dow both gained over 7.0% in last week’s trading which brought out a significant amount of risk appetite. The equity markets will remain in full view for investors this week as one hundred and fifty listed companies from the S&P 500 will be reporting quarterly earnings. On Friday the U.S. did release Building Permits and Housing Starts data. Both reports turned in better than expected numbers as the Building Permits release produced an outcome of .56 million compared to the forecast of .52 million and Housing Starts recorded a .58 million statistic – better than the estimate of .53 million.

Economic data from the U.S. will be quiet this week. Monday will be dominated most likely by market sentiment generated from equity markets, this because only the CB Leading Index will be published. Tomorrow Ben Bernanke is scheduled to testify before the House Financial Services Committee. Also making some impact in today’s trading session may be the news that CIT Corporation has basically agreed to a rescue deal via refinancing tools. News also emerged last night that Microsoft and Yahoo are discussing a possible deal. Yahoo famously turned down Microsoft about a year and a half ago but this time around they might not be able resist the security blanket that a giant like Microsoft can throw them. The USD took some punches last week as its gains made from the stock market weakness a couple of weeks ago evaporated. It might sound like a tired old song by now, but the USD is trading under the auspice of conditions from Wall Street and this will not likely change soon.

EUR
The EUR picked up some additional value on Friday as it got some additional energy from a market showing risking appetite. There was no major economic data released from the continent on Friday and today only the German PPI is on schedule. The German inflation report is forecasted to show a gain of 0.5% and it will be interesting to see what result emerges from this data. Germany and all of Europe have been keen to claim that deflation is not a concern. Publications will remain quiet until Wednesday when the broad European Industrial New Orders figures are on the calendar along with French Consumer Spending statistics. Making news this weekend was a speech given by ECB President Trichet as he warned European countries to do a better job of balancing their budgets. Which calls into question whose reality is true? Is Trichet actually that confident that European governments can effectively manage their financial concerns in the midst of this crisis or this some type of political game being waged with other influences in mind? The EUR traded in favorable positive territory all week as European bourses turned in good numbers and as long as this remains the scenario we may see the EUR perform well.

GBP
The Sterling turned in another good performance on Friday as it worked its way up to the stronger side of its range once again against the USD. It did this on a day without any significant U.K. economic data. Today will remain relatively quiet with only the Preliminary M4 Money Supply numbers on the calendar. Tomorrow things will pick up with the publication of the Public Net Borrowing data. The big risk events for the GBP from an economic data standpoint will be later this week with the Retail Sales numbers on Thursday and Prelim GDP report on Friday. Until then the Sterling may find itself like its counterparts trading at the whim of risk sentiment generated from likes of the FTSE, but traders will also keep their eyes on the range of the GBP - as it nears high water marks.

JPY
The JPY lost more ground to the USD going into the weekend as traders found themselves taking on more risk appetite. The Japanese marketplace is closed for a holiday today which should make for a light day of JPY trading. Gold continued to find takers and climb above the 940.00 USD mark, this as Crude Oil was taken higher on the back of better equity returns. The JPY will see dollar centric trading action today.

Technical Analysis

EUR/USD
The pair is now floating in a tight range between the price of 1.4100 to 1.4180. However all oscillators on the daily chart are showing bullish momentum and the Bollinger Bands are also indicating an upcoming bullish move. Going long appears to be the right strategy.

GBP/USD
The pair is now floating around the price of 1.6430. All oscillators on the daily chart are showing bullish momentum and the Bollinger Bands are also indicating an additional upcoming bullish move. Going long appears to be the right decision.

USD/JPY
The bullish channel on the daily chart continues. The Slow Stochastic on the daily chart is showing continued bullish movement and is supported by the RSI. Going long appears to be the preferable strategy.

USD/CHF
After the continuation of the bearish trend, the pair is now floating in a tight range between the 1.0717 to 1.0755 level. On the daily chart The RSI is floating around the 60 level which do not provide a clear direction. The preferred strategy today will be to wait for a clearer signal before taking any position.

The Wild Card
Crude Oil
Crude oil is now in the bullish corrective movement. All oscillators on the 4 hour chart are pointing up indicating that the price already made his correction. Going long appears to be preferable.

 

[mercaforex]

Bernanke To Talk, Stocks Still Singing

The USD lost additional value to the EUR and GBP on Monday as the equity markets extended their gains on Wall Street. The CB Leading Index was released yesterday and it produced a slightly better result with a number of 0.7%, above the estimate of 0.5%. Today the U.S. will not be releasing any major economic data but Federal Reserve Chairman Ben Bernanke is scheduled to testify in front of the House Financial Services Committee. The Fed Chairman will issue his semi-annual monetary policy report. Investors will certainly watch the proceedings and look for clues regarding the Fed’s short and long term outlook on economic conditions. Tomorrow Bernanke will follow this up with an appearance before the Senate Banking Committee. These hearings in Washington could influence the currencies in the coming days. However it appears that the equities still have a firm grasp on investor sentiment.

Essentially we are seeing traders speculate that an economic recovery is becoming a possibility. However it remains doubtful that this is a genuine return to the days of wine and roses quite yet. There is a large block of investors who believe that there is not enough conviction in the equity market to sustain these gains. Many companies are still scheduled to release their quarterly earnings reports this week. Though it may be hard to believe because of what we have seen transpire the past week, if a couple of corporations were to issue warnings about a sluggish recovery that could be enough to dampen what appears to be a strong rally on Wall Street. There has been a long time motto among traders that the trend is your friend and this has certainly caused the USD to crack somewhat as it now finds itself on the lower side of its range against the EUR and GBP. Until the equity markets show signs of another reversal, it would take a brave soul to stand in front of the train that seems to be on the track in which shares are climbing and the USD is struggling.

EUR:
The EUR continued to make strides against the USD even as the German PPI figure turned in a minus -0.1% compared to the forecasted gain of 0.5%. There will not be any significant releases from the European Union today, which will leave EUR investors watching the bourses again. Tomorrow the broad Industrial New Orders will be released for Europe. Rising equities have fueled the climb that the EUR has undertaken for a week and a half and it has pushed itself back to the stronger side of its range against the greenback. Economic data will remain rather lackluster from Europe until Friday when there will be plenty of PMI reports published from Germany and France. Economic conditions in Europe still have plenty of clouds hovering over the continent, but as long as the sun continues to shine because of the positive mood existing in the equities markets it appears the EUR will benefit.

GBP:
The Sterling made another significant climb against the USD on Monday. The U.K. released its Preliminary M4 Money Supply numbers yesterday and it turned in a negative -0.2% figure compared to the estimated gain of 0.4%. Today the U.K. will release its Public Net Borrowing statistics and an outcome of 15.7 billion is anticipated. However, like its counterparts the Sterling doesn’t seem to be paying much attention to economic data that can be considered relatively inconsequential compared to the strength the equities markets are enjoying. The data from the U.K. will build in importance starting tomorrow with the CBI Industrial Orders, Thursday will see Retail Sales and Mortgage information, and Friday the Prelim GDP numbers are on schedule. Thus, we will see how much of a reaction the Sterling can muster from what could prove to be an interesting combination of events. The GBP is solidly within the high end of its range against the USD and traders may see plenty of opportunities today and tomorrow.

JPY:
The JPY traded within a consolidated pattern against the USD yesterday. Upon returning from its banking holiday earlier today, the Nikkei traded in positive territory essentially catching up to other international bourses. The Bank of Japan issued a statement saying that they believe the economy has stopped getting worse and is starting to show signs of stability. Also making news was that the Japanese government dissolved Parliament and has called for new elections. The JPY remains in the midst of a classic trading range with the USD

Technical Analysis

EUR/USD:
After the continuation of the bullish trend the pair is now floating in a tight range between the 1.4180 levels to 1.4230. On the daily chart The RSI is floating around the 55 level and the slow stochastic is near the 64 level which do not provide a clear direction. The preferred strategy today will be to wait for a clearer signal before taking any position. Support level: 1.4150 resistance level: 1.4230

GBP/USD:
The daily chart is giving a bullish signal. On the 4 Hour chart the RSI and Momentum also supports further bullish movement. Despite the fact that this pair is now nearing tha overbought territory, the preferred strategy will still be a long position before we see a corection.
Support level: 1.6300 resistance level: 1.6490

USD/JPY:
There is still a bullish configuration on the 4 Hour chart, indicating that the momentum is still up. The RSI is floating above 60, which indicates that this bullish move has more room to run. Therefore the preferred strategy today will still be a long position.
Support level: 94.00 resistance level: 94.99

USD/CHF:
On the 4 hour chart the Oscillators are beginning to slope negatively indicating a possible correction. In addition the Slow Stochastic on the one hour chart is crossed at the 30 mark indicating that we are in oversold territory. However the other key indicators give a mixed signal so the preferred strategy today will be to buy on dips and sell on highs. Support level: 1.0680 resistance level: 1.0780

The Wild Card
Gold:
Bollinger Bands are tightened indicating decreased volatility. However on the daily chart it seems that another upward move is imminent. If we see a breach beyond 950.00 it could be an opportune time to enter a long position. Support level: 940.00 resistance level: 950.00

 

[mercaforex]

Will Obama Scare Investors Tonight?

The USD turned in a mixed day of trading which effectively reflected what took place on Wall Street Tuesday. The U.S. did not release any major data and today’s economic releases will remain relatively light. Crude Oil Inventories will be issued, but the commodity has largely been trading in the middle of its range and its price will be fueled more by speculative results from the equities markets. Quarterly earnings continued to feed trading sentiment on Tuesday and it will continue to do so today. Ben Bernanke testified in Washington and produced little in the way of surprises. He did field questions about the all encompassing powers the Federal Reserve maintains on monetary policy and left no doubt that this should remain its domain. Chairman Bernanke will be in Washington again today and investors will keep an eye on the happenings.
Other developments that could factor into the markets today and tomorrow are reports that CIT Group still is considering a bankruptcy filing, this if it cannot come to a full agreement with bondholders regarding possible insolvency. Also worthy of note is the planned speech by President Obama coming tonight about health care proposals. The initiative which is being pushed by the administration is important because of the costs involved that are hard to quantify from an accounting standpoint. The U.S. has taken on a huge amount of debt over the last year and it is questionable how a new program such as national healthcare coverage could be effectively instituted. Tomorrow the U.S. will release weekly Unemployment Claims and Existing Home Sales figures. Both of these numbers are important because of the implications they directly resonate within American consumers. It is the fear of unemployment that shifts spending habits among consumers and weakening home price values do little good for confidence either. The USD continues to trade deeply within an equity correlation and the consideration traders must gear themselves for is how much conviction this latest rally from Wall Street really has. If stocks should waver then the USD could strengthen.

EUR:
The EUR had a rather consolidated day of trading like its counterparts as the currency found little in the way of impetus. There was no major economic data from Europe on Tuesday. Today the broad Industrial New Orders for the European Union will be released and a gain of 1.9% is the estimate, this would be an improvement on last month’s negative return of -1.0%. Also French Consumer Spending is on the calendar and is forecasted to produce a rise of 0.4%. Tomorrow the Current Account data for Europe and the Italian Retail Sales data will be published. The scheduled economic reports may not be significant enough to counter the dollar centric trading that the EUR has been experiencing the past week. Large issues remain for the European Union concerning its banking sector and the exposure that exists to Eastern Europe, but the run up in the equity markets the past week and a half have managed to push doubts to the side for at least the time being.

GBP:
Sterling found itself languishing within a fairly tight range on Tuesday as a mix of caution entered its trading. Public Net Borrowing numbers showed a drop yesterday, producing a result of 13.0 billion compared to the estimate of 15.7 billion. Today the MPC Meeting Minutes publication will be presented and investors will look it over carefully to see what the Bank of England’s thinking is regarding its quantitative easing measures. Also the CBI Industrial Order Expectations reading is on the calendar and a number of minus -46 is expected. Tomorrow Retail Sales and Mortgage data will come from the U.K. and traders will be keen to study the housing numbers. The GBP has had another good showing against the USD the past week and a half while climbing to the stronger side of its range. It did this however as the equity markets also climbed, calling into question what would take place if the FTSE were to hit a road-bump.

JPY:
The JPY got stronger against the USD in what qualifies as another round of range trading within the currency pair. The Bank of Japan commented yesterday that they do not think Japan is at risk from greater deflation, but cautioned that their current policy of putting money into commercial paper – thus companies – has not concluded and will not for a while. Gold and Crude Oil moved insignificantly on Tuesday showing that the entire market may have taken a breath and is waiting to see what type of results the international equity markets can muster these next few days.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis

EUR/USD:
On the 4 Hour chart the RSI and Momentum are beginning to flatten out indicating neutrality. Howevr the Slow Stochastic has crossed the 70 level indicating that we are in overbought territory. Traders should exercise caution before entering this one as a correction may be imminent.

GBP/USD:
The Oscillators on the daily chart are negatively sloped indicating that yesterday's downward move still has room to run. The next target price will be around the 1.6290 level and if we see a breach beyond this point then it set up another stronger bearish move.

USD/JPY:
Bollinger Bands are tightened indicating decreased volatility as this pair has been trading in a range over the last few days. The Oscillators are also neutral supporting the notion that this pair is likely to remain range bound. Therefore the preferred strategy today will range trading.

USD/CHF:
The daily chart is showing range trading with no specific price direction and oscillators that float in neutral territory. The 4 hour chart is showing moderate bullish momentum due to a bullish cross on the Slow Stochastic. Therefore it seems that the preferable strategy today will be to enter a long position with tight stops.
The Wild card
Silver
We can see that the ADX on the daily chart is giving us a strong sell signal. This is further supported by the Stochastic Slow which is negatively sloped and slowly moving away from overbought territory. Forex traders may be able to maximize gains today by entering a short position

 

[mercaforex]

Weekly Unemployment Claims In Line

The USD lost a slight amount of ground to the EUR and GBP in trading on Wednesday. The U.S. did not release any critical economic data, but that will change today with the publication of the weekly Unemployment Claims figures and Existing Home Sales. The Unemployment data is expected to produce a number of 551K, which would be worse than last week’s outcome. Existing Homes Sales are expected to show an improvement. The employment picture in the U.S. remains a critical aspect of the economy. Statistics show that the number of unemployed is the highest since 1983 and that those out of work for longer than 26 weeks percentage wise is the highest it has been since 1948. This will make today’s outcome important for investors and will continue to build into a critical test of the Non Farm Payrolls numbers that will come out in two weeks time.
The U.S. stock market turned in a mixed performance again yesterday with technology stocks doing well but with some financial shares lagging. Essentially we are starting to see a realization that revenues for companies are good thus far within these quarterly reports but that sales have been bad. Having said this, the equities have gained significantly the past week and a half and have not given up their gains. This leaves a large question about how the real economy is performing and how it will do long term. Tomorrow the Revised University of Michigan Consumer Sentiment figures will be released but the crux of the story today and tomorrow will continue to be delivered from Wall Street. Investors did pay attention to Fed Chairman Ben Bernanke yesterday but it was basically an encore from the previous day of testimony without any new elements. The USD has been trading to the weak side of its range against the EUR and the GBP for a few days now and as long as the equities are able to maintain their stance, the greenback could face pressure.

EUR:
The EUR enjoyed a day of relative strength against the USD as it held onto its gains made earlier this week. Industrial New Orders from the European Union showed a drop of -0.2% compared to the estimated gain of 1.9% but this was not enough to stem the momentum the EUR has picked up in the wake of good returns on bourses. Today the Current Account data for Europe will be released and it has a forecast of minus -3.6 billion. Also the Italian Retail Sales figures will be released and they are expected to show a slight increase. The Italian number may prove interesting for some considering the French Consumer Spending data on Wednesday provided a slightly better result. Tomorrow the PMI reports are due from Germany and France and this could provide some impetus for the EUR in what has been very dollar centric trading for the past week in accordance with the strong results from equities. The EUR has had a good run the past week and a half and traders who have tried stepping in front of this short term trend have found a difficult road.

GBP:
Sterling staged another strong day on Wednesday refusing to give up its gains. It did find some pressure in the early part of the trading session but as the day grew longer the GBP found enough takers to stage another rally. This drive upwards interestingly enough, came after a poor CBI Industrial Order Expectations reading which produced a negative number of -59 compared to the estimate of minus -46. This result underscores that it is not economic data which is driving the currency market, but speculation on a recovery due to the positive sentiment on stock markets for the time being. Today the Retail Sales figures will be published from the U.K. and they are anticipated to show an improvement of 0.4%. Also Mortgage Approval data will come forth from the BBA and expected to be a bit better. Tomorrow could be an important day for the GBP, this because the Prelim GDP will be reported. Investors will watch this outcome closely and will have to weigh it carefully against existing sentiment from the FTSE which has made the trading in the Sterling strong.

JPY:
The JPY lost ground to the USD on Wednesday as Asian stock markets continued to climb higher. In what appears to be some risk appetite coming into the marketplace based on the gains from international bourse the past week and a half, the JPY has traded weaker. Having said that we are still deeply within the midst of a rather consolidated range for the JPY and USD and it shows little signs of relenting.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis

EUR/USD:
This pair continues floating between the 1.4198 levels to 1.4255 with no distinct direction. The pair now seems to be consolidating around the 1.4230 as the volatility is beginning to decrease. The RSI is floating around the 50 level and all oscillators on the 4 hour chart do not provide a clear direction as well. The preferred strategy today will be to wait for a clearer signal before taking any position. Support level: 1.4140 resistance level: 1.4310

GBP/USD:
The bullish channel on the daily chart continues. However The Slow Stochastic and the RSI on the daily chart indicate the correction of the bullish movement. Going short appears to be the right strategy.
Support level: 1.6350 resistance level: 1.6520

USD/JPY:
A bullish head and shoulders structure is shown on the 4 hour chart which took this pair to 94.20 In addition a double top stochastic pattern with a positive slope is establishing which may indicate another upcoming bullish trend as the next target is located at 94.70. Therefore, going long seems to be preferable today.
Support level: 93.10 resistance level: 94.50

USD/CHF:
This pair has been floating in a very tight range with no distinct direction at the last tradiing day. The Oscillators are relatively flat on the hourly level and the RSI on the daily chart is floating near the 50 line. However we can see on the daily chart that the Slow Stochastic shows that the bulliish momentum might come. the range trading appears to be the correct strategy.
Support level: 1.0600 resistance level: 1.0700

The Wild Card
Silver:
This commodity has rallied over the last trading day and the Oscillators indicate the continuation of the bullish movement. The hourlies also support a bullish notion. Forex traders may be able to maximize gains today by entering a steady long position.
Support level: 13.50 resistance level: 14. 10

 

[pedro01]

WTF - unemployment data just came out 15 minutes ago.

You bloody well type quickly.

 

[mercaforex]

U.K. Prelim GDP Could Prove Interesting

We have seen the USD trading to the weaker side of its range for a week and a half now against the EUR and GBP. The U.S. stock markets surged on Thursday and the Dow Jones Industrials finished above the 9000 mark for the first time since January. It can be debated long and hard on exactly why the stock market has decided to drive upwards. It may very well be a case of the market looking ahead which has been a long standing characteristic. However it must be pointed out that summer trading is certainly entrenched, this as low volume is creating conditions of self fulfillment, in other words sentiment may be driving this market more than reality. Microsoft released its data last night and it proved very disappointing. Whether that will affect equities today remains to be seen. The USD has reacted in a rather predictable way during this stretch. The greenback lost ground much of the day as the stock markets turned in good results. Microsoft released its earning after the market closed and this could put some caution into early trading today, but it will take a brave investor to stand in front of this rally.

Unemployment Claims were published yesterday and produced a number of 554K, worse than the estimate of 551K. Also Existing Home Sales were brought forth also and had a figure of 4.89 million compared to the estimate of 4.82 million – hardly anything to write home about. Thus, the unemployment picture in the U.S. has continued to show weakness and is sure to remain a thorn in the side of American consumers who are likely to show restrained spending until they feel secure about their jobs. Today the University of Michigan will issue its Revised Consumer Sentiment report and it expects a reading of 65.1. The currency markets however are probably going to focus on Wall Street going into the weekend. The price of shares may have gotten ahead of themselves and some traders may be tempted to see if the market is overstretched. The recent trend in equities has been strong and the question is how much steam does this engine have? The USD has struggled in the midst of the equity move and traders will probably watch share prices to gauge their positions today.

EUR:
The EUR had been gaining on the USD in many respects due to the positive results flowing from the bourses for the past two weeks. Yesterday the Current Account data for Europe showed an outcome of minus -1.2 billion, but this was better than the negative expectation of -3.6 billion. The EUR has not had a lot of hard economic data to trade on the past week but this will change a bit today with the publication of PMI data from across the continent. Also the German Ifo Business Climate survey will be released which could stir interest. Both the Germans and French will release their Flash Manufacturing and Services PMI results. The German Flash Manufacturing number is expected to be 42.1, which would be an improvement over the previous month. In fact all the German and French reports on schedule are anticipating better readings. The crux of the matter for the EUR however may continue to be the affects that share prices have on the currency like all of its counterparts. The EUR has staged a good trend the past two weeks and it is likely to move in an equity driven fashion going into the weekend.

GBP:
After Wednesday’s strong showing by the Sterling, the GBP did not give back its gains on Thursday. Retail Sales numbers were released from the U.K. and they produced a gain of 1.2%, better than the forecast of 0.4%. Also the BBA Mortgage Approval data was brought forth and its outcome was a number of 35.2K, higher than the estimate of 32.3. All eyes will be on the Prelim GDP statistics that the U.K. will publish today. The Prelim GDP is anticipated to show a decline of minus -0.3%. It is no secret that the recession has not ended in the U.K. and this report will be a strong indication whether the economic downturn has begun to show stability. Investors who have been allowing their positive sentiment to grow will face a true test with the GDP results. The Sterling has produced solid marks the past two weeks and has climbed back to the strong side of its range against the USD and the GDP numbers today will affect the GBP.

JPY:
As international equities surged again on Thursday the JPY lost value to the USD as risk appetite showed signs of increasing among Asian investors. The JPY has been going back and forth within a fairly consolidated trading range against the greenback for several months. Gold traded in a tight range yesterday as its recent run upwards may have run into some cautious trading as it nears the higher end of its range, it finished the day around 949.00 USD.

 

[mercaforex]

Economic Data Will Be Watched This Week

Friday proved to be a day of mostly range trading for the USD against the major currencies as equities markets provided slight gains but were not able to maintain their continuous upward move. After a nearly two weeks of a rally from Wall Street, the USD finds itself going into this week struggling on the weaker side of its range against both the EUR and GBP. The surprising gains on the international bourses have certainly increased risk appetite as some investors have left the so-called safe havens of the USD and JPY. This week currency traders will monitor what has become a proven equity correlation, but economic data may become an important barometer once again in these coming days. Today the U.S. will release New Home Sales and it is expecting a number of 353K compared to last month’s outcome of 342K.
The next two weeks will produce a good combination of reports, which will help show the recession has stabilized and is possibly receding – or on the other hand cause negative sentiment to re-surface. Tomorrow the CB Consumer Confidence reading is on schedule and U.S. data will continue unfolding during the week leading up to the Advanced GDP on Friday. These coming days will be vital as investors position themselves for the rather low volume in equities that is likely to unfold in August as summer trading begins to pervade. Thus the coming data will provide a unique test - for or against - the recent rally we have seen on Wall Street which has left skeptical investors scratching their heads in disbelief. The USD has weakened on the better than expected quarterly reports on average that corporations have produced, but it remains to be seen if the real economy and U.S. data can support the rosier outlook.

EUR:
The EUR maintained the gains it has made against the USD on Friday as PMI data among others were released from the European Union. The German Flash Manufacturing PMI numbers came in with a 45.2 outcome, above the estimate of 42.1 and their Services PMI figures also showed a better statistic with a 48.4 reading compared to the forecast of 45.9. The French Flash PMI data showed a mixed result with the Manufacturing showing an improved number, but the Services release coming in worse than anticipated. The German Ifo Business Climate report also showed a better result coming in with a 87.3 outcome, slightly above the projection of 86.6. Today the German GfK Consumer Climate survey is on schedule and is expecting a reading of 2.9. The remainder of the week will consist of inflationary data from the European Union. The EUR has gained and been able to hold onto its better value against the USD the past two weeks. The EUR is likely to continue to trade within an equity based parameter for the time being and its results a product of investor risk appetite.

GBP:
The Sterling traded in a fairly consolidated manner on Friday as the Preliminary GDP number from the U.K. proved slightly disappointing. A result of minus -0.8% was worse than the anticipated figure of minus -0.3% for the GDP. Officials were quick to point out that the downturn in the U.K. economy has started to show stability and that the scale of recession is lessening. There will be no major economic data from the U.K. today but tomorrow the CBI Realized Sales numbers will be on the table. Mortgage Approval and Consumer Confidence figures will come forth later in the week. The GBP was pushed near the higher part of its range against the USD the past two weeks and traders may continue to try and test the Sterling’s current range.

JPY:
The JPY continued its trading in range against the USD as international equity markets showed modest gains. There will be manufacturing and industrial data from Japan early this week but the crux of the matter for the JPY remains the results from the likes of international bourses and the amount of risk appetite that emanates from investors. Gold had a relatively quiet day of trading on Friday, but it did maintain it rather lofty price of 955.00 USD without too much pressure.

Technical Analysis

EUR/USD:
On the 4 H chart the Slow Stochastic is crossing at the 76 level and the RSI is at the 70 level which indicates that we are in overbought territory. In addition the daily chart also gives bearlish signal. The preferred strategy will be a short position. Support level: 1.4110 resistance level: 1.4300

GBP/USD:
This pair is now trading near the upper barrier of a tight bullish channel. Indicators are relatively neutral on the hourly chart. However just like in the case of the EUR/USD pair the daily chart supports a bearish movement. Therefore a short position will still be preferable.
Support level: 1.6350 resistance level: 1.6530

Bollinger bands are tightened indicating that this pair could trade in a tight range today. However both the dailies and the hourly’s support a bearish move. It seems that going short will be preferable. Support level: 94.50 resistance level: 95.50.

AUD/USD:
On the 4 hour chart the Slow Stochastic is crossing at the 77 level and the RSI is at the 80 level which indicates that we are in overbought territory. In addition the daily chart also gives bearish signal. The preferred strategy today will be a short position.
Support level: 0.8140 resistance level: 0.8290

The Wild Card
Crude oil:
The crude oil is now showing bullish momentum as seen by the hourly oscillators. Both the daily and hourly charts support another bullish move. Therefore, it seems that Forex traders will be able to maximize gains today by entering a long position. Support level: 67.10 resistance level: 69.10.

 

[mercaforex]

American-Sino Summit Will Grab Attention

The USD continued to move within a consolidated mode on Monday as a general lack of direction from the equities brought about a cautious market place. After nearly two weeks of gains on Wall Street, investors may be reaching a point where they are asking themselves if the market has gotten too far out in front of the economic data. New Home Sales did provide a better number yesterday of 384K compared to the estimate of 353K. However this positive number is still far below anything that will spur on a belief that the housing market has turned around quite yet. Today the CB Consumer Confidence survey will be published and it carries an expectation of 49.1. The S&P/CS Composite-20 HPI is on cue too and it is forecasted to show a modest improvement to minus -17.8%. Investors will also keep their eyes on Washington. The American and Chinese government began a Strategic and Economic Dialogue yesterday and today a press conference will be held in which Treasury Secretary Geithner will speak.
Tomorrow the U.S. will release Core Durable Goods figures, Thursday is scheduled to have weekly Unemployment Claims, and Friday the Advance GDP results will be brought forth for the second quarter. All of this data has the potential to turn the focus of investors to the ‘real economy’ and away from the speculative. Also weighing in on sentiment could be any statements coming from the American-Sino summit happening in the States. The U.S. and China share an important relationship. Consumers in the United States have been one of the crucial elements for Chinese industrial and manufacturing growth and the Chinese government is now the largest purchaser of U.S. debt. The USD has had a rather quiet two days of trading as it has languished near the weaker part of its range against the EUR and GBP, however it has shown signs of resilience and traders may be looking for the greenback to pick up some strength if equities should waver.

EUR:
The EUR held its ground against the USD again on Monday and has held stubbornly onto its gains made the past two weeks of trading. The German GfK Consumer Climate survey was released yesterday and produced a result of 3.5, better than the estimated figure of 2.9. Today the European Union will not release any major data and tomorrow the German Prelim CPI is the only piece of major economic figures on the schedule. The EUR has been the recipient of a good run within its bourses, there will be some important quarterly earnings reports from Europe today, but the equities markets have shown that they are largely dependent on the results from Wall Street for direction. Yesterday the IMF and Latvia agreed to a new fiscal plan in order to help the Baltic nation fight off a devastatingly strong recession, which basically addressed tax policy changes. Economic data from Europe will remain quiet for the remainder of the week, on Thursday the German Unemployment Change numbers are due, which means that the EUR will likely continue to move in a dollar centric fashion.

GBP:
The Sterling found itself in a rather tight range on Monday managing to maintain its rather impressive strength against the USD garnered from previous trading sessions. The U.K. did not release any major data yesterday. Today the CBI Realized Sales will be published and the expected reading is minus -12. Tomorrow the Net Lending to Individuals numbers and Mortgage Approvals will be brought forth. On Thursday the Nationwide HPI statistics are on the schedule. The U.K. economy like the U.S. has heard plenty of speculation about the possibility of a recovery sometime in the mid-term but investors are likely to begin looking for proof in the pudding. The GBP has been a good performer this year after showing some weakness at the height of the financial crisis. Since then it has consistently fought for better value.

JPY:
The JPY lost a bit of ground to the USD in what largely consisted of range trading as international equity markets that did not show the same exuberance they had the past week. The JPY has persistently traded within a consolidated manner against the USD much of this year as the ebb and flow of risk appetite has flowed. Japanese economic conditions remain challenging but the hallmark of the JPY has been its so-called nomenclature as a safe haven.

Technical Analysis

EUR/USD:
This pair is still showing positive momentum and the Oscillators are also positively sloped indicating further bullish movement. The next target price will be at 1.3300 and if this level is breached then we could see some sharper bullish movement. The preferred strategy today will still be a long position.

GBP/USD:
This pair breached the 1.4300 level and then eased off. It will now once again target the 1.4300 mark and the daily chart supports the notion that this pair will push on from there. The preffered strategy today will be to buy on dips.

USD/JPY:
There is a very nice bullish channel appearing on the daily chart. The Momentum and RSI also have a positive slope and support further bullish movement. The next target price will be at 89.90. The preferred long term trade will still be a long position.

USD/CHF:
This pair is now nearing the bottom barrier of a very wide horizontal channel on the daily chart. If this pair breaches the bottom barrier which is located at the 1.1350 mark then we could see another sharper downward move. A short position seems to be the correct strategy today.

The Wild Card
Gold
The gold is now floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.

 

[mercaforex]

Equities Stumble & The USD Gains

The USD gained on the EUR and GBP on Tuesday as the equity market stumbled and a poor piece of economic data was released. Wall Street appeared to run out of gas, at least for a day, as a few companies offered less than overwhelming news to investors. Bank of America announced it will be making large cuts to branches in an effort to reduce operating expenses, General Electric released a report saying that they are performing well but have obstacles to maneuver around, and U.S. Steel showed that the faltering economy has affected their bottom line. The CB Consumer Confidence survey released yesterday provided a reminder that Americans are less than happy with their prospects, the reports showed a 46.6 reading compared to the estimate of 49.1. Certainly the above notes were not the only things affecting the marketplace, but when you factor into the mix that equities had seen such a strong rally the past two weeks, it definitely provided a reason for even the more optimistic traders amongst those in the marketplace to take a pause.
The U.S. will release its Core Durable Good figures today and a slight gain of 0.1% is the expectation. Tomorrow the weekly Unemployment Claims data will be published and therefore start to set the stage for what will become a couple of interesting trading days going into the weekend. Unemployment remains a critical part of the poor sentiment surrounding any chances for a strong U.S. recovery and consumers expressed their doubts in yesterday’s CB Consumer Confidence results. On Friday the Advance GDP will be brought forth and this with the specter of the Non Farm Employment Change numbers due next week may be enough to cause the folks on Wall Street to hesitate. The USD has followed the equity markets step by step the past few months and this does not look like it will change anytime soon. The exaggerated gains made across the board in share prices the past two weeks sent the USD roiling and if those with risk appetite feel a somewhat diminished view in the coming days it stands to reason we could see the USD show some strength.

EUR:
The EUR found a tougher road on Tuesday as equity markets found resistance. There were no major releases of economic data from the European Union yesterday. Germany will publish its Preliminary CPI numbers today and the anticipated figure is a gain of 0.2%. The inflation picture throughout Europe remains one of debate as many analysts continue to point out that it is deflation which poses a significant danger – and not inflation. Germany companies will also be releasing important quarterly reports today with the likes of Bayer and Daimler posting. Tomorrow the German’s will be publishing their Unemployment Change numbers and Europe will bring forth its broad Consumer Confidence readings. Having had a good two week run against the USD, the EUR was beset with a lack of support on Tuesday as equities retreated a bit. Today’s trading should resemble the characteristics of the previous sessions, meaning the EUR will struggle if share prices show vulnerability.

GBP:
The Sterling slipped against the USD on Tuesday as the combination of lackluster results from the FTSE and a bad CBI Realized Sales survey took hold. The Sterling has had a strong performance the past two weeks but its strength was not enough to overcome diminished risk appetite yesterday. The CBI Realized Sales figure showed a minus -15 reading compared to the forecasted number of minus -12. Today the Mortgage Approval data is on schedule and the estimated number is 48K. Also the Net Lending to Individuals statistics will be published and a figure of 1.0 billion is expected. Both of these reports are calling for better results than their previous outcomes. Tomorrow the Nationwide HPI is on the calendar. The Sterling found a slippery slope on Tuesday as it saw sustained pressure for the first time in several sessions and traders will be keeping their eyes on the GBP today.

JPY:
The JPY gained quickly against the USD and other major currencies yesterday as risk appetite evaporated on Tuesday. The JPY remains on the stronger side of its rather well practiced range against the USD and if international bourses remain in a cautious state the JPY may continue to build in strength even though this is certainly not what the Bank of Japan would like to see. The JPY may stay a casualty of cautious trading among Asian investors.

Technical Analysis

EUR/USD:
The bearish channel on the daily chart continues with a volatile price movement. The Slow Stochastic on the daily chart is also showing continued bearish movement and is supported by the RSI. Going short appears to be the right strategy.

GBP/USD:
There is a very accurate bearish channel forming on the 4 chart. The daily chart also supports a bearish notion. We expect the next target price to be around 1.6300 level. Therefore the preferred strategy today will be a short position.

USD/JPY:
The pair continues its bearish trend breaking the 94. 50 support level and formed a short term top cycle at 94.20 levels on the 4-hour chart. However on the one hour chart the Slow Stochastic is crossing at the 18 level and the RSI is at the 18 level as well which indicates that we are in oversold territory and the correction is imminent. Going long with tight stops seems to be preferable.

USD/CHF:
The daily chart is showing moderate bullish momentum as the Oscillators are in neutral territory with a slight positive slope. The range trading on the hourlies is forming into a narrowing bullish channel. The pair is approaching the middle level of it with very tight Bollinger Bands. The next target price on the opside will be around 1.0800 level. Traders must pay attention for a possible breach which could create a great buy signal.

The Wild Card
Gold
The Gold is now showing bearish momentum as seen by the hourly oscillators. Both the daily and hourly charts support another bearish move. Therefore, it seems that Forex traders will be able to maximize gains today by entering a short position.

 

[mercaforex]

Important Data Could Stir This Market

The USD extended its gains against the major currencies on Wednesday as mixed results from the Durable Goods releases helped bring additional stagnation to equities. While Core Durable Goods Orders showed a gain of 1.1%, the broad number which includes aircraft and automobiles showed a significant drop of -2.5%. This was not the kind of news that investors were hoping for as the sobering data threw a dose of caution onto Wall Street. Today the weekly Unemployment Claims figures are due and an outcome of 573K is estimated, which would be a worse number than last week’s. Unemployment and thus the fear of job security remains a vital concern among American consumers who help drive the U.S. economy with their spending. As long as jobs are at risk it stands to reason that the U.S. will not see a strong recovery. Investors will watch the unemployment data wearily for any surprises.
Tomorrow could prove a critical moment for the markets because the Advance GDP is on the calendar and its result could ignite volatility. President Obama declared yesterday that the end of the recession is in sight and this type of remark will be long remembered if it doesn’t prove to be true. Politicians have been trying to ‘sell’ optimism for months and if the data today, tomorrow, and next week do not meet the expectations they have created we could see investor backlash. The American economy still has many question marks surrounding it and with the additional possibility of a gigantic healthcare initiative being proposed sometime this fall it is only reasonable to wonder where all of the money is going to come from. The U.S. stock markets enjoyed a good rally the past couple of weeks but the last two days have sounded a note of concern. The USD has gained well against the EUR as Wall Street has faltered and the road signs for the greenback’s direction will depend on the clouds shadowing share prices.

EUR:
The EUR stumbled again on Wednesday as CPI data from Germany proved noteworthy. The Preliminary CPI release from Germany showed a negative drop of -0.1% compared to the estimated gain of 0.2% highlighting the possibility of deflation. Today the Germans will publish their Unemployment Change numbers and a result of 44K is expected. Several major companies from Europe will be bringing forth their quarterly earnings today and investors will be keen to read exactly how the corporations express their outlooks. Also the Austrian banking sector was reminded that not all is well as the IMF said that the institutions may need a financial injection sooner rather than later to ward off exposure that still lingers from Eastern European countries of whom are suffering from the economic downturn. Tomorrow the Flash CPI Estimate will be presented for Europe and investors will examine it carefully. The EUR has found a tougher road the past two trading sessions as equity markets have begun to show caution amidst concerns that their gains may have been overstretched. The EUR could continue to face pressure if poor economic prospects affect investors taste for international bourses.

GBP:
The Sterling struggled against the USD on Wednesday as economic data from the U.K. produced uninspiring results. The Net Lending to Individuals produced an outcome of 0.4 billion compared to the estimate of 1.0 billion. Mortgage Approval data was also brought forth and showed a number of 48K matching the forecast. Today the Nationwide HPI is on the schedule and is anticipated to have a result of 0.3%. Tomorrow the U.K. does not have any major economic data on the agenda. Thus the GBP will find itself trading in a dollar centric manner based on the results from the impetus from the U.S. broad markets and data that is due today and tomorrow. The Sterling has found the going rougher the past two trading sessions.

JPY:
The JPY lost ground to the USD in cautious range trading on Wednesday. International equity markets continued to stumble after a very good run the past two weeks and investors are proving once again that the JPY and USD remain firmly within the grasp of a consolidated pattern that has been in a staple of this calendar year. Gold has come under pressure as the USD has picked up strength and now finds itself within the 925.00 USD mark.

Technical Analysis

EUR/USD:
This pair is now nearing the bottom barrier of the bearish channel on the daily chart. If this pair breaches the 1.4000 level then we could see some sharp downward movement. The oscillators also support a bearish notion indicating increased volatility. The Forex traders should wait for breach and then take the short position.
Support level: 1.4000 Resistance level: 1.4140

GBP/USD:
The pair made a substantial bearish movement yesterday. However the indicators on the daily chart are showing mixed signals which can indicate that a bullish correction is possible. The Forex traders should wait for clearer signals before taking any position.
Support level: 1.6310 Resistance level: 1.6550

USD/JPY:
This pair continues floating in a tight range between the 94.90 levels to 95.31 with no distinct direction. However, the RSI on the daily chart is showing that we are in the over-sold territory suggesting that a bullish movement is possible. Going long with tight stops appears to be preferable. Support level: 94.50 Resistance level: 95.50

USD/CHF:
The sharp bullish channel on the daily chart continues with no signs of stop. The Slow Stochastic on the daily chart is showing continued bullish movement and is supported by the RSI. Going long appears to be the right strategy.
Support level: 1.0810 Resistance level: 1.0900

The Wild Card
Crude oil:
the crude oil is now in the bearish corrective movement. All oscillators on the 4 hour chart are pointing down indicating that the price already made his correction. Going short appears to be preferable.
Support level: 62.00 Resistance level: 65.00

 

[mercaforex]

Advance GDP Will Be The Focus

The USD suffered a reversal on Thursday and lost ground to the EUR and GBP as Wall Street led a positive charge affecting the currency markets. Weekly Unemployment Claim numbers were released yesterday and produced a number of 584K worse than the estimate of 573K. However investors continued their habit of brushing off bad news and looking for the positive by pointing out that the amount of overall claims was the lowest since April. The question this raises is why are the overall claims shrinking, one negative consideration would be the possibility that a large amount of unemployed people have simply run out of time and can no longer file for unemployment insurance. Next week’s Non Farm Employment Change numbers may help clarify that. Today the Advance GDP data is on the schedule and investors will get yet another test to show off their ability to wish away bad information. This because the Advance GDP is forecasted to show the U.S. economy shrinking by -1.4%, which would actually be a big improvement on last month’s figure.

The center of the firestorm is surrounded by the debate on what constitutes positive news. The market is the barometer certainly, but there is a difference between short term trading and long term endeavors. The rally from the equity markets the past two weeks has been large but it must be taken into context. The USD has been walking lock in step with the results from the likes of Wall Street. As risk appetite has increased among investors the USD has found itself trading to the weaker side of its range against the EUR and particularly the GBP. Interpretation of data from corporate quarterly earnings or economic data such as today’s Advance GDP, are the critical factors affecting the marketplace for investors. Equities tend to be forward looking – with good reason – and thus the question is what type of recovery we are going to see one year from now. Some traders seem to be speculating on a belief that this ugly stretch is going to be passed quickly. The Advance GDP number and how it impacts the equity markets will certainly be the focal point for the USD today.

EUR:
The EUR regained much of its value on Thursday that it had lost in the previous two sessions against the USD. The EUR moved better as investors showed a greater desire for risk in the equity markets and the German Unemployment Change number produced a good result of -6K compared to the estimate figure of 44K. Quarterly earnings reports from the European corporate sectors showed mixed results and opinions regarding the economy. However, any negative sentiment that may have been surrounding the EUR from the previous sessions was swept to the side in dollar centric trading, which saw aggressive gains among bourses. Today the European Union will be releasing its Flash CPI figures and it is anticipated to have a number of minus -0.4%, which would be a deflationary outcome. However, the question is if investors will take note of this when they are filling their heads with the lofty gains from the recent equity rally? Also on schedule is the broad Unemployment Rate statistic for Europe and 9.7% is the estimate. The EUR performed well against the greenback yesterday and investors will be in a dollar centric mode once again today.

GBP:
Sterling turned in a strong day as it climbed back to the strong side of its range against the USD after two poor days of trading. The Nationwide HPI showed a gain of 1.3% versus the estimate of 0.3% and this result may have brought about positive sentiment among GBP traders. The U.K. will not be releasing any major data today but the Sterling goes into the last trading day of July having produced five solid months of positive value against the USD. Like its major counterparts the recession still looms above the U.K. economy, but sentiment has been improving and the results from the gains on the FTSE have helped spur the GBP upwards the past couple of weeks.

JPY:
The JPY lost further grown to the USD on Thursday as international stock markets continued to rally. The Asian bourses have shown positive returns for some time with certain markets actually being in a bull mode such as the Shanghai bourse in China. The movement of the JPY and USD remains locked in a risk/reward trading range. Both currencies are considered so called safe havens, however it appears that upon stronger results on the equity markets that the JPY is the currency that tends to give up ground to the greenback.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
Technical Analysis

EUR/USD:
The pair is now floating between the 1.4055 prices levels to 1.4145 with no distinct direction. The pair made few attempts to breach through the resistance level of 1.4040 but failed. On the daily charts the indicators are giving mixed signal. the range trading appears to be the preferable strategy.

GBP/USD:
The float within the narrowing bullish channel on the daily chart continues without a distinct trend as no significant breach has been made. The pair is now floating between the 1.6203 levels to 1.6573 also the 4 hour chart is giving mixed signals that support the floating of the pair. The traders should wait for a clear break before taking any position.

USD/JPY:
The float within the narrowing bullish channel on the daily chart continues as no significant breach has been made and is now floating between the 95.22 level to 95.72. However the momentum is still bullish supported by the Slow Stochastic that indicate the continuation of the bullish movement within the channel. Going long appears to be the preferable strategy.

USD/CHF:
There is a bullish channel on the 4 hour chart. However this pair is now trading near the upper barrier of this channel, so there may be a slight correction before this pair makes another bullish move. It is important to note that most of the indicators on the daily chart also give a strong bullish signal. Going long with tight stops appears to be preferable.

The Wild Card

Gold:
Gold is now floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.

 

[mercaforex]

GDP Interpretations Vary

The USD lost a large slice of ground to the GBP and EUR as investors took Wall Street up on what was received as a ‘good’ Advance GDP outcome on Friday. However, the GDP data that was published upon closer inspection will have to be considered long and hard. The Advance GDP figure for the second quarter produced a number of minus -1.0%, better than the estimate of minus -1.4%. Yet, a telltale sign that seems to have gone unnoticed by many was that the GDP for the first quarter was revised downward to a terrible minus -6.4%. Thus what we saw were equities somehow maintain their July rally on the last day of the trading month and go into the weekend perhaps impressed by its results, which no doubt helped spur on risk appetite within the currencies. Today the ISM Manufacturing PMI reading is on schedule and it carries and estimated reading of 46.4. Tomorrow the Pending Home Sales data will be published.
A curious dynamic is building within the markets, we are seeing a significant rally in equities and sustained on speculation that a recovery is in sight. However, there remain analysts who are questioning the way in which the economic data is ‘being sold’ and are warning about the possibility of anemic growth prospects for the U.S. economy. Unemployment remains a huge concern and at the end of this week the Non Farm Employment Change numbers will be presented. The GDP in the U.S. is largely made up of consumer spending and as long as the American public is not spending at their prolific levels from the past, strong growth remains suspicious. If not for the extraordinary amount of money the U.S. government pumped into the economy the past quarter, one has to wonder what the actual GDP would have been. The Obama administration presented a united front speaking about the positives in the economic data this weekend, but it must be asked if all of this is a bit too premature. The USD continues to roil under the specter of a sustained rally and traders who are looking for a pullback await, but may be playing with fire in the short term.

EUR:
The EUR kept climbing against the USD on Friday as traders continued to show signs of increased risk appetite. The European Union issued their broad Flash CPI figures and it produced a poor number of minus -0.6% compared to the estimate of minus -0.4%. The data highlights the rather unwelcome news that deflation rather than inflation continues to be a characteristic of this economic downturn. Today the Retail Sales figures from Germany will be published and the forecast is calling for a gain of 0.4%. Also the Final Manufacturing PMI numbers will be presented for the European Union. Tomorrow will be a relatively light day of data with only the PPI numbers due. The EUR has had a good performance, mirroring the rise in the equities markets of July. The question for the EUR may be how the equity markets internationally will perform in August.

GBP:
The U.K. did not release any major economic data on Friday but that did not stop the Sterling from increasing its value against the USD. The rally across the FTSE and other international equity markets continued to bolster the performance of the GBP. Today the U.K. will publish its Manufacturing PMI survey and the expected reading is 47.7, which would be a slight improvement over the previous report. The Halifax HPI was on schedule but has been pushed back until Tuesday tentatively. Also the Construction PMI figures will be presented on Tuesday. The state of the U.K. economy like its counterparts remains mired in a strong recession, but the Sterling has fostered a consistent upward trend the past five months. The fact that the equity markets have provided an impetus too, has presented GBP traders with plenty of opportunities.

JPY:
The JPY picked up some ground against the USD on Friday as trading in the currency pair continued to present traders with a rather tight range. The Japanese economy has been beset by deflation and although the Bank of Japan says it sees stability entering the economy, some investors are likely to be rather skeptical of this. Gold is trading near the 952.00 USD mark and continues to show that it is trading in an inverse pattern compared to the greenback. As for the JPY, it has shown once again that its trading range with the greenback is challenging.

Technical Analysis

EUR/USD:
The hourlies show that the pair is in a bearish configuration as volatility is increasing, and showing bearish signals. However according to the daily chart this pair is moving without a clear trend. The preferred strategy today will be to wait for a clear signal before taking any position.

GBP/USD:
This pair is now nearing the bottom barrier of the bullish channel on the daily chart. If this pair breaches the 1.6810, then we could see some sharp upward movement. The oscillators also support a bullish notion indicating increased volatility. Going long with tight stops appears to be preferable.

USD/JPY:
This pair continues floating in a tight range around 94.60 to 95.20 with no distinct direction. The pair now seems to be consolidating around the 95.00 level as the volatility is beginning to increase. The oscillators are relatively flat on the hourly level and the RSI on the daily chart is floating near the 50 line. The preferred strategy today will be the range trading.

USD/CHF:
The bullish channel on the daily chart continues. The Slow Stochastic on the daily chart is showing continued bullish movement and is supported by the RSI. Going long appears to be the right strategy.

The Wild Card
Gold:
The gold is still floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.

 

[mercaforex]

Better Data & Equities, Poor USD

Keeping in mind the well known axiom that the ‘trend is your friend’, the USD continued to get rocked on Monday losing ground to both the EUR and GBP and now finds itself floundering near the very low end of its range against these currencies among others. The U.S. equity market moved upwards yesterday, which should be no surprise if you look at the outcome of currency trading from Monday considering the results from the previous two weeks. The U.S. released its ISM Manufacturing PMI numbers and it came in with a reading of 48.9 compared to the forecast of 46.4. The better data is still considered recessionary but its improvement buoyed investor sentiment certainly. Also the Construction Spending figures were published and produced a gain of 0.3%, beating the negative estimate of -0.5%.
Today the U.S. will present its Pending Home Sales data and a number of 0.6% is expected, which would be an improvement over last month’s report. Tomorrow the ADP Non Farm Employment Change, the ISM Non Manufacturing PMI, and Factory Orders reports will all be brought forth. The data making its way forward today and tomorrow will continue to build in momentum leading up to Friday’s critical government Jobless numbers. The U.S. stock markets continue to be a rocket, leading investors into the realm of speculation based on the seemingly resolute belief which has somehow emerged the past month that a recovery is going to occur. It has been a tough market for traders trying to fight the current trends in the marketplace. The USD has been hit hard by the rally coming from Wall Street and though many are predicting that share prices are bound to hit obstacles, forecasting when equities will exactly tire from their climb is becoming dangerous at best. The USD is losing value on the increased amount of risk, investors have been allowing in their portfolios for the time being.

EUR:
The EUR continued a significant rally against the USD on Monday and now finds itself at high water marks not seen in months. The Retail Sales figures from Germany were published yesterday and produced a negative -1.8% compared to the favorable estimate of 0.4%. Yet traders managed to push these numbers to the side and found that the upward momentum of the bourses and EUR could not be weighed down. Quarterly reports from Europe and forecasts have been less than rosy but this has not hindered the EUR either. Today will be a quiet day of data from the European Union with only the broad PPI figures due, they are anticipated to show a result of 0.2%, and it may prove interesting to see if investors take into consideration deflationary numbers if they should show up. Tomorrow Retail Sales will be reported for Europe and like today’s release is expected to be slightly better than last month’s outcome. The EUR has traded in a positive manner based on the simple formula that the USD is finding an enormous amount of pressure due to international bourses producing vibrant gains.

GBP:
The Sterling hurtled forward in a powerful fashion again on Monday as the Manufacturing PMI report from the U.K. produced a good number. The report showed a reading of 50.8, which was substantially better than the forecast of 47.7. The PMI report coupled with the adequate gains from the FTSE bolstered the GBP and brought it into higher territory. Today the Construction PMI release is on schedule and the expected reading is 46.0, which would be an improvement over the previous report. Tomorrow a deluge of important publications are on the calendar with the Manufacturing Production, Services PMI both due and the Halifax HPI tentatively planned. The GBP has performed remarkably well the past five months and its gains the past week including yesterday have been noteworthy, yet the reasons for its gains are debatable. The U.K. continues to be mired like its counterparts in a recession and has many questions ahead of it. However the Sterling’s results cannot be argued and until the current trend reverses – if it does – has proven a solid avenue for its takers.

JPY:
The JPY keeping true to form, proved remarkably within the confines of rather consolidated trading range against the USD, actually losing some ground to the greenback. International equity markets provided some room for Asian traders to increase their risk appetite again but the story of the JPY and USD pair is one that must be taken into context that both – for the time being – are seen as safe haven currencies and while bourses continue to climb the two currencies have been left to move against each other in a rather non-descript manner.

Technical Analysis

EUR/USD:
The bullish trend made substantial movement yesterday breaching the resistance level of 1.4400 However on the 4 hour chart the Slow Stochastic is crossing at the 80 level and the RSI is at the 82 level which indicates that we are in an overbought territory and the correction is possible.

GBP/USD:
There is a bullish channel on the 4 hour chart. However this pair is now trading near the upper barrier of this channel, so there may be a slight correction before this pair makes another bullish move. It is important to note that most of the indicators on the daily chart also give a bullish signal.

USD/JPY:
This pair continues floating in a wide range between the 94.30 level to 95.46 level with no distinct direction. The pair now seems to be consolidating around the 94.60 as the volatility is beginning to increase. The RSI is floating around the 50 level and all oscillators on the 4 hour chart do not provide a clear direction as well. The preferred strategy today will be the range trading.

USD/CHF:
The bearish channel on the daily chart continues. The Slow Stochastic on the 4 hour and the daily chart indicates the continuation of the bearish movement within the channel. However the Slow Stochastic on the daily chart is showing the correction of the current bearish trend is possible.

The Wild Card
Gold:
According to the hourlies, the uptrend the commodity is going through seems to be strong. The daily chart is confirming that the upward momentum is still quite strong and that 969.00 is the next valid target. Forex traders may be able to maximize gains today by entering a long position.

 

[mercaforex]

Data Will Begin To Grow In Importance

The USD struggled on Tuesday as equities turned in slight gains and the Pending Home Sales data was better than expected. The greenback finds itself at the weak end of its ranges against both the EUR and GBP and many analysts continue to point towards investor risk appetite as the reason, taking into account the rally on Wall Street. Part of the trading impetus that has arisen, is the belief that the U.S. economy is now past the worst of the recession and that stability even if it is represented by negative data, is more encouraging than it was a few months ago. However there remain plenty of skeptics in the marketplace who do not think the current rally in equities is sustainable. Pending Home Sales produced a result of 3.6% compared to the estimate of 0.6%. Worth noting is the number from the Personal Income data which dropped by -1.3%, worse than the expected decline of -0.9%. And what this presents for us, is another case of having to decide if the glass is half full or half empty. While Pending Homes Sales improved again, the figures are coming off of a perilous drop and a negative result in Personal Income levels should not be a welcomed sight.
Today the ADP Non Farm Employment Change numbers will be published and is forecasted to be minus -351K, which would be an improvement on last month’s figure. Also the ISM Non Manufacturing release is scheduled and is estimated to have a reading of 48.1. Other reports will include Factory Orders and Crude Oil Inventories today. Tomorrow the weekly Unemployment Claims statistics are on cue and this will lead directly into Friday’s U.S. Non Farm Employment Change data which is beginning to cast a shadow on investor sentiment. We have seen the USD tumble in value the past few weeks as equities have climbed and the question is – if and when share prices from Wall Street and beyond will begin to face headwinds. The unemployment picture in the U.S. remains a critical lynchpin in order to achieve a full economic recovery, without better conditions within the U.S. work force, they will not be able to be counted on to spend their hard earned dollars as they have done in the past. The USD is at the weaker part of its range against many currencies and if some caution hits the equities markets we could see the greenback find footing.

EUR:
The EUR continued to mount an impressive run against the USD on Tuesday as it was bolstered by the growing groundswell into equities. The European Union released its PPI figures yesterday and it recorded an increase of 0.3%, barely over the expectation of 0.2%. Today the Final Services PMI and Retail Sales figures will be released for Europe. The PMI data is not expected to change and remain at 45.6, while Retail Sales are anticipated to show a slight gain. Tomorrow the ECB will be announcing their key interest and it is widely believed that there will be no change. Thus investors attention will shift to the always forthright press conference from European Central Bank President Jean Claude Trichet. The EUR has increased in value considerably the past three weeks on heightened risk appetite even as the European Union has shown that it is as vulnerable to the economic downturn as much as its counterparts. After such a swift climb it is natural to wonder if some type of doubts could arise among traders who have participated in the EUR’s trend.

GBP:
Once again the Sterling showed that it has considerable momentum against the USD. Tuesday’s trading provided a stark reminder that it remains a tough task to step in front of a trend no matter how much you doubt the markets action. The GBP has had a stellar period of returns. The Construction PMI was released from the U.K. yesterday and it produced a reading of 47.0, better than the estimate of 46.0. The Nationwide Consumer Confidence figures recorded a slight gain, coming in with a result of 60 compared to the forecast of 59. Today the U.K. will release its Manufacturing Production statistics and it is anticipated to be unchanged. Also the Services PMI survey is on cue and is expected to have a reading of 51.9, which would be a bit better than the previous result. Tomorrow the Bank of England’s MPC will release its key interest rate but no change is expected. The Sterling has produced strong results even though the U.K. is certainly within the grasp of a strong recession.

JPY:
The JPY languished within a fairly tight range against the USD. The JPY did lose some ground to the greenback but the pair remains within a considerably dense pattern. Gold did push up as the day progressed on Tuesday, climbing above 963.00 USD an ounce. Gold is trading within the higher realms of its range and it is doing so as the greenback continues to face pressure.

Technical Analysis

EUR/USD:
This pair has been floating in a tight range with no distinct direction at the last trading day. The Oscillators are relatively flat on the hourly level. However we can see on the daily chart that the Slow Stochastic shows that the bearish momentum might come.

GBP/USD:
The bullish channel on the daily chart continues. However The Slow Stochastic and the RSI on the daily chart indicate the correction of the bullish movement. Waiting for the correction and then going short appears to be the right strategy.

USD/JPY:
The Slow Stochastic on the 4 hour chart indicates the continuation of the bullish movement within the channel and will try to breach the very strong resistance at the 95.50 level. Waiting for the breach and then going long appears to be preferable.

USD/CHF:
The pair continues its bearish trend breaking the 1.0630 support level and formed a short term top cycle at 1.0610 levels on 4-hour chart. However on the daily chart the Slow Stochastic is crossing at the 17 level and the RSI is at the 17 level as well which indicates that we are in oversold territory and the correction is imminent. Waiting for the correction and then going long seems to be preferable.

The Wild Card
Gold:
The sharp bullish movement has been breached, and gold is now in the bearish corrective movement. All oscillators on the 4 hour chart are indicating that the price will make his correction. Traders have a good opportunity to enter a short position.

 

[mercaforex]

Data Will Have Investors Attention

The USD traded in a sideways pattern on Wednesday as economic data from the U.S. proved negative and the stock markets turned in mixed results. The ADP Non Farm Employment Change numbers produced a figure of minus -371K, slightly worse than the anticipated -351K. Also the ISM Non Manufacturing PMI survey proved underwhelming coming in with a reading of 46.4, which was worse than the projected 48.1. However, Factory Orders data provided a better number with an outcome of 0.4%, beating the expected minus -0.7%. Today the weekly Unemployment Claims numbers are on schedule and are estimated to come in with a statistic of 587K, which would be above last week’s result. Today’s unemployment news will serve at the precursor for tomorrow’s important Non Farm Employment Change release.
The dynamics that we are seeing unfold within the USD have been led by the trading on the equity markets the past couple of months. Today and tomorrow’s trading will follow that path but the economic data could spark a wave of fresh sentiment onto Wall Street if there are any surprises. The crux of the debate regarding the economic conditions in the U.S. have to do with the timeline regarding how long it will take the employment and housing picture to improve. Optimists have been pointing towards stabilization and noting that the downward momentum has been greatly reduced, while ‘cynics’ look at the economic data and speak about the dangers of a shrinking economy. The USD has been the recipient of pressure for nearly a month as equities have jumped in value but yesterday’s action from the likes of the Dow Jones and S&P may serve as a caution flag. Traders are likely to be a weary group as the jobless data begins to be published.

EUR:
The EUR effectively maintained its gains made in previous session yesterday but did find itself idling as traders essentially began to stand on the sidelines. The ECB will be holding their key interest rate meeting today. The European Central Bank will not change their rate today – if they did it would be a resounding shock – thus the focus will shift to President Trichet and his press conference. Investors will listen keenly to his outlook for the European economy and his insights as to how the continent is handling the downturn. Yesterday the Final Services PMI data was released for Europe and it came in just above expectations with a reading of 45.7 and Retail Sales figures produced a negative -0.2% result compared to the forecast of 0.3%. The EUR has gained well against the USD in the past month but the reasons it has done so may have to do more with speculative forces than fundamental factors. Traders will have to monitor both the ECB press conference today and the dollar centric news being generated on the other side of the Atlantic.

GBP:
In a busy day of economic data from the U.K. the Sterling managed to hold onto its gains. The Halifax HPI was finally released on Wednesday and turned in an increase of 1.1%, above the estimate of 0.7%. Both the Manufacturing Production and Services PMI data also produced better numbers than anticipated. Today the Bank of England’s MPC will release their interest rate decision and like the ECB is widely expected to leave the borrowing rates unchanged. Investors will be looking for any hints from the BoE regarding new quantitative easing policies and this could provide impetus into the GBP. The U.K. is still within the depths of a strong recession but the data released yesterday has provided more hope that a recovery may be possible, maybe not tomorrow or next month, but as the year concludes. However, there remains a long stretch of road to traverse for the economy to achieve ‘real’ growth and that will be the focal point for some analysts who believe that more action is needed from the Bank of England. Like its counterparts, the U.K. faces the question of how much money it can afford to pump into the economy without causing long term problems. The Sterling has been an outstanding currency the past five months and will go into today’s trading with many interested observers.

JPY:
Once again the JPY and USD produced a rather uninspiring day of range trading. The pair has consistently been moving within a tight band for a while, this because both currencies are viewed as ‘safe havens’ and as risk appetite has increased internationally the pair has languished. Gold maintained its rather lofty price on Wednesday staying above the 960.00 USD mark.

Technical Analysis

EUR/USD:
The pair is still floating within the bullish channel as the direction is unclear and no significant breach has been made, however both the daily and the 4 hour chart support a bearish correction. Waiting for a clearer signal before taking position will be preferable. Support level: 1.4360 Resistance level: 1.4490

GBP/USD:
On the daily chart the Slow Stochastic is crossing at the 79 level and the RSI is at the 85 level which indicates that we are in overbought territory. In addition the 4 hour chart also gives bearish signal. The preferred strategy today will be to wait for the correction and then take a short position. Support level: 1.6890 Resistance level: 1.7020

USD/JPY:
The pair has been extending its bullish movement, breaching the resistance level of 95.30. The daily chart also support the bullish trend as all the indicators are pointing up. Going long appears to be the preferable strategy. Support level: 94.50 Resistance level: 95.80

USD/CHF:
The hourlies show that the pair is in a bearish configuration as volatility is increasing, and showing bearish signals, the RSI and the slow stochastic supporting the continues of the bearish trend. Going short using the stop lost and take profit appears to be the correct strategy. Support level: 1.0590 Resistance level: 1.0720

The Wild Card
Crude Oil:
The crude oil is now floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.
Support level: 69.70 Resistance level: 72.50.

 

[mercaforex]

Has A Reversal Take Place?

A stunning day of trading took place on Friday as the USD advanced against all the major currencies on the back of a better than expected Non Farm Employment Change report. On a day that saw the greenback make strong gains, what stuck out for currency traders was the fact that equity markets turned in positive performances as well. This calls into question whether Friday was a reversal in trading sentiment. Since the collapse of Lehman’s bank last year the USD has essentially traded in an inverse manner against the results from Wall Street. After a month of solid strides in U.S. equity markets and the greenback being pushed back, a sudden turnaround took place going into the weekend. The move the USD turned in will set off alarm bells among traders who will have to be extremely attentive in the coming sessions due to this apparent divide which has emerged and the different avenues it could produce.

The Non Farm Employment Change figure turned in a number of minus -247K compared to the estimate of minus -320K. While this outcome is still negative, it does raise the volume from among the optimists who have been saying that the worst of the recession is over and that stability is beginning to take place. The Unemployment Rate was also released on Friday and it turned in a number of 9.4%, again beating the forecast of 9.6%. After trading at the weaker part of its ranges against many of the major currencies, the USD was able to make a strong push on Friday, and though it still finds itself in the midst of lower value its gains will raise the eyebrows of many investors. There will be no major economic data released from the U.S. today and tomorrow will be relatively light, however Wednesday will see the FOMC Statement and investors will attentively read over the Federal Reserve’s insight and try to decipher their outlook for economic prospects. Having enjoyed a remarkable day of trading on Friday, traders will be keen to examine the USD closely today. They will look to see how the greenback does compared to the results from the equities markets and try to decipher if Friday’s results were a one-time event or a new and important development within its trading parameters.

EUR:
The EUR continued to lose ground on Friday to the USD but it occurred under the bright glare of better than expected U.S. data. The German Industrial Production was the only economic report from Europe of consequence and it turned in an outcome of minus -0.1% compared to the forecasted gain of 0.6%. Today the French Industrial Production number is due and it carries an estimate of minus -0.1%. Also the broad Sentix Investor Confidence reading is on schedule from the European Union. Tomorrow inflation data will be brought forth from Germany. The EUR traded in a very dollar centric mode on Friday and though it did lose ground to the USD it still remains within the higher breaths of its range. One of the main traits of the EUR in the past month has been its strong correlation to increased risk appetite but Friday’s trading shows that this does not always work. The question not only becomes whether the EUR will return to this characteristic but could it actually succumb to questions about the European Union’s ability to pull itself out of a deep recession compared to its counterparts?

GBP:
The Sterling was taken lower against the USD on Friday but does remain in the upper reaches of its rather strong range. The U.K. released its PPI Input and Output data on Friday and the Input number produced a negative -1.4% against the expectation of minus -0.8%. The data raises questions about deflation in the U.K. and this problem is one that is shadowing most of the major economies currently. Today the BRC Retail Sales Monitor is on schedule and last month’s figure turned in a gain of 1.4%. Also the RICS House Price Balance numbers are anticipated and it carries an estimate of minus -9.8%, which would be a better outcome than the previous report. Tomorrow the U.K. will release its Trade Balance statistics. The GBP has had a stellar five months of trading and although it did lose some ground to the greenback on Friday it will take more than one day of trading to prove that it is suddenly going to reverse for a long duration.

JPY:
The JPY did lose significant ground to the USD on Friday in a round of very interesting trading. The JPY and USD has been in a notoriously tight range for some time now, but on Friday upon the strong gains of not only the equity markets but too the USD – the JPY seemed to lose the ability to keep its grip on what had been a consolidated range. The JPY has not gone below critical measurements against the greenback but does find itself on the weaker side of its band for the first time in a while. The JPY and USD will get plenty of attention today.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
Technical Analysis

EUR/USD:
The Bollinger Bands are tightening up on the daily chart, indicating decreased volatility. RSI and Momentum are still negatively sloped indicating further bearish movement today. Both the daily and the 4 hour chart support a bearish notion and a breach through 1.4130 will validate a larger bearish move. Support level: 1.4130 Resistance level: 1.4250

GBP/USD:
The 4 hour chart shows that the bearish channel continues with strong downward momentum as the pair now floats around 1.6630. Oscillators show that the momentum is still bearish and a breach through 1.6590 will validate a bigger bearish move. The RSI is also forming back into bearish formation and supports the general notion. Support level: 1.6590 Resistance level: 1.6720

USD/JPY:
On the one hour chart the Stochastic Slow is crossing at the 82 level and the RSI is at the 87 level which indicates that we are in overbought territory. In addition the 4 hour chart also gives bearish signal. The preferred strategy today will be a short position.
Support level: 96.50 Resistance level: 97.90

USD/CHF:
There is a very strong bullish trend developing on the 4 hour chart. This pair has now breached the very strong resistance level of 1.0790 and we expect further bullish movement. Therefore buying on dips seems to be preferred today. Support level: 1.0790 Resistance level: 1.0850

The Wild Card
Crude Oil:
Crude Oil has been dropping over the last trading day and all the indicators support further bearish movement. Forex traders will be able to maximize gains today by entering a short position before we see a correction.
Support level: 70.10 Resistance level: 71.90

 

[mercaforex]

FOMC Meeting Begins Today

The USD continued to gain against the EUR and GBP on Monday on a day without any major economic U.S. data. After Friday’s rather significant volatility, yesterday’s trading was tame and this may have to do with the two days of meetings that the FOMC will begin today in Washington. The equities markets traded in negative territory on Monday as traders seemed to be looking for a respite after the last few weeks of strong rallies, and they appear to be questioning how much more upside exist in a marketplace that still has so many economic questions. Today the U.S. will release its Prelim Non Farm Productivity report and a result of 5.2% is expected. The Preliminary Unit Labor Costs data will also be published, but do not expect these statistics to change sentiment.

Essentially after two days of gains, the USD has gotten the attention of many investors who may be scratching their heads while trying to figure out a trading correlation. The currency markets have been at the beckon call of risk appetite the past month and with little data today it seems likely that we may find a consolidated marketplace until tomorrow’s FOMC Statement from the Federal Reserve. Investors who do take positions in the USD today will have to take into consideration the direction the Fed will point to regarding interest rates. Certainly there will be no interest rate hike this week or in the foreseeable short term. The question however is whether or not the U.S. economy is actually going to start showing growth by the year’s end, and if this means that the FOMC will signal that it could then raise interest rates. And that is where the debate will be met with some skepticism, as some point to precarious high unemployment and a soft housing sector which will probably translate into weak consumer demand. The USD has shown strength the past two days of trading and while the markets are likely to be restrained today, the greenback could continue to exert pressure on the likes of the EUR and GBP.

EUR:
The EUR found itself losing ground to the USD on Monday. The French Industrial Production number was released and provided a figure of 0.3%, which was better than the estimate of minus -0.1%. Also the broad Sentix Investor Confidence reading was brought forth and turned in a reading of minus -17.0, an improvement over the forecasted result of minus -26.0. Today the German’s will publish inflationary reports with their Final CPI and it is anticipated to be negative -0.1%, which would match the previous number. Also the German WPI is on schedule and is expected to show a statistic of 0.1%. What this should continue to highlight if the data comes in as forecasted is that as much as people speak about inflationary concerns because of the large amount of money being shuttled forward by Central Banks, that it in fact the numbers from both the CPI and WPI would basically signal deflation and a flat economy. Tomorrow the European Union will release its broad Industrial Production figures. The EUR finds itself at the weaker side of a rather strong range it has enjoyed against the USD the past few weeks. After two losing sessions against the greenback some traders may find themselves wanting to test this ‘new’ trend.

GBP:
The Sterling struggled again on Monday against the USD for the second straight day of trading. The BRC Retail Sales Monitor released their figures and it showed a gain of 1.8%, which was above the previous month’s 1.4%. Also the RICS House Price Balance numbers were published and it had a decline of -8.1%, which actually bettered the estimate and beat the last figure of minus -17.6% by a wide margin. Today the U.K. will release its Trade Balance numbers, and tomorrow importantly the Bank of England will bring forth its Inflation Report and BoE Governor Mervyn King will speak. The U.K. like the U.S. sits on the threshold of positive sentiment generated among investors who feel that the economy is going to turn the corner and begin to show growth. However, there remains a legion or two of investors who continue to be more cautious with their outlooks pointing to a lack of evidence that there has been little more than stability seeping into data. The GBP has had nothing short of a strong run against the USD for many months now, but the last two days of trading loses has caused some warning bells to sound.

JPY:
The JPY gained against the USD as international equities turned in a cautious day of trading and mostly traded in negative fashion. The range of the JPY and USD remains a challenging one, based on the amount of risk appetite that traders are willing to bear among these two so called safe haven currencies. Gold found itself trading lower against the USD and finds itself trading around 946.00 USD per ounce. Traders should expect to see a rather consolidated market today, due to investors awaiting tomorrow’s critical FOMC report from the States, thus the JPY should continue to move in a rather tight trading range today.

Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst
Technical Analysis

EUR/USD:
This pair is still showing negative momentum and the Oscillators are also ngatively sloped indicating further bearish movement. The next target price will be around 1.4100 and if this level is breached then we could see some sharper bearish movement. The preferred strategy today will still be a short position.

GBP/USD:
The sharp bearish channel on the daily chart continues with no signs of a stop. The Slow Stochastic on the daily chart is showing continued bearish movement and is supported by the RSI. Going short appears to be the right strategy.

USD/JPY:
This pair lost over 60 pips yesterday and there is still very strong negative momentum. The RSI and the Momentum on the daily chart have a very sharp negative slope. The preferred strategy today will be a short position.

USD/CHF:
The bullish channel on the daily chart continues, while no significant breach has been made. The Slow Stochastic on the 4 hour chart indicates the continuation of the bullish movement within the channel. However the Slow Stochastic on the daily chart is showing the correction of the current bullish trend is possible. Going long with tight stops appears to be the preferable.

The Wild Card
Gold:
There is a strong bearish trend on the one hour chart and all the daily indicators show that this bearish move can continue. The hourlies also support further bearish movement and the next target price seems to be around 940.00. Going short appears to be the right strategy.

 

[mercaforex]

FOMC Statement Is Today’s Risk Event

As suspected it would occur, the USD traded in a rather consolidated range against all of the major currencies on Tuesday as investors appeared to be more inclined to wait for today’s FOMC Statement. The U.S. did release its Prelim Non Farm Productivity report yesterday and it showed an increase of 6.4%, which was above the estimate of 5.2%. The number highlights that employers are getting more production out of their employees who have kept their jobs after a serious round of layoffs. The U.S. stock market traded lower yesterday across the board and this once again indicates that we might be seeing some type of reversal take place within trading sentiment, this because the USD did not gain in any significant manner with the declines on Wall Street as it has done during much of this financial crisis.
Most investor eyes will be on the FOMC Statement being released by the Federal Reserve later on today. The Federal Reserve is not expected to change their key interest rate by anyone, but what the market will be looking for is insight into the expectations for the world’s largest economy. Though last week’s Non Farm Employment Change data did improve it is still showing that the U.S. is losing jobs. Also many corporations are still warning their share holders that the outlook for 2010 remains challenging. However, there are many traders who have shown that they believe that the stability that has been achieved signifies somehow that the U.S. economy may be able to pull itself out of a recession sooner rather than later. The question investors are now asking is whether the Federal Reserve will confirm the better expectation or try to dampen over exuberant optimism. The USD will probably trade in a rather cautious manner until the publication of the FOMC Statement, but traders are likely to find opportunistic movement afterwards. In the spirit of keeping its ‘team’ enthused, it is suspected that the Federal Reserve will signal that the economy is improving, will remain tough, but that better day can be expected in the mid-term.

EUR:
The EUR found itself in a considerably tight trading range on Tuesday as caution festered in the marketplace. The German’s published their Final CPI data yesterday and it came in unchanged from the previous report. Germany also published their WPI and it declined -0.5%, which was worse than the estimate. The numbers continue to point out that deflation is an actual fact on the ground and that the recession within Europe’s largest economic member remains difficult. Today the European Union will release its broad Industrial Production figures and the forecast is anticipating a rise of 0.3%. However the crux of today’s EUR trading will be very dollar centric focused as investors look for clues from the other side of the Atlantic. Tomorrow the Europeans will actually provide a strong dose of trading sentiment into the fray with the German Prelim GDP and French report of the same ilk scheduled for printing. The EUR was able to muster some support yesterday but did not manage to provide traders with much of a direction. That may change later today when the winds from across the ocean blow.

GBP:
The Sterling consolidated on Tuesday after two rather poor trading sessions. The GBP is still very much trading at the stronger side of its range but is facing two rather distinct risk events today. Having found a tranquil ground yesterday, the Sterling may find that volatility erupts again because of the Inflation Report scheduled to be read aloud in Parliament and discussed in detail by Bank of England Governor Mervyn King. Coupled with the FOMC news that will come from the States, the GBP could have an interesting day of trading. The U.K. will also be releasing its Claimant Count Change numbers. Thursday and Friday will be very quiet regarding economic data from Britain, thus traders will be quite attentive to the onslaught of economic sentiment that will be generated by government officials today.

JPY:
The JPY traded slightly stronger against the USD on Tuesday as caution prevailed among investors as international equity markets sputtered. Gold languished in trading yesterday as it hardly moved from its perch of 946.00 USD an ounce, showing that there is broad market consolidation before the FOMC results are known. The JPY and the entire marketplace is awaiting impetus from the economic events that will unfold from the U.S. later today.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis

EUR/USD:
The pair made a bearish movement breaching the resistance level of 1.4110, the Bollinger bands are tightened indicating that this pair could trade in a tight range today. However the daily chart supports the continuation of the bearish move. It seems that going short will be preferable. Support level: 1.4050 resistance level: 1.4190

GBP/USD:
The 4 hour chart show that the pair is in a bearish configuration as volatility is increasing, and showing only bearish signals. Going short with tight stops appears to be preferable. Support level: 1.6370 resistance level: 1.6530

USD/JPY:
The bearish channel on the one hour chart continues. The Slow Stochastic on the one hour chart indicates the continuation of the bearish movement within the channel. However the Slow Stochastic on the 4 hour chart is showing the correction of the current bearish trend is possible. Going short with tight stops appears to be the preferable.
Support level: 95.10 resistance level: 96.10.

USD/CHF:
The Slow Stochastic on the 4 hour chart indicates the continuation of the bullish movement within the channel and will try to breach the resistance level at 1.0870. Going long with tight stops appears to be preferable.
Support level: 1.0790 resistance level: 1.0870.

The Wild Card
Silver:
There is a very accurate bearish channel forming on the 4 chart. The daily chart also supports a bearish notion. We expect the next target price to be around the 14.00 level. Therefore the preferred strategy today will be a short position.

 

[mercaforex]

Dollar Loses As Fed Speaks

The USD lost a limited amount of ground to the EUR and GBP as Wednesday concluded. The greenback did this after the Federal Reserve released their FOMC Statement, which showed that they were going to keep their steady approach in trying to tackle what has become the biggest financial debacle in decades. On the news that the Fed said they believe the recession is bottoming and that they are projecting a limited amount of growth in the mid-term, the U.S. equity market rose. As much as the Fed fueled positive sentiment, they did try to remain cautious, saying that consumer spending has stabilized but is still very constrained. The Fed also said that the economy is likely to remain weak by normal standards for some time. Lastly while they anticipate gradual sustainable growth, they added that interest rates will remain exceptionally low for an extended period.
The U.S. will release weekly Unemployment Claim figures today and they are expected to be slightly better than the previous report. Also Retail Sales data is on schedule and is estimated to be stronger than last month’s outcome. These publications will be important because the jobless problem in the U.S. is a critical lynchpin in household spending and savings rates. American consumers are the engine that makes the U.S. and other major economies go. The level of purchasing power the average American displays has an impact on the U.S. GDP as well as those of the ‘great’ exporting nations. Tomorrow the U.S. will release CPI figures and once again this will give us insight into the level of inflation versus deflation that is exactly taking place. While some economists continue to speak about the dangers of inflation arising because of the amount of money governments are pouring into stimulus packages, there is evidence which suggests that actual demand for products is so bad that prices are struggling merely to hold their ground. The USD traded slightly weaker yesterday as the equity markets climbed. The greenback may continue to face a bit of pressure if Wall Street turns in another good day.

EUR:
The EUR gained some ground against the USD on Wednesday as it was helped by positive gains on bourses. The Industrial Production numbers from Europe were released yesterday and provided a negative -0.6% drop compared to the anticipated rise of 0.3%. Today the German and French Preliminary GDP statistics will be published. The German report is forecasted to show a decline of -0.2%, which would be an improvement over the last quarter. The French are expecting an outcome of minus -0.3%. Tomorrow the European Union will bring forth CPI data and this will feed the debate regarding the ‘real’ economy. The EUR found firmer demand yesterday against the USD and it may find that it continues to get some backing if equities repeat Wednesday’s performance.

GBP:
The Sterling found some upward movement against the USD on Wednesday. This took place in the wake of the Bank of England releasing its Inflation Report, which said that the economy remains challenging and will continue to face tests for the foreseeable future. The U.K. also released its Claimant Count Change numbers and they came in slightly better than estimated with a result of 24.9K. The Unemployment Rate numbers were brought forth too and turned in a 7.8% reading. Today and tomorrow will be light on economic data from the U.K., thus it is expected that the Sterling will trade in a rather dollar centric manner. Even as it traded lower against the greenback earlier this week, the GBP managed to hold onto the stronger side of its range, and traders may be tempted to see what kind of strength the Sterling has going into the next two trading sessions.

JPY:
The JPY lost some ground to the USD on Wednesday as international equity markets climbed after the release of the FOMC Statement. The JPY and USD continue to do battle in a very risk sensitive range and traders will need to continue to monitor the results from bourses in order to choose their positions. Gold managed to pick up some value, climbing above the 950.00 USD mark as the greenback traded lower.

Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis

SPX/USD:
What a trading range we have in this product. Support 992.4, Resistance 1018! In the meanwhile we are going to have to see if the market is able to maintain these levels. We pushed all the way to 1012 yesterday and were not able to hold it. A 7 point selling tail formed. At the moment the best trade (long term) is to stand aside until we are able to establish a new direction. On a side note, the previous dollar relationship is back in play. A weaker dollar has helped push equities higher.

CLC/USD:
Support 68.845, Resistance 72.824. Inside candle formed yesterday, however while the candle is green it does not necessarily mean that we are going higher. Today’s action should allow for a clearer direction to be found. Many are suggesting that oil is moving higher due to a weaker dollar. And yet, the chart is not showing us any serious strength. i.e.: Lower highs. Looking for a break above or below yesterday’s high and low in order to perhaps get into a trade.

GBP/USD:
Yesterday’s statement by the Bank of England was able to give a small lift to the national currency. As I suggested yesterday, I believe this to be a dead cat bounce and expect to see us trading the full range of this channel. While we may have slowed near the 1.6392 area, there is still room to explore the lower side of this range. Support and resistance stay the same within the band of the channel. 1.6744, and 1.5803, with small levels in between

USD/JPY:
Yesterday I wrote: “The strong push up in the USD, broke the steady slow decline we have been seeing in the past few weeks. However, the last couple days have seen an attempt to return to an “accepted” price band. Today’s data should tempt traders to make a substantial push in this currency pair. We have completed nearly a 62% retracement. While I do expect us to push a bit lower, I believe, that the dollar strength was just a case of too far too fast, and now that we have returned to “normalcy” another push up by the so called safe haven currency should be in the making.”
It would seem that that’s exactly how things played out yesterday. We can see that we tested the trend line, and popped right back up. While the candle is neither terribly bullish nor extremely bearish, it does suggest that while the market tried to push lower, serious buying came in. The sellers however would not allow for a sustainable push upwards and pushed for a close just above the day’s opening price. I am looking for today’s price action to allow us to get behind this pair and send it higher.