The EUR/USD fell from its three-week high yesterday, sinking downwards of 1.4340 before flattening out in today’s morning session. A technical barrier that was triggered near 1.4450 ended up pushing the pair lower yesterday and a downgrade of Greece’s bond rating by Moody’s Investor Services added insult to injury. Bearish sentiment appears to be winning out as of this morning.
USD – Yesterday’s USD Gains Erased as Traders Seek Safety
The US dollar (USD) halted its resurgence against most currencies yesterday as traders sought safety following a downgrade of Greece by Moody’s Investor Services. Positive news regarding Greece’s debt woes helped the euro (EUR) initially hold its ground against the USD’s resurgence Tuesday but yesterday’s news has pushed the pair back to 1.4350 from its 3-week high of 1.4458.
The shift into safe-haven assets like the Swiss franc (CHF) and Japanese yen (JPY) carries an ill wind for global growth assessments which have begun anticipating faster growth in the second half of 2011. Weak fundamentals out of the US and other leading economies have some analysts a bit skeptical nowadays, especially with ADP’s non-farm employment change report yesterday showing sluggishness.
Today, the United States is scheduled to release a series of significant data sets. The most impactful figure being published will be the weekly unemployment claims report, set to be released at 13:30 GMT. With a week focused on employment in the United States, this report may transfer over to recent consumer sentiment, but traders are also in a holding pattern ahead of tomorrow’s NFP report. Forex traders may be withholding funds today ahead of such important economic news as a result.
EUR – Another Greece Downgrade Sinks EUR Values
The EUR/USD fell from its three-week high yesterday, sinking downwards of 1.4340 before flattening out in today’s morning session. A technical cap that was triggered near 1.4450 ended up pushing the pair lower later in the day and a downgrade of Greece’s bond rating by Moody’s Investor Services added insult to injury.
The euro (EUR) now appears to be slumping against all of its currency rivals as traders are seeking safety in the Swiss franc (CHF) and Japanese yen (JPY).
Although the euro has been a top performer against the other major currencies lately, the ratings downgrade was a sharp blow to the recent uptick in the region’s currency values. Coupled with the poor fundamental data out of the United States, traders have taken the cue to move away from higher yields and into safety prior to tomorrow’s NFP report out of the US.
As for Thursday, the euro looks to be continuing its losses as a shift in sentiment is not likely to fully play out with an expected thin trading environment. Most of Europe will be on holiday in observance of Ascension Day, and global investors are also hesitant to invest prior to tomorrow’s NFP figure.
JPY – Japanese Yen Pares Losses as Risk Aversion Jumps
The Japanese yen, which took a sharp dive yesterday against most of the other major currencies, pared most of those losses in yesterday’s late trading sessions after Moody’s Investor Services downgraded Greece’s bond rating. Yen pairs and crosses were last seen moving in a direction favorable to the JPY as the shift in risk aversion has helped boost safe-havens like the yen and Swiss franc (CHF).
Yen traders have been weighing risk sentiment lately, attempting to decipher the direction of the economy during this news heavy week. With Friday’s Non-Farm Payrolls (NFP) ahead, much can be said about the increase in speculative shifts taking place in the market right now. Last week’s data provided a temporary bullish uptick for the island currency, but Tuesday’s news from Moody’s about reviewing Japan’s bond rating reversed much of this sentiment until yesterday’s shift in risk appetite.
Oil – Oil Prices Plummet as USD Surges vs. EUR
Oil prices pushed beyond $103 a barrel yesterday after investors viewed the recent downward correction as a natural process to help get prices in line with supply. However, a shift in risk sentiment which favored the US dollar (USD) against the euro (EUR) has helped drop commodity values after investors shifted into safer assets. The Swiss franc (CHF) and Japanese yen (JPY) are on the rise and physical assets usually would jump with heightened risk aversion, but the positive movement of the dollar asserted itself over the value of oil.
The decision point anticipated since Monday appears to have been reached yesterday morning, but technical forces appeared to have tested the recent jump and found it wanting. Whether oil traders decide to lift oil prices again will depend on manufacturing and industrial growth figures out of the major global economies. Employment also appears to be a top priority in this growth sentiment and oil traders are eyeing this week’s NFP data out of the United States to verify their revamped growth schedule for oil prices, especially with Europe on holiday today.
The pair has twice failed to establish a beachhead above 1.4450, a level that coincides with the 50% retracement of the May move lower. Resistance is found at 1.4570 from the 61.8% retracement target followed by 1.4750 from the late April and early May lows. A breach here would target the May high at 1.4940. 1.4250 should serve as the initial support level followed by 1.4140 from the rising support line off of the May low and the 100-day moving average at 1.4060.
After a failure to close above the 1.6515 resistance level the pair declined sharply and found support near the 50-day moving average at 1.6325. A break below 1.6300 would perhaps then test the rising trend line off of the May 2010 low at 1.6140. Below the trend line the March low at 1.5935 comes into play.
The yen’s rally failed to breach the 82.25 resistance as well as the 100-day moving average before the pair turned sharply lower while making a significant close below the rising trend line from the May low. Falling daily stochastics point to further declines in the pair. Therefore traders may look to be short on the USD/JPY with initial support at 80.70 and 80.35, followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10. A move to the upside and the pair may encounter initial resistance at the previous trend line which comes in at 81.95, followed by 82.25, and retracement targets from the April to May move at 82.50 and 83.25.
In almost textbook like fashion, the USD/CHF rose as high as 0.8890, a level that coincides with the trend line off of the February high only to encounter resistance and plummet, ending the week at a new all-time low at 0.8464. This level should serve as initial support for the USD/CHF, followed by 0.8400. A retracement back to the falling trend line would offer traders better levels at which to enter the trend with a stop above one of the resistance levels near 0.8890 and 0.8945.
The Wild Card
Gold prices continue to rally as the technicals point to further potential gains with the Momentum-14 indicator rising sharply higher. Forex traders may want to be long on spot gold with an initial target at the all-time high of $1,577 with a protective stop below the support level at $1,514.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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