German and French Flash Data on Tap Today
Today's publications are set to be euro-heavy. Liquidity will likely be higher in today's early trading as several European events are being published in rapid succession. Most significant will be the publication of France and Germany's flash figures on services and manufacturing.
USD – US Dollar Expecting Climb Ahead of Busy Week
The US dollar (USD) may be seen trading mildly bullish Monday morning if traders see the global stock market persist in its decline. Although the value of US credit was downgraded, investors have little place else to move their troubled assets outside of US Treasuries. The downturn in the stock market last week has played into the strength of the US economy: its traditional store of value.
Though analysts view the downgrade as overall bearish for the USD, a sharp downturn was held in check by a continued purchase of bonds by European investors. Similar declines and ratings downgrades of several European peripheral nations have made the USD and gold all the more attractive as valued safe-havens.
As for this week, the US economic releases will focus mostly on housing, GDP, and manufacturing. Today's publications, however, are euro-heavy. Liquidity will likely be higher in today's early trading as several European events are being published in rapid succession. French and German liquidity will be heightened, and Canada will contribute to today's movements with its retail sales reports. Traders will want to pay close attention to today's euro zone data.
EUR – EUR Mixed as Periphery Struggles with Debt
The euro (EUR) was seen trading with mixed results this morning following pessimistic reports on euro zone debt woes. Against the US dollar (USD) the euro was trading somewhat bearish in early morning hours Monday as the greenback moved upward against all currency rivals. The euro, however, does not appear in a position to capitalize on the gains being seen elsewhere; its structural weaknesses are gouging its value worldwide.
Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment, due to the S&P downgrade, has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY's gains.
Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today's data persists negative, the EUR is likely to take another hit.
JPY – JPY Bullish as Speculators Anticipate BOJ Intervention
The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven continues to push its value bullish. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.
The latest moves of the JPY are causing some concerns, however, as many speculators are anticipating another round of intervention by the Bank of Japan (BOJ). A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan's current financial model.
Gold – Gold Price Increasing Monday Morning
The price of Gold found support over the past week amid the plummeting strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from the euro zone's periphery and a recent downgrade of US debt by S&P's ratings agency.
As investors seek safety, the value of gold, which has been seen trading with mixed results, is expected to rise, but a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week's uncertain environment is expected to assist the sentiment favoring gold. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value.
The push to 1.4500 found willing offers and the falling resistance line from the May high has kept the pair trading in a relatively defined 500 pip range since late-July. This scenario could change this week as the pair encroaches on the bottom of a triangle pattern that runs underneath the July and August lows at 1.4190. A move below this trading range is favored as both daily and monthly stochastics are declining. A break here could test the rising trend line from May 2010 and may have long term technical ramifications. To the upside last week's high of 1.4515 will serve as initial resistance followed by 1.4700.
Following a failure to move below its 200-day moving average Cable has underwent an impressive run to the 1.66 level. However, three failed attempts to close above the 1.6540 level points to sterling weakness. The pair also looks to be oversold as daily, weekly, and monthly stochastics are all turning lower. An initial move lower could run into support at the 20-day moving average at 1.6370 followed by the August 11th low at 1.6110. A deeper move could test the July low at 1.5780. Should the momentum continue to the upside initial resistance is found at 1.6580 with the most likely target at the April high of 1.6750.
Last week the pair briefly moved below the March low and the 76 yen level but the dollar was quickly bid and the daily candlestick formed a doji. While often a sign of an impending reversal a doji by itself is not enough to change the technical picture. Bias remains to the downside and a close below 76 would signal further declines in the pair. A lack of support on the long term charts makes it problematic to forecast a target but the big round number of 70 yen stands out. Should the doji pattern hold and a reversal ensue; the pair will encounter plenty of selling opportunities with the most likely of entry points found at 78.50, 79.50, and 80.20.
A rebound in the pair made it as high as 0.8015, just above the 50% retracement level from the May to August move. This move looks like it may have more room to run as weekly and monthly stochastics are rolling higher. Additional resistance comes in at the falling trend line from the February high at 0.8150. A break here would target the 61% Fibonacci retracement at 0.8220. However, traders should remember the long term trend is to the downside and support is found at 0.7800 followed by 0.7550.
The Wild Card
Recent consolidation in the pair has formed a falling wedge pattern. Based on the chart pattern the bias is for a breakout higher. Initial resistance is found between 111.00-15 and a move above here has a convenient target at114.15 from the trend line off of the April high which coincides with the post intervention high. forex traders can place a protective stop at 110.15 inside the wedge pattern to protect against a false breakout to give a profit to loss ratio of roughly 3:1.
Article Source: German and French Flash Data on Tap Today