The USD Recovery Continues.
Economical News
USD
On Monday, the greenback rose slightly from record lows against the EUR as investors were focusing on a fresh batch of economic data which is expected to be released during the week. Yesterday, the USD went up 0.4% to 1.4217 against the EUR, pulling back from record highs of 1.4281 earlier in the session. Despite the Dollar's recovery on Monday, its outlook remains bearish and investors will probably continue the selloff if U.S. data continues to disappoint. Yesterday's US Institute of Supply Management Manufacturing data showed a weak sentiment for the domestic economy, with the key industrial indicator falling for the third consecutive month. Meanwhile, Interest Rate futures show traders expect a 0.25% point rate cuts at the Fed's next two monetary policy meetings on October 31 and December 11. On the contrary, some analysts believe that a further interest-rate cut will probably reduce investing in the U.S. currency, especially while other major banks not keeping up the pace with the Fed's active rate cuts.
Pending Home Sales are on tap today along with the U.S Domestic Vehicle Sales. Pending Home Sales Index measures the number of signed real estate contracts for existing single-family homes. The expectations for the Pending Home Sales release are currently standing at -2.0%, with the previous figure of -12.2%. However, the impact if the Pending Home Sales report on EUR/USD may be limited as traders will be anxiously awaiting Friday's non-farm payrolls report which is expected to be more price shaking than ever after last month drop of 4K jobs.
EUR
The EUR has set record highs three weeks in a row reaching 1.4281 earlier in the session. Currently the EUR/USD is floating around 1.4215 levels after a slight drop earlier today. The economic data within the region, especially through the last week, hardly supports such a bullish sentiment. The EUR seems to be extremely overbought and its strength is becoming a drag on European economy growth. European manufacturing and service industries expanded at the slowest pace in two years last month. With the pair now trading above 1.40, the manufacturing sector may well begin to suffer as the competitive disadvantage of the high EUR will pressure the exporters. Shipments from Germany, the largest European exporter, have already fallen 0.1% in August as the stronger currency damped demand from Asia and the U.S.
Meanwhile, the ongoing U.S subprime mortgage crisis has influenced UBS Warburg, as the Swiss banking company had an unexpected third-quarter loss and plans to cut 1,500 jobs after writing off the value of fixed-income securities by more than $3.4 billion. It will be the company's first quarterly loss in nearly 10 years.
Yesterday, the European Manufacturing PMI was released inline with expectations at 53.2, but still it is the lowest reading in over a year. Today, there will be no significant data releases from the EUR zone except from the PPI and the Unemployment Rate, both of a minor importance. The major event of this week will be the ECB rate announcement on Thursday while market expects rates to remain at 4.0%. The realization that European rates aren't rising anytime soon, may trigger a profit taking rally for the European currency.
JPY
Yesterday, the JPY dropped against all of the 16 most-active currencies. It fell to a seven-week low of 103.27 against the AUD and a low of 88.69 against NZD currency, extending a 7% slide last month as the Federal Reserve's interest-rate cut bolstered confidence in carry trades. The USD gained 0.6% to 115.46 JPY, with the Japanese currency getting only a very brief boost after the headline figure in the Bank of Japan's September Tankan Large Manufacturers Index came in slightly above the market forecast.
There was no significant economic news coming out of Japan yesterday and today is also devoid of data therefore, most price movement on JPY pegged currencies will be derived from the European and American market events.
Technical Analysis
EUR/USD
The pair has dropped from the all time high of 1.4280 and is now testing the 1.4200 without success. The 4 hour chart is implying on a further local bearish move as the daily charts are implying a deeper correction into the 1.4100 zone again, maybe even before the end of the week.
GBP/USD
The cable is testing the strong support of 2.0380 but appears to be having difficulty breaching the level. The 4 Hour chart is showing a bullish momentum with RSI and slow stochastic floating on the 50 level. The daily chart support the bearish notion as 2.0450 appears to be the next target price.
USD/JPY
The wide range that the pair has been trading in, is becoming narrower and the pair seems to be consolidating at 115.40 which is the 23.6% Fibonacci level of the 124.00/112.70 move. Both the daily and the hourly charts are neutral and there seems to be no clear direction for the next break which appears to be close. Waiting for a clear signal appears to be the right move for the pair at the moment.
USD/CHF
There has been a violent breach through the 1.1700 level and a local correction move appears to be in motion. The 4 Hour chart is bullish with room to run and the daily chart is showing the 1.1780 appears to be a real target for intraday trading.
Wild Card
Crude Oil
There has been a strong breach through the bottom barrier of the channel on the 4 Hour chart and the bearish correction move is validated. This provides Forex traders the ability to enjoy the bearish momentum that is derived from a channel breach and might take the Oil to 78.00 before the weekend.
Market Trend
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
|---|---|---|---|---|---|---|
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.4320 | 2.0520 | 116.30 | 1.1790 | 0.8970 | 0.7026 |
| 1.4300 | 2.0480 | 116.00 | 1.1750 | 0.8900 | 0.7000 | |
| 1.4268 | 2.0450 | 115.70 | 1.1730 | 0.8850 | 0.6971 | |
| Support | 1.4200 | 2.0360 | 115.00 | 1.1673 | 0.8800 | 0.6924 |
| 1.4157 | 2.0300 | 114.70 | 1.1625 | 0.8768 | 0.6900 | |
| 1.4098 | 2.0243 | 114.35 | 1.1600 | 0.8743 | 0.6879 |
Indicators
| Date | Time GMT | $€£¥ | Event | Period | Prev. | Forecast | Imp |
|---|---|---|---|---|---|---|---|
| 2/10/2007 | 2:00p | USD | Pending Home Sales | m/m | -12.2% | -2.0% |  |
| 2/10/2007 | 11:30 | AUD | Interest Rate Statement | 6.50% | 6.50% | |