After falling broadly late last week, the U.S dollar regained some
ground on Monday as the market is watching cautiously to see if China
will keep making comments on the reserve currency. China's central bank
did not mention the Dollar by name on Friday but said it was a serious
defect in the international monetary system that one currency should
dominate.
Debate about an alternative international currency has
heated up in recent months and central bankers gathering in Basel this
weekend also discussed the dollar's role. Still, the dollar will keep
its role as reserve currency, as China is unlikely to change the
composition of its foreign currency reserves any time soon. That's
dollar positive analysts said.
USD - USD Up despite Recent Downward Pressures from Abroad
The US Dollar, after dropping last week due to renewed calls from
China and Russia to switch to an alternate reserve currency, began to
steadily strengthen in today's early morning hours. From a peak high
above 1.4100 against the EUR, the USD has pared some of these losses
and is currently trading just above 1.4000. Versus the British Pound,
the greenback has gone from 1.6550 back towards 1.6450, remaining
within the range this pair has experienced over the previous 2 weeks.
While
China's recent call for a new international reserve currency, and
Russia's support of such an action, has put downward pressure on the
USD lately; the impact has been somewhat muted. It has been forecast a
number of times that the greenback will begin to depreciate against
most currency pairs as the global economy recovers. As one of the
world's leading safe-haven investments, the Dollar will no doubt take a
hit from an increase to risk appetite which naturally stems from
economic recovery.
China and Russia added to this weight with
a call for portfolio diversification, which in fact carries roughly the
same impact as calling for the purchase of riskier assets. For economic
giants, such as these two countries, to call for a diversion away from
the largest economic rival is a basic economic weapon aimed at gaining
a larger market share. The problem is that they lay out a general
economic plan which is already understood to be in motion. This is why
the impact was muted, and why the USD will still experience multiple
up-ticks in the near future.
Looking forward to today's trading,
however, will see traders with little economic news to wager on for the
US Dollar. Britain and Japan appear to be releasing the bulk of today's
news, which means we may see a day of trading with low liquidity and
increased volatility. Day-traders can take advantage of these intense
trading days by swinging within the larger-than-normal price
fluctuations.
EUR - EUR's Mixed Results due to High Optimism, Bleak Data
The EUR has been uncertain in its direction lately, despite clear
calls for a buy-up of this higher-yielding currency during times of
mild economic optimism. Positive news from the Euro-Zone typically
leads to an increase to risk appetite, which is definitely something
which traders saw last week. The EUR started Friday just under 1.40
against the USD, but steadily rose above 1.41 before the end of last
week's trading. The EUR even peaked around 0.8550 against the Pound,
despite the moderate drop towards 0.8520 at the end of Friday's trading
session.
Many of the economic indicators being released these
past 2 weeks have shown that the Euro-Zone is experiencing a boost in
consumer optimism. This has come about despite a growth in budget
deficits and continuously shrinking manufacturing output and GDP. The
people have started looking forward to better days, but the numbers
still tell a bleak story. One of the primary impacts of such data is
that the EUR has showed heavy signs of a comeback, but fraught with
nasty downturns as its rivals make headway from periods of instability.
As
for this week, the 16-nation currency has leveled-off in today's early
trading sessions, but it appears to be poised for a rather sharp
movement today or tomorrow. The EUR looks to be consolidating towards
significant price barriers against most of its currency rivals and will
either go through a massive drop or, more likely, strengthen as
economic indicators continue to show a growth in optimism, and possibly
a chance to poke holes in the USD's most recent gains. Traders should
pay attention to the few economic indicators released today as the
story is being told solely by Europe and Great Britain. With a silenced
US economy, we could see much more predictable price movements from the
European currencies.
JPY - Yen Declining as Consumer Spending Expected to Fall
Despite the grueling downward trend the JPY experienced last week
against its currency counterparts, the Yen now appears to be flattening
out. The only currency which seems to have bested the Yen in today's
early morning hours is the USD which has climbed from 95.15 to the
95.50 level, with the possibility of reaching 95.80 in the coming
hours. Against the EUR and GBP, the Yen has done very little in terms
of price movement, consolidating towards the price of 138.90 and
157.30, respectively.
As industrial production in Japan rises
for 3 consecutive months, there are some analysts who forecast a
faster-than-anticipated recovery for the island economy. On the other
hand, consumer spending in Japan has typically played a large part in
economic growth, but these figures are expected to continue plummeting
this week. Also putting mild pressure on the JPY is the fact that
unemployment in Japan has finally reached over 5% and is still
climbing. With such negative economic news it is hard to expect a
strong recovery in the Yen anytime soon.
OIL - Oil Prices Still Failing to Stay above $70
No matter how much downward pressure there appears to be on the
value of the US Dollar, the price of Crude Oil still seems to have
difficulty finding support above $70 a barrel. Dropping from over $71
to as low as $69 last Friday, the price of the black gold has continued
its plunge in today's early trading hours and currently sits near
$68.50 a barrel.
As expectations for fuel and energy demand have
been decreased these past weeks, many speculators are now beginning to
price in the reality that oil prices may not find the support necessary
to climb successfully above $70 in the nearest future. Without a sudden
short-fall in supply, the price will no doubt reflect this reality.
Traders may anticipate a series of fluctuations above and below the $70
price range as the market searches for a true range of the value of
Crude Oil.
Technical News
EUR/USD
The pair has been range-trading for the past few days, and is now
traded around the 1.4030 level. Currently, the Bollinger Bands on the 1
hour chart are tightening, suggesting that a sharp movement is
impending, and as all oscillators on the hourly chart are pointing down
it appears that the move will be bearish. Traders should wait for the
breach and swing.
GBP/USD
The daily chart shows fresh signs of a bearish move, suggesting that
the uptrend has vanished. The 4 chart's RSI also supports this notion
indicating that the downwards momentum has more steam in it. Going
short with tight stops might be the right strategy today.
USD/JPY
On the 4 hour chart the pair is showing consistent bullish momentum
for a while now and the RSI is also supported by a bullish trend line.
Although the signal is not strong the pair might have a local target at
96.00,.which might make it feasible for forex traders to go long with
tight stops.
USD/CHF
The pair has been range-trading for a while now, with no specific
direction. The daily chart's Slow Stochastic is providing us with mixed
signals. All oscillators on the 4-hour chart do not provide a clear
direction either. Waiting for a clearer sign on the hourlies might be a
good strategy today.
The Wild Card
Silver
The current bullish trend continues as all technical indicators on
the daily and the 1 hour charts are showing that the direction is up
and the momentum is high. This provides forex traders with a great
chance of enjoying the additional momentum still left for the
commodity.
