By Mercaforex
The USD gained against most of the major currencies on Monday except for the JPY. On a day of little economic data from the U.S., equity markets took center stage and fell considerably, thus helping the greenback’s status as a safe haven. Existing Home Sales data will be released today and is expected to produce a figure of 4.82 million compared to the previous number of 4.68. While this may turn out to be a better number than before, what must be taken into consideration is that Americans are turning to cheaper houses and taking advantage of the amount of foreclosures on the market. The mood on Wall Street mirrored the cracks that are emerging in the armor of official statements that have been trying to convey a positive economic outlook. In essence, what we have begun to see are the realities of weaker revenues from corporations and their tendency to issue downgrades taking a toll on prospects.
Tomorrow will be a potentially huge day of publications. Core Durable Goods, New Home Sales, and the FOMC Statement from the Fed are on schedule. The combination of poor sentiment that has risen to the surface and the upcoming reports could provide a potent mixture. The White House admitted last night that U.S. Unemployment is expected to reach 10% in the coming months and this news will have to be managed carefully by the Obama administration. Jobs and housing remain critical factors in the economy and directly affect consumers. There are many questions that have created an overhang of doubt regarding the chances for real growth. President Obama may find that it becomes increasingly hard to spend U.S. taxpayer money if tangible results cannot be verified within the coming months. The USD has taken another step into the spot light and investors who are weary may find the greenback a familiar friend.
EUR:
The EUR lost additional ground to the USD on a day when negative returns on bourses took hold. While the German Ifo Business Climate survey did come in slightly better than expected with a number of 85.9 compared to the forecast of 85.1, the EUR turned in uninspiring results. Today a parade of PMI data will be forthcoming from Europe. Both the German and French Flash Services and Manufacturing readings will be issued. The figures are expected to provide slightly positive feedback but again investors will ask if these numbers can be looked at with anything but a skeptical glance. ECB member Ewald Nowotny was quoted yesterday as saying that the European Central Bank’s interest rates would remain low well into 2010. Also getting into the act was ECB President Trichet warning that governments have little room for more debt. Additionally Europe, like its counterparts, is clearly within the grasp of a recession that is producing poor revenues for a broad range of its corporations and growth outlooks have been diminished. While the EUR was able to make a climb in value in conjunction with the better results in international equities markets since March, it appears that the currency could find itself in for a tough road if bourses retrace and concerns about the European financial system linger.
GBP:
The Sterling did find itself under pressure on Monday and was not able to withstand the strength of the USD. There was no major economic data from the U.K. on Monday but the BBA Mortgage Approval figures are on cue today. Tomorrow BoE Governor Mervyn King is scheduled to speak and Inflation Hearings will take place. GBP investors like others will continue to look at housing data and corporate revenues with concern. Inflation continues to take a back seat to deflationary risk. The long term prospects of the U.K. government being able to cope with the amount of debt that they have saddled themselves with has the ability to become a cautionary tale. Having created a broad amount of stability the past few months the GBP still finds itself within the stronger side of its range against the USD but yesterday’s Sterling weakness will be monitored by investors closely.
JPY:
The JPY gained in strength against the USD as the Nikkei traded significantly lower and some Japanese corporations reiterated their stark warnings about growth. Risk adverse traders have come to the fore in the JPY. Gold slid in trading yesterday on the renewed strength of the greenback and finished the day around 917.00 USD and it should be noted that a broad range of commodities went lower too, including Crude Oil. With equity markets showing a large amount of strain, including the Nikkei, JPY investors are sure to be a cautious bunch.
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 4 hour chart support a bearish notion and a breach through 1.3790 will validate a larger bearish move. Therefore the preferred strategy today will still be a short position.
GBP/USD:
The 4 hour chart shows that the bearish channel continues with strong downward momentum as the pair now floats around 1.6300. Oscillators show that the momentum is still bearish and a breach through 1.6190 will validate a bigger bearish move into the 1.6110 levels. The RSI is also forming back into bearish formation and supports the general notion. The preferred strategy today may be a short position.
USD/JPY:
On the 4 hour chart the Oscillators are beginning to slope negatively indicating a possible correction. In addition the Slow Stochastic on the daily chart is crossed at the 23 mark indicating that we are in oversold territory. However the other key indicators give a mixed signal so the preferred strategy today will be trading in a range.
USD/CAD:
There is a very strong bullish trend developing on the 4 hour chart. This pair has now breached the very strong resistance level of 1.1500 and we expect further bullish movement. Therefore the long position is preferable.
The Wild Card
Gold
According to the hourlies, the downtrend the gold is going through seems to be very strong and the daily chart validates that there is still room to run. The daily chart is confirming that the downward momentum is still quite strong and that 897.00 is the next valid target. Forex traders may be able to maximize gains today by entering a short position.
The USD gained against most of the major currencies on Monday except for the JPY. On a day of little economic data from the U.S., equity markets took center stage and fell considerably, thus helping the greenback’s status as a safe haven. Existing Home Sales data will be released today and is expected to produce a figure of 4.82 million compared to the previous number of 4.68. While this may turn out to be a better number than before, what must be taken into consideration is that Americans are turning to cheaper houses and taking advantage of the amount of foreclosures on the market. The mood on Wall Street mirrored the cracks that are emerging in the armor of official statements that have been trying to convey a positive economic outlook. In essence, what we have begun to see are the realities of weaker revenues from corporations and their tendency to issue downgrades taking a toll on prospects.
Tomorrow will be a potentially huge day of publications. Core Durable Goods, New Home Sales, and the FOMC Statement from the Fed are on schedule. The combination of poor sentiment that has risen to the surface and the upcoming reports could provide a potent mixture. The White House admitted last night that U.S. Unemployment is expected to reach 10% in the coming months and this news will have to be managed carefully by the Obama administration. Jobs and housing remain critical factors in the economy and directly affect consumers. There are many questions that have created an overhang of doubt regarding the chances for real growth. President Obama may find that it becomes increasingly hard to spend U.S. taxpayer money if tangible results cannot be verified within the coming months. The USD has taken another step into the spot light and investors who are weary may find the greenback a familiar friend.
EUR:
The EUR lost additional ground to the USD on a day when negative returns on bourses took hold. While the German Ifo Business Climate survey did come in slightly better than expected with a number of 85.9 compared to the forecast of 85.1, the EUR turned in uninspiring results. Today a parade of PMI data will be forthcoming from Europe. Both the German and French Flash Services and Manufacturing readings will be issued. The figures are expected to provide slightly positive feedback but again investors will ask if these numbers can be looked at with anything but a skeptical glance. ECB member Ewald Nowotny was quoted yesterday as saying that the European Central Bank’s interest rates would remain low well into 2010. Also getting into the act was ECB President Trichet warning that governments have little room for more debt. Additionally Europe, like its counterparts, is clearly within the grasp of a recession that is producing poor revenues for a broad range of its corporations and growth outlooks have been diminished. While the EUR was able to make a climb in value in conjunction with the better results in international equities markets since March, it appears that the currency could find itself in for a tough road if bourses retrace and concerns about the European financial system linger.
GBP:
The Sterling did find itself under pressure on Monday and was not able to withstand the strength of the USD. There was no major economic data from the U.K. on Monday but the BBA Mortgage Approval figures are on cue today. Tomorrow BoE Governor Mervyn King is scheduled to speak and Inflation Hearings will take place. GBP investors like others will continue to look at housing data and corporate revenues with concern. Inflation continues to take a back seat to deflationary risk. The long term prospects of the U.K. government being able to cope with the amount of debt that they have saddled themselves with has the ability to become a cautionary tale. Having created a broad amount of stability the past few months the GBP still finds itself within the stronger side of its range against the USD but yesterday’s Sterling weakness will be monitored by investors closely.
JPY:
The JPY gained in strength against the USD as the Nikkei traded significantly lower and some Japanese corporations reiterated their stark warnings about growth. Risk adverse traders have come to the fore in the JPY. Gold slid in trading yesterday on the renewed strength of the greenback and finished the day around 917.00 USD and it should be noted that a broad range of commodities went lower too, including Crude Oil. With equity markets showing a large amount of strain, including the Nikkei, JPY investors are sure to be a cautious bunch.
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 4 hour chart support a bearish notion and a breach through 1.3790 will validate a larger bearish move. Therefore the preferred strategy today will still be a short position.
GBP/USD:
The 4 hour chart shows that the bearish channel continues with strong downward momentum as the pair now floats around 1.6300. Oscillators show that the momentum is still bearish and a breach through 1.6190 will validate a bigger bearish move into the 1.6110 levels. The RSI is also forming back into bearish formation and supports the general notion. The preferred strategy today may be a short position.
USD/JPY:
On the 4 hour chart the Oscillators are beginning to slope negatively indicating a possible correction. In addition the Slow Stochastic on the daily chart is crossed at the 23 mark indicating that we are in oversold territory. However the other key indicators give a mixed signal so the preferred strategy today will be trading in a range.
USD/CAD:
There is a very strong bullish trend developing on the 4 hour chart. This pair has now breached the very strong resistance level of 1.1500 and we expect further bullish movement. Therefore the long position is preferable.
The Wild Card
Gold
According to the hourlies, the downtrend the gold is going through seems to be very strong and the daily chart validates that there is still room to run. The daily chart is confirming that the downward momentum is still quite strong and that 897.00 is the next valid target. Forex traders may be able to maximize gains today by entering a short position.