EURUSD consolidated after broad moves on Friday. Initial support became the lows of the day at 1.3426 giving an indication to further possible weakness. EURJPY briefly fell below primary and secondary support today before rapidly accelerating up to 130.53, a 2.54% increase for the day. Today was a quiet day with regards to FX announcements. The key announcements to watch tomorrow will be:
The Yen continued its advance this week against the dollar making a new 30 day low. Fundamentally, government bond yields are a big driver for the yen, the tightening of yield spreads is in part a driver for the advance in the Yen in respect to the dollar. Japanese investors are also less in favor of buying up foreign securities.
Canada’s currency weakened for the first time in seven weeks as stocks fell and crude oil tumbled. CAD is a commodity linked currency and so concerns about future economic growth will have a negative impact on its strength. The change in direction reflects the market’s adjustment of risk sentiment and suggests that we are going to enter a period of consolidation.
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Markets are calm at the moment as participants wait for fresh news or data. As the markets are digesting the merits of the recent economic data, we are currently moving within a trading range and the next major move outside of this could indicate the direction the markets will take for the next few weeks of trading.
Look out for the US Unemployment Claims tomorrow at 1:30pm GMT. Estimates are around 608K which would be up 7k from last month. Trade with caution as any major suprises here will rock major USD pairs!
The EUR continues to strengthen, supported by equity market rallies and declining VIX, traders are looking to build long positions in the EUR. Comments by Bernanke and Trichet have added to the growing optimism surrounding the global recovery. Whilst acknowledging the uncertainty in the market, Bernanke talked up the USD yesterday, maintaining that “the USD will be strong because the US economy is strong”.
Jean-Claude Trichet commented yesterday that the global downturn had bottomed with some large economies already on the path to recovery. Risk appetite among investors is improving, risk-correlated assets has seen large rallies in the past few weeks and global markets to continue to outperform. We are still far from concluding that this will be a “V” shaped recovery.
The Yen continued its gain against the dollar, we still wait for some consolidation and confirmation before entering this trade again. After a brief retracement and some consolidation in EurUsd we continue to aim for 1.3740 area, a break past this level would make 1.3950 a likely target. We find initial support at 1.3557.
The double-top head and shoulders kicked in this morning with a neckline at 98.24 and a strong double top resistance at 99.58. Quantum-Forex closed out today with a profit of 120 pips. The 50% retracement was tested; we are looking for more bearish opportunities in this market in the coming days.
Many investors are calling this the bottom of the bear market yet fundamentals are still very weak and government debt levels are at an all-time high. Just how this will play out is anyone’s guess however it will have a big impact on the long term strength of the dollar.
Fed Chairman Bernanke Speaks early on Tuesday morning (12:30am GMT) so be cautious entering trades as volatility is likely to increase during this period.
The results of the US bank Stress Test failed to calm investor’s optimism, despite 10 firms requiring nearly $75bn in new capital. Chairman Bernanke said the stress test results should give the public “considerable comfort”. We’ll be hearing more from him on Tuesday morning 12:30am (GMT) so expect heightened volatility in the USD on the back of that.
CAD advanced last week to the highest level versus the USD this year after an unexpected increase in jobs during April. Technically the USDCAD trend continues to be very bearish.
EUR has been very bullish versus USD for a third straight week on speculation of a European Central Bank’s bond purchase. We will wait for volatility to calm before looking for EURUSD trading opportunities however EUR remains bullish against all major currencies.
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