The USD extended its gains against the major currencies on Wednesday as mixed results from the Durable Goods releases helped bring additional stagnation to equities. While Core Durable Goods Orders showed a gain of 1.1%, the broad number which includes aircraft and automobiles showed a significant drop of -2.5%. This was not the kind of news that investors were hoping for as the sobering data threw a dose of caution onto Wall Street. Today the weekly Unemployment Claims figures are due and an outcome of 573K is estimated, which would be a worse number than last week�s. Unemployment and thus the fear of job security remains a vital concern among American consumers who help drive the U.S. economy with their spending. As long as jobs are at risk it stands to reason that the U.S. will not see a strong recovery. Investors will watch the unemployment data wearily for any surprises.
Tomorrow could prove a critical moment for the markets because the Advance GDP is on the calendar and its result could ignite volatility. President Obama declared yesterday that the end of the recession is in sight and this type of remark will be long remembered if it doesn�t prove to be true. Politicians have been trying to �sell� optimism for months and if the data today, tomorrow, and next week do not meet the expectations they have created we could see investor backlash. The American economy still has many question marks surrounding it and with the additional possibility of a gigantic healthcare initiative being proposed sometime this fall it is only reasonable to wonder where all of the money is going to come from. The U.S. stock markets enjoyed a good rally the past couple of weeks but the last two days have sounded a note of concern. The USD has gained well against the EUR as Wall Street has faltered and the road signs for the greenback�s direction will depend on the clouds shadowing share prices.
EUR:
The EUR stumbled again on Wednesday as CPI data from Germany proved noteworthy. The Preliminary CPI release from Germany showed a negative drop of -0.1% compared to the estimated gain of 0.2% highlighting the possibility of deflation. Today the Germans will publish their Unemployment Change numbers and a result of 44K is expected. Several major companies from Europe will be bringing forth their quarterly earnings today and investors will be keen to read exactly how the corporations express their outlooks. Also the Austrian banking sector was reminded that not all is well as the IMF said that the institutions may need a financial injection sooner rather than later to ward off exposure that still lingers from Eastern European countries of whom are suffering from the economic downturn. Tomorrow the Flash CPI Estimate will be presented for Europe and investors will examine it carefully. The EUR has found a tougher road the past two trading sessions as equity markets have begun to show caution amidst concerns that their gains may have been overstretched. The EUR could continue to face pressure if poor economic prospects affect investors taste for international bourses.
GBP:
The Sterling struggled against the USD on Wednesday as economic data from the U.K. produced uninspiring results. The Net Lending to Individuals produced an outcome of 0.4 billion compared to the estimate of 1.0 billion. Mortgage Approval data was also brought forth and showed a number of 48K matching the forecast. Today the Nationwide HPI is on the schedule and is anticipated to have a result of 0.3%. Tomorrow the U.K. does not have any major economic data on the agenda. Thus the GBP will find itself trading in a dollar centric manner based on the results from the impetus from the U.S. broad markets and data that is due today and tomorrow. The Sterling has found the going rougher the past two trading sessions.
JPY:
The JPY lost ground to the USD in cautious range trading on Wednesday. International equity markets continued to stumble after a very good run the past two weeks and investors are proving once again that the JPY and USD remain firmly within the grasp of a consolidated pattern that has been in a staple of this calendar year. Gold has come under pressure as the USD has picked up strength and now finds itself within the 925.00 USD mark.
Technical Analysis
EUR/USD:
This pair is now nearing the bottom barrier of the bearish channel on the daily chart. If this pair breaches the 1.4000 level then we could see some sharp downward movement. The oscillators also support a bearish notion indicating increased volatility. The Forex traders should wait for breach and then take the short position.
Support level: 1.4000 Resistance level: 1.4140
GBP/USD:
The pair made a substantial bearish movement yesterday. However the indicators on the daily chart are showing mixed signals which can indicate that a bullish correction is possible. The Forex traders should wait for clearer signals before taking any position.
Support level: 1.6310 Resistance level: 1.6550
USD/JPY:
This pair continues floating in a tight range between the 94.90 levels to 95.31 with no distinct direction. However, the RSI on the daily chart is showing that we are in the over-sold territory suggesting that a bullish movement is possible. Going long with tight stops appears to be preferable. Support level: 94.50 Resistance level: 95.50
USD/CHF:
The sharp bullish channel on the daily chart continues with no signs of stop. The Slow Stochastic on the daily chart is showing continued bullish movement and is supported by the RSI. Going long appears to be the right strategy.
Support level: 1.0810 Resistance level: 1.0900
The Wild Card
Crude oil:
the crude oil is now in the bearish corrective movement. All oscillators on the 4 hour chart are pointing down indicating that the price already made his correction. Going short appears to be preferable.
Support level: 62.00 Resistance level: 65.00