The euro rose to an 11-week high at above USD1.31 Thursday after improving euro-zone economic data contrasted with festering worries that the U.S. economy is slowing.
The dollar traded at its lowest point in three months against a trade-weighted basket of its competitors as investors, worried over the lack of pace in U.S. growth, turned away from the greenback.
A better-than-expected reading of U.S. weekly jobless claims failed to extinguish the worry, as the previous week's claims were revised upward, signaling little improvement in the labor sector and keeping the dollar under pressure. The Labor Department announced initial claims for jobless benefits declined by 11,000 to 457,000 in the week ended July 24.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.556 from 82.132. The index traded at its lowest level since late April.
Separately, the Reserve Bank of New Zealand Thursday lifted the Official Cash Rate by 25 basis points to 3.0% after a similar increase last month, but the cautious tone of the statement has firmed up expectations there will be a pause in the hiking cycle later in the year. The New Zealand dollar fell slightly against the greenback on the cautious tone of the statement.
Market expectation
The euro continues to benefit from easing concerns over the region's sovereign-debt crisis. The worst of that crisis has likely passed, and there are signs of confidence returning, though some countries will still face deficit-related problems, analysts.
Analysts warned that the euro is likely to enjoy continued support over the near-term, especially if U.S. data remains weak, its gains may prove limited if concerns about a slowing U.S. economy widen to include the broader global economy.
UK Mortgage Approvals are expected to fall for the second consecutive month in June while Net Consumer Credit growth slows from the previous month over the same period.
UK Mortgage Approvals are expected to fall for the second consecutive month in June while Net Consumer Credit growth slows from the previous month over the same period. The figures will reinforce dovish comments from BOE policymakers delivered in testimony to the Parliament’s Treasury Committee, where governor Mervyn King downplayed the stronger-than-expected second quarter GDP result to stress lingering uncertainty about the recovery in general and inflation in particular, signaling monetary policy is firmly stuck in accommodative territory for the time being.
Trading Tactics
A clear uptrend could be an opportunity to Buy GBP/USD.
The buying point is at 1.5627; Pivot point highest level is the take profit at 1.5695; Pivot point is the stop loss at 1.5590
The selling point is at 1.5570; Fibonacci 38.2% is the take profit at 1.5450; Pivot point is the stop loss at 1.5650
Technical: Sterling forms a new high and may continue the minor uptrend. A move back higher could set up a test of 1.5695
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD crosses the signal line upwards; Momentum and RSI (Relative Strength Index) are in an uptrend; stochastic oscillator gives a neutral signal.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
The Japanese yen rose today against the U.S. currency as the growing concern for the global recovery spurs the investors to seek safety, increasing the appeal of the Japanese currency.
The U.S. economy continues to show the sings of the weakness. While the banking sector in Europe looks pretty robust, the manufacturing sector gives the reason for the concern. According to the experts’ estimates, the manufacturing confidence in the Eurozone was minus five in July.
USD/JPY fell from 87.44 to about 87.17 today as of 8:58 GMT after reaching as low as 87.08.
The euro rose against the U.S. dollar today on the concern for the U.S. economic recovery, which decreased the appeal of the U.S. currency for the investors and increased the attractiveness of the shared European currency.
The euro regained some of its strength after the stress tests showed that only seven European banks required to raise capital. In the same time, the U.S. gives more and more reasons for the concern about its economic growth. The analysts’ estimates say that the gross domestic product rose by the annual rate of 2.5 percent in the last quarter, down from 2.7 percent in the three months earlier. The government report for the GDP will be released tomorrow.
EUR/USD rose from 1.2994 to 1.3074 today as of 8:36 GMT.
Markets are trading in a lethargic manner as participants continue to nervously take on risk-correlated trades. The move toward risk is logical because without the massive sovereign crisis fear hovering over the market like the Sword of Damocles, one needs to consider the fundamentals - particularly monetary policy, as the core driver. Overall, the rate at which central banks are mopping up excess liquidity has been slower-than-expected with the BoE and Fed still discussing the potential for further QE.
In this era of ultra-low policy rates, risk taking will be encouraged. In the past few days, we’ve seen Eurozone sovereign spreads narrow considerably, the VIX index is trending lower along with decreased FX volatilities and global equity markets have demonstrated a resilience to bearish news. If corporate earnings come out strong, this could be the start of a summer rally, however we’re not so sure. Our view is that the fears surrounding sovereign risk may have subsided for the time being, but will most likely return this fall.
Even with the recent stint of positive news, foreboding signs are on the horizon. The Fed’s Beige book released yesterday reported that the US recovery remained on track but has begun to actively slow. The notion of a US slowdown was reinforced by recent US data, including yesterday’s durable goods figures.
In New Zealand, the RBNZ raised its policy rate 25 bps to 3.00% as we had predicted and the accompanying statement asserted that future growth prospects had deteriorated considerably. Traders rapidly paired down their interest rate expectations which in turn weighed on the NZD.
Governor King’s comment seemed to slam into the sterling market, which was curious because his remarks were really nothing new or original. He recommended caution over reading too much into the strong Q2 GDP figures and reaffirmed that inflation remained finely in check. Paul Fisher stated that the global outlook had weakened and David Miles resonated with the most dovish view of all – that inflation would taper off and the current ultra-loose policy was correct.
The combination of all these comments hit the GBP value like a sledge hammer. It wasn’t until Sentance’s hawkish comments that the “current policy setting was extreme” that some sanity was regained in the FX market.
We are convinced that the market is now underestimating the strength of the UK recovery and that the current downtrend in inflation will flat line and then begin to move higher. The BoE interest rate path should give GBP a boost in the mid-term.
Otherwise, there’s a frenzy of data to be released during the European session today and after that it’s onto corporate earnings. We will continue to use equity market activity as a compass for FX directions. Correlation remains particularly high between the EURUSD and S&P and should thus be traded accordingly.
Today's Key Issues (time in GMT): 07:30 SEK Jun retail sales, +0.6% m/m EXP; prior +1.6% m/m, +2.7% y/y. 08:00 EUR GER Jul unemployment rate, 7.6% sa EXP; prior 7.7%. 08:00 EUR GER Jul unemployment, nsa and sa; prior 3.153 mln, 3.23 mln. 08:00 EUR GER Jul unemployment - change, -10k sa EXP; prior -21.0k. 08:00 EUR ITA Jun wages, +2.6% y/y EXP; prior +0.1% m/m, +2.5% y/y. 08:30 GBP Jun consumer credit, GBP300 mln EXP; prior GBP331 mln. 08:30 GBP Jun mortgage appl/loans, 49k/GBP1 bln EXP; prior 49.81k/GBP1.184 bln. 08:30 GBP Jun money supply; prior unch. 09:00 EUR Jul business climate index, 0.39 EXP; prior 0.37. 09:00 EUR Jul consumer sentiment index, -14.0 EXP; prior -17.0. 09:00 EUR Jul economic sentiment index, 99.1 EXP; prior 98.7. 09:00 EUR Jul industrial sentiment index, -5.0 EXP; prior -6.0. 09:00 EUR Jul services sentiment index; prior 4.0. 12:30 USD Initial jobless claims, thous (4wma) 24-Jul 23:01 GBP GfK consumer confidence survey, bal Jul
EurUsd We’ve had another day of tight range trading in EURUSD, and for the time being there is a ceiling of resistance at 1.3046 that is blocking the path higher. We are still playing the bullish break out of a symmetrical triangle pattern on the hourly chart, and based on the projected path of that triangle we are expecting a move to 1.3290 in the coming days. Once we clear 1.3046, the next resistance level is expected at 1.3093 (10 May high) with weak resistance also anticipated at 1.3213 and 1.3254 (14 and 13 May highs respectively). Support at 1.2950 is still valid, with trendline support just below at 1.2940 –should the pair drop below there we would have to concede the failure of the bullish triangle breakout, and would then eye technical levels below at 1.2793 (23 Jul low), 1.2733 (21 Jul low), 1.2683 (14 Jul low) and 1.2522 (13 Jul low).
GbpUsd There were a few hairy moments yesterday for GBPUSD as BoE’s King hit the newswires to downplay the significance of the latest GDP reading, but tellingly the temporary sell-off was met with eager buyers clambering to get in on this impressive GBPUSD recovery, and the pair has since pushed to fresh highs of 1.5655. As previously discussed, we feel that the UK GDP figures last Friday were a game changer, and from here we would relish any dips towards the lower edge of the current uptrend channel now seen at 1.5385 to get long. The way things have gone so far, we may not even get a correction that deep as decent support is also anticipated around the 200-day moving average at 1.5545, 1.5525 pivot, then again at 1.5443 (yesterday’s low). Really there is not much standing in the way of an assault on the 17 Feb high 1.5816 in the coming days, and beyond there we open up the possibility of re-testing the top of the 8-week uptrend channel (currently at 1.5950) before the psychologically significant 1.6000.
UsdJpy USDJPY may have slumped in a rather ungainly fashion back below 87.50 in the past few sessions, but the pair is at the very least continued carve out successively higher highs and higher lows since the double bottom around 86.25 levels. The last rally (which topped out at 88.11) was thwarted by a pretty formidable confluence of resistance levels (8-week downtrend resistance, top of 1-week uptrend channel and 88.00 pivot), but we still believe the bulls can overcome these barriers on a subsequent re-test now they are more comfortably spaced out. The 8-week downtrend has now crept down to 87.90 while the top of the current uptrend channel has climbed to 88.25; however thereafter few levels are discernible ahead of our triangle target 88.85. Should the rally have the momentum to continue beyond there, look for sellers at 89.15 (12 Jul high) and 89.50 (28-29 Jun high). The most convincing support level to try getting in on the long trade appears to be the lower edge of the 1-week uptrend which is now seen at 87.10-15 (already had one test of that area this morning), then further supports anticipated at 86.82 (Tuesday’s low) and 86.25 (recent range floor).
UsdChf Despite the bullish engulfing candlestick on Monday/Tuesday of this week AND the important break of the 1-month downtrend channel, the bulls have looked lacklustre in the past 24 hours and have sloppily allowed the 1-week uptrend to break down around 1.0560. This conclusively negates the bullish flag pattern we had proposed yesterday, and seems compelling argument to move to the sidelines for the time being on this one and wait for more favourable risk-reward trades to present themselves. Buyers should be able to catch the fall if it extends to 1.0450, and an extremely important support still remains at 1.0400 so we would look to resume buying down at those levels. Strong selling interest may once again cap rallies at 1.0640-47 (13 Jul & 27 Jul highs and 200-day moving average), and given the propensity of July/August markets to be directionless and range bound, we would actually look to sell at those levels rather than look for a continuation higher. IF the bulls manage to pull their fingers out and effect that break higher, a powerful resistance level around 1.0700 is backed up but the top of the 1-week uptrend at 1.0710.
The recent upside failure at 1.3044 has seen a narrow consolidation, ahead of today’s renewed attempt higher. Break above the later is required to resume gains, with 1.3073/93 seen next, ahead of 1.3125 Fibonacci level. Immediate support stands at 1.2965/51 zone.
The latest strength retraced 50% of 1.7041/1.4230 descend at 1.5637 yesterday, with consolidation just below here followed. Fresh push higher is now underway, with clear break above 1.5637 to focus 1.5688, 18 Feb high, next. Below, 1.5544 offers initial support, while 1.5440 remains key support and possible break under here to weaken the structure and allow deeper corrective pullback.
The latest upleg off 86.82 higher low stalled at 88.10 yesterday, ahead of reversal. This has so far reached 87.09, retracing over 50% of the entire upleg off 86.25, increasing risk of lower top and possible fresh weakness towards 86.33/25, key support zone. Otherwise, regain of 88.10 would revive bulls and resume recovery.
Upside rejection at 1.0638, 200 days M.A on 27 July has triggered a reversal to 1.0515 so far. To maintain immediate bulls, higher low above 1.0480 is now required. Above 1.0638/45 will open 1.0675/95 barriers, with break here required to resume recovery. Loss of 1.0480/58, however, would attract key 1.0406/1.0393 support zone.
The parity found support on 1160 and the price is currently making a rebound of correction. Indicators are globaly bearish. We maintain to trade only short positions as far as 1170 is resistance. The breakout of 1160 will give a new sell signal. As far as 1160 is support, a pullback on 1180 is possible.
The parity found support on its bullish slant, after a lowest on the support at 0.89. Indicators are mixed. We maintain to trade only long positions as far as the price is above 0.89. The breakout of 0.9050 will give a new buy signal. However, if 0.89 is broken, a sell signal will be given. We will then advise to trade only short positions as far as 0.8950 will be resistance.
We maintain our last analysis : 'The parity continues to test the resistance at 1.30. In extension, the price don't succeed to break 1.3050. The parity is still moving into its bullish channel. All indicators are bullish. We maintain to trade only long positions as far as the price is above 1.2890. The breakout of 1.30 will give a new buy signal.'
The parity continues its bullish movement and is currently testing the breakout of the resistance at 1.56. If validated, a new buy signal will be given. We could then target the next resistance at 1.57. We maintain to trade only long positions as far as the lower band of the former bullish channel is support. In case of breakout, we will stay neutral. Only the breakout of 1.5466 will allow us to trade short positions.
The parity broke its bullish slant and 0.72 acted as support. So, we are now neutral on the parity between 0.72 and 0.73. We advise to wait a breakout of one of these two bands to take position: - Long if 0.73 is broken - Short if 0.72 is broken
The parity made a pullback on 1.0382 and then got back into its bearish channel. So, we maintain to trade only short positions as far as this level is resistance. The breakout of 1.0225 will give a new sell signal. However, if 1.0382 is broken, we could trade long positions.
The parity is currently making a correction and is testing the support at 1.0550. We maintain to trade only long positions as far as this level is support. A new breakout of 1.0580 will comfirm the take up of the bullish movement. However, if 1.0550 is broken, we will stay neutral on the parity between this level and 1.0494. We will then wait the breakout of one of these two bands to take position.
88 finaly acted as resistance and a correction occured, pushing back the price below 87.67. So, we are neutral on the parity between this level and 86.86. We will wait the breakout of one of these two bands to take position: - Long if 87.67 is broken - Short if 86.86 is broken
MORNING BRIEFING: Beige Book shows some districts slowing economy
What’s new: United States: Financial state of emergency in California United States: Beige book report shows some districts slowing economy Euro zone: Tougher lending rules for banks from ECB United Kingdom: No tacit agreement to keep low rate China: IMF board split on China’s exchange rate debate Japan: BOJ’s Kamezaki says won’t base policy on forex New Zealand: RBNZ raises interest rates by 25bps to 3.00%
Today:
Rates in Asia and Indices: EURUSD: 1.3045 - 1.2978. USDCHF: 1.0581 - 1.0517. GBPUSD: 1.5631- 1.5584. EURJPY: 113.97 – 113.18. USDJPY: 87.52 – 87.10. DowJones: 10'497.88 -0.38% NASDAQ: 2'264.56 -1.04% S & P 500: 1'106.13 -0.69% Nikkei: 9'696.02 -0.59% Shanghai: 2'648.60 +0.57% Gold: $ 1'167.20 Crude Oil: $ 77.22
Comments: In an interview, British finance minister George Osborne declared ‘There is no tacit agreement with Bank of England Governor Mervyn King on keeping interets rates low. He is absolutely independent, as is his Monetary Policy Committee.'
New Zealand’s Central bank lifted interest rates by 25bps to 3.0%, but scaled back its plans for further move. The New Zealand Dollar fell sharply after the Reserve Bank of New Zealand signalled the pace of further interest rate hikes would be less than earlier thought. The kiwi fell to a low near $0.7202, from about $0.7287 before the announcement.
The Beige Book, released yesterday at 2000 CET, reports on conditions in all 12 districts that are part of the Federal Reserve system. The report, based on information before July 19, said activity "continued to increase, on balance" though Cleveland and Kansas City said business held steady. "Among those districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two districts, Atlanta and Chicago, said the pace of economic activity had slowed recently," the Fed said.
The Euro is still hovering near an 11-week high against the US Dollar reached earlier this week. EURUSD is up to 1.3045 today, just shy of the recent high reached 27th of July. Against the Yen, the single currency dipped on high selling by Japanese exporters. Traders are expecting more offers to emerge if the Euro rises to above 115 Yen.
EUR-USD It looks more likely that it would rise to 1.3036 - 1.3076 from 1.2981 or 1.2960. After which a downside move is expected.
USD-CHF There are initial signs of a good corrective recovery towards 1.0595 or even 1.0614. Supports at 1.0552 and 1.0528 zone.
GBP-USD While below 1.5619 - 1.5643 it is more likely to fall further towards 1.5573 or 1.5551. Premature rise above 1.5643 could see it rising above 1.5687 zone.
USD-JPY There are initial signs of a good corrective recovery towards 87.79 or even 87.96. Supports at 87.37 and 87.12 zone.
USD-CAD It should trade higher to 1.0420 while 1.0360 or 1.0344 offers support. Stop loss below 1.0328 zone.
NZD-USD Support at 0.7264 or 0.7239 should hold the downside for a correction to above 0.7321 zone.
AUD-USD Market should pop up towards 0.8979 or 0.9002 this bullish scenario would be damaged if 0.8920 - 0.8884 zone is broken, a severe break down could then occur.
EUR-JPY It looks more likely that it would rise to 114.53 - 115.39 from 113.45 or 113.02. After which a downside move is expected.
EUR-CHF Preferred view is for a fall to 1.3724 - 1.3692 while 1.3775 - 1.3794 area resists. A clear break of 1.3857 would be bullish.
EUR-GBP Current fall is near an end of wave around 0.8308 zone, a rally should then procede to above 0.8360. Fall below 0.8285 would cancel this scenario.
EUR-CAD It should try higher up to 1.3504 - 1.3543. Entry point 1.3466 or 1.3444. After this rise, a correction is expected.
EUR-NZD Current upmove should be ended around 1.7900 - 1.7960. Any correction consolidation should find support in 1.7795 - 1.7751 zone.
EUR-AUD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.4632 or 1.4640 if support around 1.4510 hold. After which a pullback to 1.4510 - 1.4464 zone is possible.
GBP-CHF A corrective rise should ideally test 1.6544 or even higher than 1.6605. Supports are at 1.6425. Stop loss below 1.6397 zone.
GBP-JPY There are initial signs of a good corrective recovery towards 136.99 or even 137.35. Supports at 136.17 and 135.71 zone.
GBP-CAD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.6221 or 1.6261 if support around 1.6149 hold. After which a pullback to 1.6149 - 1.6120 zone is possible.
GBP-AUD Current rise should end around 1.7576. Objectives of this downmove are 1.7301 or 1.7138. A rise above 1.7688 is again bullish.
CAD-JPY It looks more likely that it would rise to 85.13 - 86.07 from 84.10 or 83.63. After which a downside move is expected.
NZD-JPY There is bearish potential for a fall to 63.18 while 63.86 - 64.07 resist. After this fall a recovery up to 64.07 or 64.28 is expected.
AUD-JPY No comment!
XAG-USD It may meet resistance in 17.50 - 17.52 zone for a drift down to 17.31 zone, after which bounce to 17.71 is anticipated.
XAU-USD It should try higher up to 1164.96 - 1167.60. Entry point 1162.32 or 1160.31. After this rise, a correction is expected.
The Australian and Kiwi dollars were the big losers on Wednesday on the back of a weaker Australian CPI report and dovish interest rate decision from the Reserve Bank of New Zealand.
AUD/USD shed 92 pip on the back of yesterday’s weaker than expected CPI report. The Australian Bureau of Statistics reported a 0.6% quarter-over-quarter growth rate in second quarter CPI, despite calls for an increase to 1.0% from 0.9% in Q1. Annual CPI growth moved up to 3.1% from 2.9% in Q1, despite calls for 3.4%. The pair last traded down 88 pips at 0.8936.
Meanwhile, NZD remains under pressure after a dovish interest rate decision earlier on Thursday. Although the RBNZ hiked its benchmark interest rate by 25 bps to 3.00%, as expected, central bank Governor Alan Bollard said the pace of monetary policy expansion may slow. He added that the economic outlook for the region has softened, with domestic demand subdued, and the New Zealand dollar stronger than what is consistent with the fundamentals. NZD/USD last traded lower by 119 pips at 0.7213.
Meanwhile the USD remained on top, outperformed only by the yen after core durable goods unexpectedly fell by 0.6% despite calls for a 0.4% gain. Also, the Federal Reserve’s Beige Book Economic Report said that economic activity in the U.S. slowed in some areas.
Looking ahead, focus will be on a barrage of euro zone climate indicators as well as U.S. weekly jobless claims.
Plenty of important macro data from the U.S. was published yesterday. Investors were disappointed by the figures and responded mainly by moving away from riskier assets. At first U.S. Durable Goods came negative at -1%, at 12:30GMT later at 18:00GMT Beige book revealed a gloomy outlook for U.S. economy. Although company earnings are still high, yesterday fears about recovery came back to dominate the markets.
Economic News
USD - Traders Shift from EU Debts Concern to U.S. Economic Outlook U.S. macro data came far less than expected. Investors responded by moving away from riskier assets back to buying the Yen and U.S. Dollar. The EUR/USD was slightly down after U.S Durable Goods was published, The USD/JPY traded lower, currently trading at $87.22 as investors feel safer holding the Yen over the USD. The British Pound continued to rally against the U.S. Dollar, despite the move to safer assets.
U.S. demand for Durable Goods, which is usually a sign for economic strength, came negative at -1.0%. Forecasts which already expected a form of decline from last month were more moderate than the actual figure. Traders were surprised by the final figure and reacted by sending markets lower. Later the Beige Book was released by the Fed during mid U.S. day trading. It provided a mixed economic picture but eventually supported the markets from declining further. The report said that the U.S. economy was growing but there were also signs of a slowdown in some regions over the past two months.
Looking ahead to today, traders should follow the release of the Unemployment Claims at 12:30 GMT. A worse than expected result might intensify the current trend and strengthen the greenback further.
EUR - EUR's Recent Rally Losing Steam EUR's rally against its major counterparts stumbled yesterday as new economic data raised fears about the strength of global economic recovery, with the common currency ending lower against its major counterparts.
EUR/USD ended slightly lower yesterday, reaching a low of 1.2968; however, it managed to recover some of its loses to currently trade at 1.3010. The pair seemed to trade without a clear trend and moved mostly sideways. The EUR/JPY, however sent more clear signs of a correction building up. The pair's five days rally ended yesterday after it breached an 11 week high. Signals show that pair should further decline in coming days.
Looking ahead to today, traders are advised to follow the British HPI data at 6:00 GMT as well as the German Employment change at 7:55 GMT. Positive data might bring back some market optimism, pushing the Pound and EUR higher against their counterparts.
JPY - Strengthens on Safe Heaven appeal The JPY strengthened against the U.S. Dollar yesterday as investors expressed their concerns about the U.S. economy by selling the U.S. Dollar and buying the Japanese Yen. The Yen traded higher against most of its major counterparts; however, a strong currency may ultimately weigh on the Japanese economy as it is heavily dependent on exports.
A strong Yen would have bad influence on profits of Japanese companies. Consequently the Japanese government might be forced to weaken their local currency. So far no comments were published regarding Government intervention. As long as the Japanese Bank avoids market intervention the Yen is expected to keep its strengthening momentum.
Looking ahead to today traders should pay attention to the $86.88 support line, crossing down might take the USD/JPY pair even lower. Some analysts estimate that that the Yen could even reach as high as $85 in the coming months.
Crude Oil - High U.S. Inventories Send Crude Oil Price Lower Crude Oil prices ended lower yesterday after U.S Oil Inventories rose by 7.3M barrels. Lately this figure made little impact over Crude Oil prices but yesterday it came quite high compared with expectations of a 1.4M drop.
Demand for durables goods which also came surprisingly lower added to worries that demand for Oil would decrease in the near future as manufacturing declines. Crude Oil price might decline further in the short term if economic figures continue to deteriorate. Investors are worried about a possible double dip, meaning a renewed recession.
Gold price rebounded slightly during yesterday trading session. During the day it reached as low as $1156.25, but thereafter recovered and is currently trading at $1165 Gold price dropped after inflation worries began to fade and analysts begin to worry about another recession or economic slow down.
Technical News
EUR/USD The pair was relatively unchanged yesterday and as such has formed a 2nd consecutive doji candlestick which reflects the bulls and bears inability to move the price significantly. The RSI (14) has crossed below the overbought line, triggering a sell signal. But traders may want to be patient and wait for the RSI line to break its trend line before going short. A rising trend line can be drawn from the low of the RSI line that begins on June 4th.
GBP/USD The pound was stronger yesterday and has risen versus the dollar for the past 6 consecutive bars. This has pushed most oscillators into oversold territory as the Slow Stochastic is showing a bearish cross and the RSI (14) is floating in the oversold territory. However, before going short, traders may want to wait for a breach of a short term trend line that can begins at the bar on June 22nd.
USD/JPY A bearish flag pattern has formed on the 4-hour chart. The base of the flag pole begins at the high on June 14th and runs to the low for the pair at 86.25. The flag pattern is sloping upward with a previous downward trend. Therefore, a breakout may be expected to the downside in the direction of the long term trend. Traders may want to wait for a confirmation of the breakout at a price of 86.80 and enter short.
USD/CHF For the past 15 days the pair has traded in a defined range between the prices of 1.0650 and 1.0400. In this trading range a double bottom reversal pattern may be forming. A confirmation of the reversal pattern will be a close above the 1.0650 resistance line.
The Wild Card Gold The drop in the price of gold shows a potential reversal in the trend. The price has closed below the long term upward sloping trend line for the past two days, confirming a significant breach of the trend line and a breach below the support level of $1169. However, yesterday's trading closed and formed a hanging man candlestick. This may signal an upturn in the price. CFD traders may find a good opportunity to go long on a breach above the $1169 resistance level.
The dollar declined against the yen in Asia Thursday on speculation that U.S. Treasury yields will fall further due to concerns over a slowdown in the world's biggest economy.
Strong demand at a U.S. five-year sovereign note auction overnight suggested that recent weak economic reports from the U.S. have made investors pessimistic about the country's growth outlook.
The U.S. currency was weaker also because of speculation that foreign investors will buy new shares offered by Japanese companies, a process which involves yen-buying.
On Wednesday, market sentiment was dampened after data showing demand for U.S. durable goods slid for a second straight month in June. At the same time, the Federal Reserve's latest beige-book report pointed to signs that the economic recovery may be running out of steam, adding to the market's disappointment.
The dollar was at JPY87.19 as of 0450 GMT, lower than JPY87.44 in New York Wednesday.
The euro was higher at USD1.3013 at 0450 GMT from USD1.2988 overnight while it was lower against the yen at JPY113.47 from JPY113.54.
The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 81.970 from 82.132.
The British pound remained at a 5-month peak against the dollar despite dovish comments from the Bank of England, which did little to diminish optimism about the UK economic outlook after a run of encouraging data.
Flat Asian stock markets left the Australian dollar floundering Thursday, rising only slightly through the trading day, with crucial Chinese manufacturing data Sunday the next major test of market confidence. General U.S. dollar weakness and cross-related demand helped to put some support under the Aussie dollar.
Market expectation
Currency dealers believe Treasury yields will keep falling for the time being, meaning investors will see less returns from their dollar-denominated assets. That view helped prompt dollar selling, said analysts.
Investors will pay attention to Thursday's seven-year Treasury bond tender to see whether yields keep falling.
The euro won't be able to rise far above USD1.3, dealers said, because big U.S. hedge funds have resumed selling the euro based on their medium-term European economic forecasts.
The greenback may fall to as low as JPY86.00 in this global day, some dealers said. But the pace of any decline below JPY86.50 would be slow due to dollar-buying orders placed by Japanese importers, said analysts.
European stock markets are expected to have an uneven open Thursday, as investors weigh up the competing influences of disappointing U.S. economic data but upbeat second quarter corporate earnings.
