Yesterday’s bullish retail sales and PPI figures out of the American economy, alongside solid growth figures in British CPI and RPI data, have so far helped to lift the value of riskier assets as investors seek higher growth in their portfolios. The EUR, GBP, and AUD were each appreciating against the US dollar throughout Tuesday’s session, with mild downturns coming towards the day’s closing. Continuation of this trend is being wagered ahead of today’s heavy news day.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend |  |
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| Resistance | 1.4676 | 1.6560 | 81.47 | 0.8638 | 1.0948 | 0.8934 |
| 1.4556 | 1.6474 | 80.93 | 0.8528 | 1.0802 | 0.8874 | |
| 1.4498 | 1.6421 | 80.70 | 0.8490 | 1.0742 | 0.8847 | |
| Support | 1.4378 | 1.6335 | 80.16 | 0.8380 | 1.0594 | 0.8788 |
| 1.4318 | 1.6302 | 79.84 | 0.8309 | 1.0508 | 0.8756 | |
| 1.4199 | 1.6216 | 79.30 | 0.8199 | 1.0361 | 0.8697 |
Economic News
USD – USD Bearish as Traders Seek Risk
The US dollar was seen in decline in trading yesterday for the second consecutive day as traders began to seek risk following several bullish economic data releases. The EUR/USD was seen moving towards 1.45 yesterday before settling mildly below this mark. The GBP/USD was also in a bullish channel, but witnessed a stronger downtick later in the session than its euro zone counterpart.
Yesterday’s bullish retail sales and PPI figures out of the American economy have so far helped to lift the value of riskier assets as investors seek higher growth in their portfolios. The EUR, GBP, and AUD were each appreciating against the US dollar throughout Tuesday’s session, with mild downturns coming towards the day’s closing.
With another heavy news day expected, traders are sure to see heightened volatility. Most significantly, the US economy will be publishing its CPI reading as well as its TIC Long-Term Purchases report. Expectations are for a near-doubling of the investment differential, with global investment flows favoring the US economy. Should the long-term purchases report disappoint, traders may see some upward movement in the USD as investors shift back to safety.
GBP – British Employment Sector under Review Today
The British pound (GBP) was seen trading higher yesterday following news of stable growth in the island economy’s CPI and RPI inflationary reports. The UK Office for National Statistics is also due to release several more significant data reports today; most impactful will be the 9:30 GMT publication of the UK’s Claimant Count Change report alongside its quarterly reading of the Average Earnings Index.
While the pound was seen flattening out against the EUR yesterday, it appears to have moved mildly higher against the greenback and continues to see sideways price action versus the Japanese yen.
Today’s employment sector data will help many forex investors get a feel for how well the structural challenges in the UK labor market have been addressed. The report published earlier this week by the Confederation of British Industry (CBI) highlighted expectations for a continued rise in unemployment through 2011, but today’s Claimant Count Change report is scheduled to reveal a slowdown in claims for unemployment benefits. The conflicting data may help the GBP in the short-term, but the overall trend appears to be for an eventual turnaround in sterling values.
JPY – Japanese Yen Bearish as Investors Seek Higher Yields
The Japanese yen was seen trading lower against most of its currency rivals yesterday as investors moved towards higher yielding assets in Europe and the Pacific. Japan’s economy has published several positive figures over the last week, much of which has helped establish the yen’s recent bullishness. With yesterday’s rate statement affecting JPY values, traders are likely to see heightened volatility as the day moves ahead.
While the yen suffers from its own economic concerns, shifts in consumer sentiment have helped lift yen values against a number of its rivals. This trend was cut short yesterday, however, as investors took cues from bullish inflationary reports out of the US and UK to mean that riskier assets may see an uptick. The yen, which traditionally acts as a store of value during times of uncertainty, was seen taking a hit yesterday as investors largely moved away from the island currency and into higher yielding assets like the EUR and AUD.
Oil – Crude Oil Prices Halt Decline as USD Falters
Crude Oil prices dropped sharply towards $97 a barrel Monday as sentiment appeared to favor a downturn in global industry and expectations for unilateral action among members of OPEC. The sudden halt to this downward movement came as a result of several forces Tuesday.
Data releases out of China, Britain and the US yesterday were driving many investors back into higher yielding assets as most reports suggested steady growth in global inflation and consumer spending. As investors sought higher yields, the value of crude oil, which was seen plummeting Monday, held steady just above $97 a barrel.
Faltering dollar values have helped many investors pause on their short-taking positions on physical assets. Crude Oil witnessed a mild uptick in yesterday’s late sessions while Gold and Silver began to largely see sideways movement. Should sentiment hold steady this week, oil prices may continue to find weak support near its current price.
Technical News
EUR/USD
A three week rally was met with a failure of the pair to breach 1.4700, a level not far from the previous trend line which opened the door for a significant pullback that retraced 50% of the late May to early June gains. The week’s declines ended at the 20-day moving average at 1.4330 and will serve as initial support. Falling daily stochastics suggest the move lower may have scope to continue where the pair may find resistance at 1.4250, a level that coincides with the 61% retracement and the rising trend line from the May low. A breach here and the pair will test the 100-day moving average followed by the May low at 1.3970. To the upside, resistance will likely come in 1.4570 followed by 1.4700.
GBP/USD
The weekly candlestick suggests further declines may be in store as last week’s candlestick ended on a shaven bottom, indicating momentum is moving to the downside. A confirmation will be needed from this week’s trade to confirm the bearish pattern. In the meanwhile the move lower finished at the 38% retracement level of the December to April move and is quickly approaching the trend line off the May 2010 low at 1.6180. The pair could receive a bounce from this level, as was the case in late May. Resistance is located at 1.6400 and 1.6460, and 1.6550. Should the pair not receive a bounce at the trend line declines could mount to 1.6060 and the April low at 1.5935.
USD/JPY
The yen was relatively unchanged from the previous week after an attempt to breach below the 80 yen level was only briefly successful before the pair was bid higher. While most oscillators remain in neutral territory, the pair continues to trade lower with resistance at the falling trend line from April high which comes in near the 20-day moving average at 81.00. This level may offer traders a better price to enter short. Further resistance is located at 81.75 from the May 31st high followed by 82.25 of the May 19th high. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.
USD/CHF
The pair is testing a short term resistance level at 0.8450 and a breach here would expose the resistance at 0.8855 which lies just below the 20-day moving average. A rise to this price may offer traders better levels at which to enter short. Above these levels rests the falling trend line from the mid-February high which comes in at 0.8720. Support is found at the all-time low at 0.8325.
The Wild Card
EUR/SEK
After a surprising breakout higher from a triangle chart pattern on the daily chart the EUR/SEK has retraced 61.8% of its late November to early March downtrend at 9.1500. A move above this level would indicate a reversal of the long term downtrend and a test of the early December resistance at 9.1700. Forex traders may want to be long as from this point a lack of resistance is found on the daily chart and thus the euro could continue to gain on the Swedish krona to the November high of 9.4275 in the mid-term.
Written by Forexyard.com