Forex Analytics
Review of FOREX 10.03.08
March 9th, 2008
USD
Over the last week, USD fell against major currencies. The decline started from the middle of the week and continued until the middle of Friday, when after reaching new absolute maximums fixing of positions started and USD completed the last day in growth.
Among the fundamental data, which have had an impact on the American currency decline, it is worth to mention Beige Book, which showed that from the beginning of the year, economic growth has slowed down, and growth in economic activity declined in more than half the regions.
In the Beige Book noted continuation of price declines in the housing market. Sales of homes fell sharply in Boston, Minneapolis, Richmond and St. Louis. Prices continued to fall, because stocks remained at a high level.
Activity in the retail sector has been weak or slowed, in particular the weakness observed in the sales of automobiles.
Mixed signals received from the commercial real estate sector. Almost all regions have reported pressure from the prices of raw materials and energy, but wage growth was moderate.
U.S. authorities are still saying that they want a strong dollar, but otherwise they would say the same. The head of the European Central Bank, Jean-Claude Trichet said in his statement that he did not give guarantees for promises their American colleagues. This statement could mean that the American currency will continue to remain above the level of 1.5 against the European currency for few months, more precisely, until the moment becomes clear that the United States have outlived a recession after which a strong correction will occur.
EUR
EUR/USD updated its absolute maximum, in an area of which continues to be at present. Negative information from the United States, as well as increased inflation in the euro contributed to the growth of a pair to new maximums, which no longer correspond to any fundamental data.
Nevertheless, this situation can not occur for good. As soon as from the U.S. data begin to arrive that the recession is minor (expected that the growth rate in July reached the bottom), all will reconsider a position on the American economy, which would strengthen the dollar.
The European economy will complete the fight against inflation very soon. Despite the fact that now the threats of inflationary growth are strong enough (against the background of increase in the prices of food and raw materials) September is likely to reach a comfortable level of inflation range so that it ill lead to reducing the rate of the European currency.
At present EUR/USD is located in the area of their maximums. The closest significant level of resistance is at around 1.56, and the nearest target level, which will have significant support pair EUR/USD is 1.46 (closing this year, coinciding with the closing of a second three-year cycle) (see chart).
It is expected that after reaching the area 1.55-1.56, the pair finds absolute maximums in the area where price will not appear within 7-10 years.
In the current situation it is difficult to recommend the opening of long-term short positions on any specific levels (all will depend on the size of recession and inflation in the euro), but, in my opinion, this will happen in a month - two, when it becomes more clearly about size of recession. In this situation the 1.56 mark looks good protection stop orders and the level of 1.46 looks like the nearest target.
the source of info: PoltekFX Analytics
GBP
GBP/USD is above the level of support 2.0080, formed by the closing half of 2007. Against the background of declining USD as well as the weakness of the British currency, the whereabouts of prices in the area make it an attractive couple maximums for Bid.
Last year Government of GB announced that the cycle of monetary policy with high rates ended and now a new economic cycle is coming which is going to be accompanied by the weakness of the pound.
This statement has turned around a pair trend, which has formed a descending trend, a rebound of price is a technical correction, which is expected to show a maximum near the mark 2.0250 (50% of the downward movement).
These attractive levels to sell the British currency will not remain unnoticed. Speculators will take advantage of this by opening the long-term short positions as soon as the first signs of a turn appear.
At the current time it is attractive to sell the pair from the level of 2.0250 with a stop order above 2.0500. The nearest target is in the area of 1.94. Further is 1.9175 (closure of the first three-year cycle)
JPY
USD/JPY is in the area of their minimums. Despite a strong decline in prices, it is expected that soon decline trend will change, which is a technical correction after a long decline.
The authorities of the country are in no hurry to raise interest rates, arguing about hesitant development of the economy, so the weakness of JPY will provide support for a long time to Japanese producers and create pressure on their currencies, but after the completion of a recession USD will begin to strengthen rapidly, which may cause correction of pair.
Approximate area which USD/JPY could strengthen to is 111.80-113.30. It is expected that turn of the trend may start as soon as possible (maximum in a month or two), but the Japanese currency trading, which is the most unpredictable among major currencies, is very dangerous, so is not advisable to open positions if they attended by a high risk.
This week there are no statistical data that can change the basic trend. The focus of the market will be on data on balance of payments of Japan and the United States as well as the statements of officials, who will demand urgent action to stabilize the situation after reaching the level of 1.54 this week.
the source of info: PoltekFX Analytics
USD
Yesterday USD has been trading in the lateral range. The lack of significant news for two largest economies as well as the first trading day of the week, which in many countries is day off, has led to a strong decline in the volume of trades. Nevertheless, in general, this week will be very important for the whole foreign exchange market. After a strong decline of USD which lasted several weeks, it is expected technical correction which should determine the future levels of support for major currency pairs.
Among American data attention is drawn to the trade balance - Intl Trade Balance, which will be published at 15:30. Although the market is not very interested in data on balance, probably news in the short term will have some impact taken into account that the following interesting data from the USA will be published only on Friday.
Participation in the stock indexes shows that investors are hesitant to the American economy.
EUR
EUR/USD is being traded second day with a slight decline. It is likely that the price increase will be able to turn into a correction, which will provide opportunities for the opening of speculative long positions.
Technical analysis shows that the nearest significant level of support is in the area of 1.4930-1.4850 (50% of the growth and the closure of January). The intermediate support lies in 1.5190 (February closing), but in the case of a bear's mood, this level will be beaten.
Among European data the business expectations index - ZEW EMU and the assessment index of current economic conditions - ZEW EMU current conditions will be published today, however, these figures are not of the interest at the moment.
GBP
The British pound has completed the first trading day with decline against the American currency. The negative fundamental analysis data, which supported overpriced rate of pair, provoked a decline of GBP.
GBP/USD is currently located in the area of its maximums, and there is a high probability that the price at the moment is changing the growing trend sinker. We recommend opening short positions with a stop losses above 2.0450 and intermediate target in the region of 1.9870 (closing of the second three-year period). The next goal is located at 1.94. Then a strong level of support that could stop the decline, would be at 1.9175 (closure of the first three-year cycle).
Among the statistics it is recommended to draw attention to the Primary data on the growth of GDP - NIESR GDP Estimate
GOLD
After reaching the absolute maximums, gold is forming an intermediate level of support in the area of $ 960 per troy ounce. This level coincides with a rising trend line support, which gives it extra significance.
If the price can beat it, the ascending trend will be completed. The next support will be the mark of $ 940 per troy ounce (50% of the uptrend).
Otherwise, renewals of new absolute maximums are possible this week. Strategic level of resistance is still the mark of the $ 1000 per troy ounce, after reaching which many actors will close long positions causing significant instability of prices.
USD
Yesterday USD updated the maximum against EUR, which is now close to the resistance level of 1.5. This level serves as a strong resistance, which is not likely to to break it at the first attempt, and the price will test it for some time.
Today there will be no important data on the American economy. Among the statistics it is worth to pay attention to the oil reserves in the United States, which are expected to grow and thus they will have some resistance to the strong increase of the price of raw materials, which is being observed.
Among European statistics attention will be drawn to the manufacturing production - Industrial production, but as expected the data will not have a significant impact on the market.
GBP
GBP/USD is being traded in the area of its historic highs. It is expected that these marks in the area of price will turn out and change the ascending trend to descending one.
Further growth of the pair is restricted by the level of resistance 2.0250 (50% descending movement), from which it is recommended to open short positions with intermediate purpose at 1.9870 (closing of a second three-year cycle (see graph)), the main purpose at 1.9420 (the current support), and a strategic purpose at 1.9175 (closure of the first three-year cycle). However, if the price does not reach those marks, GBP can be sold from the current positions, but in any case the protective order needs to be put above 2.0450.
The British economy today will issue data on the trade balance, which in the case of bad figures will help to change the trend of ascending GBP/USD to descending one.
JPY
USD/JPY is located near the mark 103. Correctional rise to the level of 111.80 (closure of the year and 50% of the price) has not been foreseen yet as well as the confidence in USD is still weak, but the situation may change at any time.
Once statistics show that in general the crisis in the United States does not pose a threat to the U.S economy, the dollar will get strong support which helps remove all imbalances in the market accumulated since then.
Because of the strong oversold it is not recommended to open short positions, although further short-term decline is possible.
GOLD
Gold is being traded in lateral shrinking range. Technical analysis shows that the completion of the lateral trends happens soon, and the exit in the upper trend is possible. However, the opening positions are not without risk, because the price has not made a technical correction after growth. If increased risk is not taken into account, it is recommended to open positions from current levels with Stop Orders below the line of support of the ascending trend, preferably below the mark $ 960 per troy ounce. The nearest aim is $1000, but in the case of breaking price may increase more higher.
the source of info: PoltekFX Analytics
FXdudy,
Ty for your commentary. Could you explain "collapse" ?
ES
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