By Mercaforex
Rather strong range trading took place on Monday within the USD and other major currencies. Traders essentially found a marketplace in which fair value is being fought for as investors are largely bogged down debating the merits of the international economy. On the one year anniversary of the Lehman debacle a real discrepancy exists regarding the overall health of financial system. Bulls and Bears have a divergent viewpoint about the direction of the mid-term and long-term. While debate has always been a critical part of the marketplace helping create a solid amount of speculation, what has taken place the past year has put investors in a rather difficult mode. President Obama did speak in front of a Wall Street audience yesterday and talked about the need for regulation, while saying he believed the markets are returning to normalcy but warned against complacency.
The U.S. will release its Retail Sales figures today and this may provide a rather interesting twist for investors. The expected outcome for Retail Sales is a gain of 1.9%. It has been said that last month’s ‘cash for clunkers’ auto sales program led by the government will be one of the key elements in a good Retail showing. Also on the calendar in the U.S. is the Empire State Manufacturing Index and a reading of 14.7 is expected, which would be an improvement compared to the previous month. Tomorrow the CPI data and the TIC Long-Term Purchases numbers will be brought forth. Equity markets yesterday continued to move in a rather undetermined manner, meaning that consolidated trading still has a rather stern grip on the S&P and the Dow Jones, how long this is going to continue is the million dollar question as Bulls and Bears seem to be colliding. The USD appears to be within the grasp of a market that seems ready to move, until then we may see range trading rule the day.
EUR:
The EUR started Monday off on a weaker note, but as the day continued found itself at its highs against the USD. The European Industrial Production figure was released yesterday and produced a number of minus -0.3% meeting expectations head on. Also the broad Employment Change statistics showed a change of minus -0.5%, which was a slight improvement on the previous report. Today the German ZEW Economic Sentiment readings will be published and is anticipated to be 59.9, which would be better than last month’s outcome. The broad ZEW Economic Sentiment data for the European Union will also come and is expected to show an improvement too. Tomorrow CPI releases are on schedule. The EUR has certainly held onto its gains made the last two weeks of trading against the USD. The questions that traders are asking, center themselves on the dynamics for this display of strength by the EUR. The results from the German ZEW Economic Sentiment readings today could provide the EUR with additional short term impetus.
GBP:
The Sterling climbed higher as the trading day ended against the USD. The RICS House Price Balance figures provided a good result with a gain of 10.7% versus the forecast of minus -0.1%. This news was greeted well, but in a quiet manner. House prices are showing stability it appears in the U.K. and the question now is if they can manage to show a real improvement or merely bounce along the bottom. Inflation data is on the calendar from the U.K. today with the CPI and RPI releases. The Inflation Report Hearings will be held in Parliament via the Bank of England members providing their sentiment on the economy too. The GBP has performed well for nearly two weeks coming off of its lows against the USD in a confident manner.
JPY:
The JPY provided traders with a narrow trading day as the currency matched the rather laggard performances of international equities markets. Having said this it should be noted that the JPY remains entrenched at the high end of its range against the USD and has shown little in the way of giving back its gains. Gold bounced around the 1000.00 USD mark again on Monday.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
Market Strength, Regardless of Economic Data?
SPX/USD:
I have been repeating myself recently saying “the trend is your friend” but you can’t fight the fact that even though we started off the day weaker buying came in and we were able to test the and close above the previous day’s high. There seems to be serious strength in this market. At the moment I continue to suggest going long this market. Some data will come out in the United States today, but the way things have been going, in terms of pushing down the equity market, there could very probably be little or no effect. True Resistance is going to be at 1049.7, 1072.9, 1106.4, and 1169.3. At any point on the way there I would hope to see some consolidation and that will allow me to gauge the market strength and direction. Support will be 1023.1, 1018, 1001.7
XAU/USD:
Gold continues to trade between 1011.85 and 982.40. As the American dollar pushes higher after a weak start this morning, this precious metal is showing us the strength of its relationship with the greenback. Trades will need to get used to seeing larger moves in XAU/USD as 10-15$ are becoming the norm. Yesterdays buying tail is not enough to justify great strength in this market, so we will continue to trade this uptrend with caution, and a hopeful bias to the downside! Support 990.2, 988.25 followed by 982.4, 971.75, 967. Resistance 1006.2, 1011.85 1032.3
GBP/USD:
Today’s 5 minute chart is an example of negative data can affect a currency. However, as a trader, it can be very difficult to get into this trade as the too far too fast idea comes into play. Once we broke support of 1.6595 we just flow down to the lower 1.65 area. If you were unable to get into this trade when the collapse began, you would want to play this trade cautiously and wait for the least risky time to re-enter the market. That would be once we saw some consolidation (smaller candles with similar highs and lows). At this point we can try and judge whether or not the market is still weak, or have found a bottom. I think it’s still weak. Looking for a sell with little risk, before it breaks support of 1.6489. Something around the 1.65 area.
EUR/USD:
On the four hour chart we can see how the Euro tried to push back up towards resistance of 1.4651failed and began to show some declines. At the moment we have come back some and are holding 1.46. We will be watching the dollar closely in order to see how this market reacts. After the negative GBP data, we did see some weakness in the Euro zone currency but nothing significant. This pop off of support suggests traders may see further weakness in the USD throughout the course of the trading day. If we break above and hold1.4611, 1.4615 I think we will continue back towards the 1.47 area. Support 1.4577, 1.4518, 1.4449, 1.4327, 1.4188
Rather strong range trading took place on Monday within the USD and other major currencies. Traders essentially found a marketplace in which fair value is being fought for as investors are largely bogged down debating the merits of the international economy. On the one year anniversary of the Lehman debacle a real discrepancy exists regarding the overall health of financial system. Bulls and Bears have a divergent viewpoint about the direction of the mid-term and long-term. While debate has always been a critical part of the marketplace helping create a solid amount of speculation, what has taken place the past year has put investors in a rather difficult mode. President Obama did speak in front of a Wall Street audience yesterday and talked about the need for regulation, while saying he believed the markets are returning to normalcy but warned against complacency.
The U.S. will release its Retail Sales figures today and this may provide a rather interesting twist for investors. The expected outcome for Retail Sales is a gain of 1.9%. It has been said that last month’s ‘cash for clunkers’ auto sales program led by the government will be one of the key elements in a good Retail showing. Also on the calendar in the U.S. is the Empire State Manufacturing Index and a reading of 14.7 is expected, which would be an improvement compared to the previous month. Tomorrow the CPI data and the TIC Long-Term Purchases numbers will be brought forth. Equity markets yesterday continued to move in a rather undetermined manner, meaning that consolidated trading still has a rather stern grip on the S&P and the Dow Jones, how long this is going to continue is the million dollar question as Bulls and Bears seem to be colliding. The USD appears to be within the grasp of a market that seems ready to move, until then we may see range trading rule the day.
EUR:
The EUR started Monday off on a weaker note, but as the day continued found itself at its highs against the USD. The European Industrial Production figure was released yesterday and produced a number of minus -0.3% meeting expectations head on. Also the broad Employment Change statistics showed a change of minus -0.5%, which was a slight improvement on the previous report. Today the German ZEW Economic Sentiment readings will be published and is anticipated to be 59.9, which would be better than last month’s outcome. The broad ZEW Economic Sentiment data for the European Union will also come and is expected to show an improvement too. Tomorrow CPI releases are on schedule. The EUR has certainly held onto its gains made the last two weeks of trading against the USD. The questions that traders are asking, center themselves on the dynamics for this display of strength by the EUR. The results from the German ZEW Economic Sentiment readings today could provide the EUR with additional short term impetus.
GBP:
The Sterling climbed higher as the trading day ended against the USD. The RICS House Price Balance figures provided a good result with a gain of 10.7% versus the forecast of minus -0.1%. This news was greeted well, but in a quiet manner. House prices are showing stability it appears in the U.K. and the question now is if they can manage to show a real improvement or merely bounce along the bottom. Inflation data is on the calendar from the U.K. today with the CPI and RPI releases. The Inflation Report Hearings will be held in Parliament via the Bank of England members providing their sentiment on the economy too. The GBP has performed well for nearly two weeks coming off of its lows against the USD in a confident manner.
JPY:
The JPY provided traders with a narrow trading day as the currency matched the rather laggard performances of international equities markets. Having said this it should be noted that the JPY remains entrenched at the high end of its range against the USD and has shown little in the way of giving back its gains. Gold bounced around the 1000.00 USD mark again on Monday.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst
Market Strength, Regardless of Economic Data?
SPX/USD:
I have been repeating myself recently saying “the trend is your friend” but you can’t fight the fact that even though we started off the day weaker buying came in and we were able to test the and close above the previous day’s high. There seems to be serious strength in this market. At the moment I continue to suggest going long this market. Some data will come out in the United States today, but the way things have been going, in terms of pushing down the equity market, there could very probably be little or no effect. True Resistance is going to be at 1049.7, 1072.9, 1106.4, and 1169.3. At any point on the way there I would hope to see some consolidation and that will allow me to gauge the market strength and direction. Support will be 1023.1, 1018, 1001.7
XAU/USD:
Gold continues to trade between 1011.85 and 982.40. As the American dollar pushes higher after a weak start this morning, this precious metal is showing us the strength of its relationship with the greenback. Trades will need to get used to seeing larger moves in XAU/USD as 10-15$ are becoming the norm. Yesterdays buying tail is not enough to justify great strength in this market, so we will continue to trade this uptrend with caution, and a hopeful bias to the downside! Support 990.2, 988.25 followed by 982.4, 971.75, 967. Resistance 1006.2, 1011.85 1032.3
GBP/USD:
Today’s 5 minute chart is an example of negative data can affect a currency. However, as a trader, it can be very difficult to get into this trade as the too far too fast idea comes into play. Once we broke support of 1.6595 we just flow down to the lower 1.65 area. If you were unable to get into this trade when the collapse began, you would want to play this trade cautiously and wait for the least risky time to re-enter the market. That would be once we saw some consolidation (smaller candles with similar highs and lows). At this point we can try and judge whether or not the market is still weak, or have found a bottom. I think it’s still weak. Looking for a sell with little risk, before it breaks support of 1.6489. Something around the 1.65 area.
EUR/USD:
On the four hour chart we can see how the Euro tried to push back up towards resistance of 1.4651failed and began to show some declines. At the moment we have come back some and are holding 1.46. We will be watching the dollar closely in order to see how this market reacts. After the negative GBP data, we did see some weakness in the Euro zone currency but nothing significant. This pop off of support suggests traders may see further weakness in the USD throughout the course of the trading day. If we break above and hold1.4611, 1.4615 I think we will continue back towards the 1.47 area. Support 1.4577, 1.4518, 1.4449, 1.4327, 1.4188