The USD continued to gain against the EUR and GBP on Monday on a day without any major economic U.S. data. After Friday�s rather significant volatility, yesterday�s trading was tame and this may have to do with the two days of meetings that the FOMC will begin today in Washington. The equities markets traded in negative territory on Monday as traders seemed to be looking for a respite after the last few weeks of strong rallies, and they appear to be questioning how much more upside exist in a marketplace that still has so many economic questions. Today the U.S. will release its Prelim Non Farm Productivity report and a result of 5.2% is expected. The Preliminary Unit Labor Costs data will also be published, but do not expect these statistics to change sentiment.
Essentially after two days of gains, the USD has gotten the attention of many investors who may be scratching their heads while trying to figure out a trading correlation. The currency markets have been at the beckon call of risk appetite the past month and with little data today it seems likely that we may find a consolidated marketplace until tomorrow�s FOMC Statement from the Federal Reserve. Investors who do take positions in the USD today will have to take into consideration the direction the Fed will point to regarding interest rates. Certainly there will be no interest rate hike this week or in the foreseeable short term. The question however is whether or not the U.S. economy is actually going to start showing growth by the year�s end, and if this means that the FOMC will signal that it could then raise interest rates. And that is where the debate will be met with some skepticism, as some point to precarious high unemployment and a soft housing sector which will probably translate into weak consumer demand. The USD has shown strength the past two days of trading and while the markets are likely to be restrained today, the greenback could continue to exert pressure on the likes of the EUR and GBP.
EUR:
The EUR found itself losing ground to the USD on Monday. The French Industrial Production number was released and provided a figure of 0.3%, which was better than the estimate of minus -0.1%. Also the broad Sentix Investor Confidence reading was brought forth and turned in a reading of minus -17.0, an improvement over the forecasted result of minus -26.0. Today the German�s will publish inflationary reports with their Final CPI and it is anticipated to be negative -0.1%, which would match the previous number. Also the German WPI is on schedule and is expected to show a statistic of 0.1%. What this should continue to highlight if the data comes in as forecasted is that as much as people speak about inflationary concerns because of the large amount of money being shuttled forward by Central Banks, that it in fact the numbers from both the CPI and WPI would basically signal deflation and a flat economy. Tomorrow the European Union will release its broad Industrial Production figures. The EUR finds itself at the weaker side of a rather strong range it has enjoyed against the USD the past few weeks. After two losing sessions against the greenback some traders may find themselves wanting to test this �new� trend.
GBP:
The Sterling struggled again on Monday against the USD for the second straight day of trading. The BRC Retail Sales Monitor released their figures and it showed a gain of 1.8%, which was above the previous month�s 1.4%. Also the RICS House Price Balance numbers were published and it had a decline of -8.1%, which actually bettered the estimate and beat the last figure of minus -17.6% by a wide margin. Today the U.K. will release its Trade Balance numbers, and tomorrow importantly the Bank of England will bring forth its Inflation Report and BoE Governor Mervyn King will speak. The U.K. like the U.S. sits on the threshold of positive sentiment generated among investors who feel that the economy is going to turn the corner and begin to show growth. However, there remains a legion or two of investors who continue to be more cautious with their outlooks pointing to a lack of evidence that there has been little more than stability seeping into data. The GBP has had nothing short of a strong run against the USD for many months now, but the last two days of trading loses has caused some warning bells to sound.
JPY:
The JPY gained against the USD as international equities turned in a cautious day of trading and mostly traded in negative fashion. The range of the JPY and USD remains a challenging one, based on the amount of risk appetite that traders are willing to bear among these two so called safe haven currencies. Gold found itself trading lower against the USD and finds itself trading around 946.00 USD per ounce. Traders should expect to see a rather consolidated market today, due to investors awaiting tomorrow�s critical FOMC report from the States, thus the JPY should continue to move in a rather tight trading range today.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst
Technical Analysis
EUR/USD:
This pair is still showing negative momentum and the Oscillators are also ngatively sloped indicating further bearish movement. The next target price will be around 1.4100 and if this level is breached then we could see some sharper bearish movement. The preferred strategy today will still be a short position.
GBP/USD:
The sharp bearish channel on the daily chart continues with no signs of a stop. The Slow Stochastic on the daily chart is showing continued bearish movement and is supported by the RSI. Going short appears to be the right strategy.
USD/JPY:
This pair lost over 60 pips yesterday and there is still very strong negative momentum. The RSI and the Momentum on the daily chart have a very sharp negative slope. The preferred strategy today will be a short position.
USD/CHF:
The bullish channel on the daily chart continues, while no significant breach has been made. The Slow Stochastic on the 4 hour chart indicates the continuation of the bullish movement within the channel. However the Slow Stochastic on the daily chart is showing the correction of the current bullish trend is possible. Going long with tight stops appears to be the preferable.
The Wild Card
Gold:
There is a strong bearish trend on the one hour chart and all the daily indicators show that this bearish move can continue. The hourlies also support further bearish movement and the next target price seems to be around 940.00. Going short appears to be the right strategy.