By Mercaforex.com
USD:
The USD lost ground to the EUR and GBP but the greenback remains in the stronger parts of its range against the two currencies. There was no major economic data from the U.S. yesterday but Wall Street bounced off of it lows and turned in a positive day. The Dow Jones Industrial Index finished the day above the 10,000 mark, which is viewed by many traders as an important psychological barometer. After a week of positive movement versus most currencies the USD has met what appears to be some resistance. The U.S. will be releasing Trade Balance numbers today but the main highlight for investors will be Ben Bernanke. The Federal Reserve is expected to begin outlining its exit strategy from the stimulus programs it has undertaken with its monetary policy the past year and a half. Investors will be keen to decipher what implications are in store for the U.S. economy as the Fed begins to change its management approach to the financial crisis.
Tomorrow the weekly Unemployment Claim figures will be brought forth and on Friday Retail Sales statistics will be published. These two reports could be enough to inject the marketplace with impetus since they deal directly with issues confronting the prospects for growth within the States. However, investors today will be examining Chairman Bernanke’s testimony which will be released formally. The actual hearings in front of Congress have been postponed because of the severe snow storm which has buried Washington. The paper and all discussions which follow are sure to discuss the ‘exit strategy’ of the Fed in a rather conservative manner. Showing that there is a game plan to investors, while the Fed points out that the ‘golden faucet of cash’ is not going to be shut off prematurely and stall the economy in its tracks will be vital. Besides the Federal Reserve’s platitudes today, investors will also keep looking over their shoulder and across the Atlantic as Europe deals with it ongoing saga regarding Sovereign debt. The USD has struggled early this week and the question is how risk sentiment will play out today.
EUR:
The EUR was able to find some firm ground on Tuesday as rumors began to swirl that the European Union would intervene within the Greek debt crisis. Though it is still not clear exactly how a bailout for Greece will be arranged, reports are starting to circulate that Germany is involved in the process. The question that investors have had to worry about is the risk of contagion taking place within Europe concerning the debt crisis. The reported lifeline that will supposedly be given to Greece goes against all pronouncements made the previous two weeks, but it became self evident that if Greece were allowed ‘to fall’ that it could create an unwanted domino effect. News regarding the Sovereign debt issue will grow over the next two days as the European Union holds a previously planned meeting in Brussels for the leaders of its nations. Yesterday the German Trade Balance numbers were released and came in better than expected. Today Industrial Production figures will come from France and Italy. Investors will be looking for a clear solution regarding the Greek debt problems, and any questions which are left open or remain cloudy could influence the EUR in the coming days.
GBP:
The Sterling gained on Tuesday against the USD and this happened even as the Trade Balance statistics from the U.K. proved weaker than anticipated. Manufacturing Production figures will be released today along with Industrial numbers. The Manufacturing report is expected to see a gain of 0.4%. Also the Bank of England will publish its Inflation Report today and Mervyn King will provide a statement regarding the state of the U.K. economy. Today’s data and news will be the highlight of the week for the GBP in terms of homegrown influence, but the question investors will continue to monitor is if any storm clouds regarding risk adverse trading make their way from the European continent and hover over the U.K. as they did late last week. The health of the British economy remains a critical issue but it has been overshadowed the past week by the items at hand within the European Union. How all of this interacts for traders today and tomorrow will be important storylines for Sterling traders.
JPY:
The JPY and USD continued to fight their way through a rather intensive consolidated round of trading on Tuesday. Risk adverse trading throughout the Asian bourses has been prevalent and could be seen even as the U.S. equity indexes gained. Gold did gain slightly as the USD did show a bit of weakness versus the other major currencies yesterday. The JPY finds itself within a range bound mode against the USD and appears to be waiting for its next round of impetus.
Technical Analysis
EUR/USD:
The EUR staged a major comeback versus the Dollar. After opening at 1.3686 it hit an intraday high of 1.3839 before settling back near 1.3785. For technicians, 1.38 is a key level because it represents the Fibonacci 50% Retrace level. Fibonacci's premise is that numbers have a relationship one to the next. The relationship represents a pattern and a pattern suggest an identifiable behavior in price movement that may queue traders into potential future price action. To draw Fibonacci's lines simply identify a high and low over a specified period of time and the tool will identify where key levels of price action may transpire.
In this case, we used the low set back in March 2009 at 1.2457 and the high set in November 2009 at 1.5142. This places the Fibonacci 50% Retrace level at exactly 1.38. A close above that level would suggest that we may retest the 38.2% level. However, a close maintained below 1.38 implies that the EUR is still weak and may fall again.
GBP/USD:
We talked yesterday about the Pound's “range-bound” relationship with the Greenback. On Friday, February 5th the pair finally broke out of the range it had been trading in for so long. However, the Dollar yielded so much ground to its G7 counterparts that it has the pair knocking at the range boundary once again. We also mentioned the significance of the Moving Average cross over that just occurred which certainly point to a potentially falling GBP.
In the chart below, we have included a Fibonacci Retrace, similar to that of the EUR analysis for today. This places the 38.2% Fibonacci Retrace right at the absolute low of the range. It is not sheer coincidence that Tuesday's price action will close between those 2 points. The market is telling us that it is not ready to return to range trading on this pair just yet, but it is awfully close.
Commodity Currencies:
NZD & AUD were the big winners among the G-7 today, but what role do commodities play in forex price action............? We will explore that tomorrow.
USD:
The USD lost ground to the EUR and GBP but the greenback remains in the stronger parts of its range against the two currencies. There was no major economic data from the U.S. yesterday but Wall Street bounced off of it lows and turned in a positive day. The Dow Jones Industrial Index finished the day above the 10,000 mark, which is viewed by many traders as an important psychological barometer. After a week of positive movement versus most currencies the USD has met what appears to be some resistance. The U.S. will be releasing Trade Balance numbers today but the main highlight for investors will be Ben Bernanke. The Federal Reserve is expected to begin outlining its exit strategy from the stimulus programs it has undertaken with its monetary policy the past year and a half. Investors will be keen to decipher what implications are in store for the U.S. economy as the Fed begins to change its management approach to the financial crisis.
Tomorrow the weekly Unemployment Claim figures will be brought forth and on Friday Retail Sales statistics will be published. These two reports could be enough to inject the marketplace with impetus since they deal directly with issues confronting the prospects for growth within the States. However, investors today will be examining Chairman Bernanke’s testimony which will be released formally. The actual hearings in front of Congress have been postponed because of the severe snow storm which has buried Washington. The paper and all discussions which follow are sure to discuss the ‘exit strategy’ of the Fed in a rather conservative manner. Showing that there is a game plan to investors, while the Fed points out that the ‘golden faucet of cash’ is not going to be shut off prematurely and stall the economy in its tracks will be vital. Besides the Federal Reserve’s platitudes today, investors will also keep looking over their shoulder and across the Atlantic as Europe deals with it ongoing saga regarding Sovereign debt. The USD has struggled early this week and the question is how risk sentiment will play out today.
EUR:
The EUR was able to find some firm ground on Tuesday as rumors began to swirl that the European Union would intervene within the Greek debt crisis. Though it is still not clear exactly how a bailout for Greece will be arranged, reports are starting to circulate that Germany is involved in the process. The question that investors have had to worry about is the risk of contagion taking place within Europe concerning the debt crisis. The reported lifeline that will supposedly be given to Greece goes against all pronouncements made the previous two weeks, but it became self evident that if Greece were allowed ‘to fall’ that it could create an unwanted domino effect. News regarding the Sovereign debt issue will grow over the next two days as the European Union holds a previously planned meeting in Brussels for the leaders of its nations. Yesterday the German Trade Balance numbers were released and came in better than expected. Today Industrial Production figures will come from France and Italy. Investors will be looking for a clear solution regarding the Greek debt problems, and any questions which are left open or remain cloudy could influence the EUR in the coming days.
GBP:
The Sterling gained on Tuesday against the USD and this happened even as the Trade Balance statistics from the U.K. proved weaker than anticipated. Manufacturing Production figures will be released today along with Industrial numbers. The Manufacturing report is expected to see a gain of 0.4%. Also the Bank of England will publish its Inflation Report today and Mervyn King will provide a statement regarding the state of the U.K. economy. Today’s data and news will be the highlight of the week for the GBP in terms of homegrown influence, but the question investors will continue to monitor is if any storm clouds regarding risk adverse trading make their way from the European continent and hover over the U.K. as they did late last week. The health of the British economy remains a critical issue but it has been overshadowed the past week by the items at hand within the European Union. How all of this interacts for traders today and tomorrow will be important storylines for Sterling traders.
JPY:
The JPY and USD continued to fight their way through a rather intensive consolidated round of trading on Tuesday. Risk adverse trading throughout the Asian bourses has been prevalent and could be seen even as the U.S. equity indexes gained. Gold did gain slightly as the USD did show a bit of weakness versus the other major currencies yesterday. The JPY finds itself within a range bound mode against the USD and appears to be waiting for its next round of impetus.
Technical Analysis
EUR/USD:
The EUR staged a major comeback versus the Dollar. After opening at 1.3686 it hit an intraday high of 1.3839 before settling back near 1.3785. For technicians, 1.38 is a key level because it represents the Fibonacci 50% Retrace level. Fibonacci's premise is that numbers have a relationship one to the next. The relationship represents a pattern and a pattern suggest an identifiable behavior in price movement that may queue traders into potential future price action. To draw Fibonacci's lines simply identify a high and low over a specified period of time and the tool will identify where key levels of price action may transpire.
In this case, we used the low set back in March 2009 at 1.2457 and the high set in November 2009 at 1.5142. This places the Fibonacci 50% Retrace level at exactly 1.38. A close above that level would suggest that we may retest the 38.2% level. However, a close maintained below 1.38 implies that the EUR is still weak and may fall again.
GBP/USD:
We talked yesterday about the Pound's “range-bound” relationship with the Greenback. On Friday, February 5th the pair finally broke out of the range it had been trading in for so long. However, the Dollar yielded so much ground to its G7 counterparts that it has the pair knocking at the range boundary once again. We also mentioned the significance of the Moving Average cross over that just occurred which certainly point to a potentially falling GBP.
In the chart below, we have included a Fibonacci Retrace, similar to that of the EUR analysis for today. This places the 38.2% Fibonacci Retrace right at the absolute low of the range. It is not sheer coincidence that Tuesday's price action will close between those 2 points. The market is telling us that it is not ready to return to range trading on this pair just yet, but it is awfully close.
Commodity Currencies:
NZD & AUD were the big winners among the G-7 today, but what role do commodities play in forex price action............? We will explore that tomorrow.