Forex Market Technical and Fundamental Recap
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.
By ForexHound.com the portal for Analysis, Education and exclusive timely market Gann Analysis
Disclaimer: Trading foreign exchange on the margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore should not invest money that you cannot afford to lose.
Last edited by Jess; 05-13-2009 at 04:23 AM. Reason: link violation
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Today's Forex Analysis summary
The daily EUR USD is on pace to test a 50% at 1.4184. Regaining this area sets up a further rally to 1.4621. The rapid rise in the EUR USD may become a concern for the European Central Bank if it begins to curtail export demand. This may not be known for some time however.
A two-sided trade dominated the USD JPY on Friday. Early in the session, traders bought up the Yen over concerns the U.S. was going to lose its top credit rating. Further strength was triggered by an optimistic statement from the Bank of Japan.
Technically, the USD JPY is in a downtrend but found support in front of the March 19 bottom at 93.53. The daily closing price reversal bottom which was formed at 93.84 on Friday will be confirmed on a breakout over 94.91 next week. Although this formation will not change the trend to up, it is a strong indication that the buying may be greater than the selling at the current price level.
The daily chart indicates the GBP USD is on pace to test a 50% resistance level at 1.6085. Regaining this price on a closing basis could lead to a further rally to 1.6694. These are just upside objectives of where the market may run into resistance. Upside momentum is so strong that it would be foolish to stand in front of the trend. Aggressive counter-trend traders have to read the trade when this area is being tested for clues of the start of selling pressure.
The USD CAD extended its losses this week fueled by news that the Canadian inflation rate is under control and in anticipation of a U.S. sovereign debt reduction.
Based on the current chart pattern, the USD CAD is on pace to test a major retracement zone at 1.1059 to 1.0586. There could be profit-taking at this level or at the least a technical bounce. Don’t anticipate anything until this zone is tested and momentum can be judged.
Fear is driving the USD CHF lower as the U.S. Dollar is losing its luster as a safe haven currency. Concerns over the expanding size of the U.S. debt and the U.S. ability to pay back its obligations, is leading traders to seek the safety of the Swiss Franc. Because of the spike in demand for hard assets, the Swiss Franc has also become an attractive alternative to the U.S. Dollar because of its huge inventory of gold.
Technically, the charts indicate further weakness as both the daily and weekly charts are in downtrends. This week this pair closed inside of a major retracement zone at 1.0972 to 1.0660. Based on the developing chart pattern, this market could accelerate sharply lower if the bottom end of the retracement zone is violated.
Both technical and fundamental factors continue to support the rapid rise in the NZD USD.
Technically this pair is in an uptrend on both the daily and weekly charts. Upside momentum is strong although lagging behind the other commodity-based currencies. This should not hinder this pair’s progress to a major retracement zone at .6553 to .6945
The AUD USD continued to soar higher and is on pace to test a major retracement zone of its entire range since the top in July 2008. The current range of .9792 to .6008 has created a retracement zone at .7900 to .8346. Depending on the momentum at the time this market reaches this retracement zone, look for profit-taking, or at the least technical bounces at these levels.
By ForexHound.com the portal for Analysis, Education and exclusive timely market Gann Analysis
Disclaimer: Trading foreign exchange on the margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore should not invest money that you cannot afford to lose.