Forex Market Technical and Fundamental Recap
nowadays's Forex Analysis summary.
Right earlier the New York opening, the U.S. Dollar started to weaken as the global equity markets began to turn from negative to positive. It was also as if a light bulb had gone off as traders quickly put risky trades back on again. This led to a strong short-covering rally initially but new buying may have supported the market late in the trading session.
The EUR USD traded weakly early in the trading sitting as negative news from last week regarding the worsening Euro Zone recession weighed on the market overnight. Traders were selling the Euro as pessimism was taking over the market. Concerns over the size of the Euro Zone contraction was the main cause of the shift in investor sentiment.
Technically, the Euro confirmed last week’s closing price reversal top with a follow-through break overnight but failed to close lower. The downside target of 1.3299 is still possible, but this pair has to hold a retracement to and attract new selling at 1.3572 to 1.3607.
The British Pound acted strong all day and in fact has performed the best versus the U.S. Dollar over the past five days. Part of Monday’s rally was fueled by an article stating that the weaker British Pound is making U.K. real estate an attractive investment. Additional support for the rally came from the desire to buy more risky assets because of the huge turnaround in the global equity markets right before the New York opening.
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Today's Forex Analysis summary.
The rally in the EUR USD is another sign that the U.S. currency is losing its luster as a safe haven currency. Optimism is building that the Euro Zone economy is getting ready to turn higher.
Doom and gloom in the GBP USD yesterday turned into optimism today as three reports showed that the U.K. economy may be bottoming.
News that industrial production fell at a slower pace than estimated helped put in a bottom overnight. The bottoming action was confirmed and the market accelerated to the upside when additional reports showed better than expected results in the housing and retail sectors.
Stronger commodity markets helped to support the Canadian Dollar. Gains were limited however as the stock market was under pressure throughout the day. Lately the Canadian Dollar has been moving in lock-step with the U.S. stock market. This could cause problems with the currency if the equities fall as many analysts are predicting.
The strength in the Japanese Yen may be reflecting the possibility of a break in the global equity markets. Yen traders sensing that the stock markets may be topping have been buying back Yen as they exit from the equity markets.
Swiss Franc investors frustrated by the low yields in the U.S. markets are repatriating in an effort to get better returns elsewhere. The recently reported improvements in the U.S. economy and the results of Fed’s bank stress tests have settled the U.S. markets and reduced demand for the U.S. Dollar as a safe haven currency. As long as this economic scenario exists, continue to look for higher markets to follow
The AUD USD was able to post a strong gain on Tuesday despite a report that the economic contraction will last until at least June 2010. Traders also ignored the news that the budget is expected to show a deficit until 2016. The fact that the market rallied only proves that investors are chasing yield at this time and not paying too much attention to the economy.
The NZD USD has been consolidating the past two days after posting a new high for the year last week at .6126. Traders are still being confounded by this current rally as it suggests that the New Zealand economy is in some kind of a recovery mode. Based on the chart pattern, this market is clearly following the U.S. stock markets as trader appetite for higher yielding assets has increased since March.
The tight range the past two days means that traders are waiting for equity markets to make their next move. Stocks have been stagnant on perceptions of being overvalued. A correction in the equity markets should put pressure on the NZD USD.
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