The surprise drop in consumer confidence in the United States
yesterday has resulted in a sudden buy-up in USD as investors flock to
safe-havens. With a market that appears to be lacking a clear direction
recently, major reports such as the CB Consumer Confidence report
yesterday, and today's ADP Non-Farm Employment Change report become
that much more important to watch as more investors await their release
before trading.
USD - USD Trades Higher on Economic Outlook
The greenback gained Tuesday as a report on U.S. home prices showed
that the pace of price declines may be slowing and manufacturing data
from June came in slightly better than expected. The Dollar may extend
its gains versus the EUR after a report showed an unexpected drop in
U.S. consumer confidence for June, increasing demand for the safety of
the world's main reserve currency.
The USD traded at 1.4035
versus the EUR, following a 0.4% gain yesterday. The dollar also
fetched 96.35 yen following a 0.3% advance. Tuesday's data gave
investors more reasons to buy the U.S Dollar. For months, improvements
in the outlook for the economy, financial markets or other companies
has led to stock gains and weighed on the USD, taken as a signal of
reduced demand among investors to hold the safe-haven currency.
However,
analysts have said that the Dollar may be near a turning point, after
trading in a pattern closely correlated with equity moves. Investors
have sold U.S. Dollars recently as stock markets and oil prices rose on
an upbeat view for prospects of a global economic recovery, hurting
demand for the greenback as a safe haven.
Investors now await
the U.S. government's high-profile monthly employment report. The jobs
data is due on Thursday as U.S. financial markets will be shut on
Friday for Independence Day.
EUR - EUR Holds Steady vs. Greenback and Rallies against JPY
The EUR gained versus the U.S Dollar on speculation European Central
Bank (ECB) policy-makers will today signal that the central bank will
keep Interest Rates on hold into next year to aid an economic recovery.
ECB member Axel Weber said last week that the central bank has used up
its scope to cut Rates. Policy-makers will leave the benchmark rate
unchanged at this week's meeting, according to analyst predictions.
There
is also an improving sentiment in the Euro-Zone's economic conditions.
European economic confidence rose more than economists forecast in
June, the European Commission in Brussels reported yesterday, signaling
the region's slump is abating. Analysts predict that the ECB will keep
Rates at 1% for the foreseeable future. And that might turn the EUR
further on the upside.
The European currency has advanced the
most in 4 months against the Yen, last traded at 135.56 yen from 135.21
yesterday. When it reached 135.96 for a brief stint yesterday, this was
the highest level reached since June 15. The EUR has risen 7.1% versus
the Japanese yen this year and doesn't seem to be losing any momentum.
JPY - Yen Declines as Investors Dump Safety Demand
The Japanese Yen weakened against the EUR and the Dollar yesterday
after a report showed China's manufacturing expanded for a 4th
consecutive month, dampening demand for the relative safety of Japan's
currency. The JPY fell to 135.80 per EUR and weakened to 96.95 per U.S.
Dollar from 96.36. The Yen also fell against 15 of the 16 most-traded
currencies after an Australian report showed retail sales climbed for a
3rd month, giving investors more confidence to purchase higher-yielding
assets.
Although, the Bank of Japan's (BOJ) June Tankan
corporate survey showed on Tuesday that big manufacturers' sentiment
pulled back from a record low hit 3 months ago, the improvement was
smaller than forecast. The Yen edged down against the Dollar after the
news but the market's reaction was subdued overall as investors decided
that it offered no surprise.
Analysts said that the market has
considered all the positive factors that have come out and is starting
to react more to negative factors. The market is lacking clear
direction and is likely to stay in an adjustment period for now.
Crude Oil - Crude Oil Momentum to Rise Further
Crude Oil rose above $70 a barrel after an industry report showed
the biggest decline in crude inventories since September in the U.S.,
the world's largest user of the fuel. Also today, the Energy
Information Administration (EIA) report will probably give a better
direction to the market.
A U.S. Energy Department report today
will likely show Crude Oil stockpiles declined 2 million barrels,
according to economists' estimations. A fall in crude inventories may
cause the commodities market to move higher, and will reinforce Crude
to stay at or go above current levels.
Oil prices yesterday
spiked above $73 a barrel, which stood as the June high for more than 2
weeks, as the Dollar declined and escalating militant attacks in
Nigeria raised concern that supplies may be disrupted. Crude Oil is set
to extend gains amid this week's volatility and may reach the $76 a
barrel level.
Technical News
EUR/USD
This pair currently lacks clear direction. With most indicators
either floating in neutral territory, or giving off mixed signals, this
pair continues to trade in a distinct range. Buying on lows and selling
on highs within this range is the most preferable strategy in this
environment.
GBP/USD
There is a distinct bullish cross on the 4-hour chart's Slow
Stochastic and an imminent bullish cross on the hourly chart's MACD.
These two signals together indicate an impending bullish correction to
yesterday's sharp downward movement. Going long might be wise today.
USD/JPY
Yesterday's volatile bullish movement in this pair has pushed the
RSI on the hourly and 4-hour charts into the over-bought territory,
representing the presence of downward pressure. The fresh bearish cross
on the 4-hour chart's Slow Stochastic supports the notion of a downward
correction. Going short with tight stops appears to be preferable.
USD/CHF
Almost all indicators on this pair show neutrality as the price
floats near the 1.0850 price level. With a bearish cross on the hourly
MACD and a bullish cross on the 4-hour MACD, the direction of this pair
is uncertain. Waiting for a clearer signal might be a good choice
today.
The Wild Card
EUR/GBP
The price of this pair has been trading flat these past several
days. However, the Bollinger Bands on the hourly and daily charts are
tightening, signaling an impending volatile jump. With a bearish cross
on the hourly MACD and the 4-hour chart's Slow Stochastic, this
volatile jump may very well be bearish. Forex traders have a great
opportunity to enter early sell positions before this jump takes place
and ride out the downward slope for profits!
