Monday, June 20, 2011

EUR Holds Gains as Investors Bet on Greece Bailout

The euro zone will be publishing its reports on consumer confidence today; most predominant will be the ZEW readings. Many investors are turning their attention on the euro zone regional economy after yesterday’s faltering debt discussion met resistance. Most speculative traders appear to be betting on a last minute deal being thrown together this week to save Greece, and the EUR will benefit from the shift in risk appetite that results.

Economic News 


USD Bearish as Traders Seek Risk

The US dollar was seen in decline in trading yesterday as traders began to seek risk following speculation that the euro zone would put together an eleventh-hour deal to bailout Greece.

The EUR/USD was seen moving towards 1.43 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 stagnant German PPI figures have so far done little to help lift the value of riskier assets, but other news surrounding Greece’s bailout has held the international spot light. The EUR, GBP, and AUD were each appreciating against the US dollar throughout the latter half of Monday’s session, with mild downturns coming towards the day’s closing.

With a heavy news day expected, traders are sure to see heightened volatility. Most significantly, the US economy will be publishing its Existing Home Sales report. Expectations are for solid growth of approximately 4.8M housing sales. The USD could see some bullishness if the data surprises to the upside.


EUR Bullish as Investors Move into Riskier Assets

The euro rose versus the US dollar this morning, with the pair’s price reaching a recent high near 1.4300. Soft data out of the American economy last week forced a reevaluation by many investors who went long on the USD following the European Central Bank’s (ECB) cloudy rate statement from over a month back, and several grumblings about Greece’s debt woes.

What little data was published out of the euro zone yesterday highlighted stagnant growth. The difference in fundamental data from the US and Europe has generated a heightened intrigue in the comparative interest rates as risk sentiment gets shifted. Fed Chairman Bernanke’s statements yesterday have many investors turning to the higher yielding economies of Europe in expectation of record low interest rates in the US for longer than was initially forecast.

As for today, the euro zone will be publishing its reports on consumer confidence; most predominant will be the ZEW readings. Most investors are turning their attention on the euro zone regional economy after yesterday’s faltering debt discussion met resistance. Most speculative traders appear to be betting on a last minute deal being thrown together this week to save Greece and the EUR will benefit from the shift in risk appetite that results.


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.

Crude Oil

Crude Oil Prices Continue Decline

Crude Oil prices dropped sharply towards $92 a barrel Monday as sentiment appeared to favor a downturn in global industry and expectations for unilateral action among members of OPEC.
Data releases out of Britain and Europe yesterday were driving many investors back into higher yielding assets as most reports suggested steady growth in global inflation and consumer spending. Sudden upticks in dollar values have helped many investors pause briefly on their short-taking positions on physical assets, however.

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, but the trend remains bearish so far this week.

Technical News

Last week’s failure of the pair to close below the 100-day moving average should not dismay euro shorts. The late in the week rally failed to move above the 20-day moving average which may induce some traders to sell into any euro gains. Both monthly and weekly stochastics have turned lower and point to potential declines. Support is found at 1.4075 followed by the May low at 1.3970. The 200-day moving average may be a likely target and below that the rising trend line from the May 2010 low comes in this week at 1.3610. Resistance is found at Friday’s high of 1.4340 followed by 1.4500 and the early June high of 1.4690.
Cable is on the verge of breaking the neckline of a head and shoulders top which comes in today at 1.6120. A breach at this level and a measured move from the chart pattern could take the GBP/USD lower to 1.5370. The likeliest target on the charts is the December low at 1.5350. On the way lower cable could encounter support at the May low of 1.6050 and the March low at 1.5940. To the upside the pair may see resistance at last week’s high at 1.6440 as well as 1.6550 off of the May high.
The pair failed to establish a beachhead above the 81 yen level and proceeded to fall. This level will serve as initial resistance followed by the May 31st high at 81.75 followed by 82.20 and 82.57. Falling daily stochastics hint at further declines. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.
The USD/CHF rose to the May support which has turned into a resistance level at 0.8550, a phenomenon which often occurs in technical analysis. A break higher would run into the 50-day moving average which coincides with the falling trend line off of the February high at 0.8640. This may offer traders a good level to enter short into the long term downtrend. Additional resistance is located at the mid-May low at 0.8750 and the May high of 0.8950. To the downside the all-time low could be supportive at 0.8325.

The Wild Card  

Spot gold prices are rising and the technicals are setting up in favor of further gains. Both daily and weekly stochastics are moving higher indicating momentum is to the upside. A successful test and subsequent move higher from the rising trend line off of the January low also bodes well for additional gains. Forex traders should look for a break of the June resistance at $1,1553 where the commodity would likely test the all-time high at $1,576. Support comes in at $1,150.50.