By Mercaforex
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
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