The USD picked up ground against the EUR and GBP in what appears to be the continuation of risk adverse trading. The University of Michigan Prelim Consumer Sentiment data was released and produced a reading of 64.6 compared to the estimate of 70.9. The U.S. stock markets were already in a precarious place before the consumer sentiment figures were published and found nothing to smile about afterwards. The performance of stocks on Wall Street remained sluggish and as Friday came to an end the currency markets showed once again that the USD remains a magnate for investors who would prefer to be cautious. The U.S. will release its Federal Budget Balance data today. Tomorrow the Retail Sales numbers will be brought forth. The retail reports will garner interest because of the dismal outcome from the University of Michigan Consumer Sentiment reading on Friday and investors will look for correlations.
Investors will continue to pay prime attention to earnings reports from Wall Street. Heavyweights such as Goldman Sachs and J.P. Morgan are on schedule this week and traders will be keen to judge the health of these major financial institutions. Also starting to find chatter are the murmurs of another stimulus package which found a backer in Warren Buffet in a recent interview. President Obama is beginning to feel heat from his political opponents who are saying that his actions thus far have not produced tangible results. Whether or not the political agenda of his opponents has merit remains questionable, but it appear the subject is on the verge of growing into a bigger debate. If a second stimulus plan finds backing the argument could grow into a full-fledged summer imbroglio. Unemployment, housing, and consumer spending remain core issues for the U.S. economy and stock markets remain nervous because of the clouds that seem unlikely to go away anytime soon. The USD has pushed its way to the stronger side of its recent range against both the EUR and the Sterling and has shown that it will likely hold its ground as long as equity markets flounder.
EUR:
The EUR continued to trade to the lower part of its range against the USD on Friday as the affects from sagging returns on equities markets took their toll. There has been little in the way of major economic data from the European Union and today will be a quiet day as well. ECB President Trichet is scheduled to speak in Germany today but it is doubtful his remarks will spur the markets. Tomorrow the German ZEW Economic Sentiment reading is due along with the broad report for the European Union and the broad Industrial Production numbers. On Wednesday inflation data will be published but like it is actually deflation which remains a concern in Europe and among its major counterparts. Look for the EUR to move on sentiment generated from the results on global equity markets and lingering discussions about the health of the European banking system which continues to foster speculation that it will need additional capital in order to function properly.
GBP:
Sterling was taken lower again on Friday against the USD as pressure continued to mount against the GBP. There was little in the way of economic data except for the PPI Input and Output numbers which did not cause any major surprises. The U.K. will release its BRC Retail Sales Monitor and RICS House Price Balance figures today. Both of these numbers could cause some waves for the Sterling but it is most likely that the GBP will remain likes its counterparts at the whim of investors who are gauging their risk sentiment based on the results from the equity markets. Inflation data will be published from the U.K. tomorrow and on Wednesday the Claimant Count Change figures are on schedule. The Sterling has found itself in a downward trend the past two weeks and its slope appears slick.
JPY:
The JPY maintained its strong range against all the major currencies including the USD on Friday as a barrage of risk adverse trading continued to surge in the currency markets. In essence the lack of commitment on the part of equity traders has fed directly into the desire of currency traders to take paths of preservation in a flight to quality as questions and doubts linger about global growth. Gold continues to show a lack of takers and it has not found the ability to climb from the lower plateaus of its current range. The JPY continues to turn in strong results even as the Bank of Japan calls for a weaker Japanese currency and this circumstance looks as if it may stay the case as long as traders remain cautious.
Technical Analysis
EUR/USD:
After a continuation of a bearish trend, the pair is now floating in a tight range between the 1.3915 levels to 1.3980. On the daily chart The RSI is floating around the 59 which do not provide a clear direction. The preferred strategy today will be to wait for a clearer signal before taking any position.
Support level: 1.3830 resistance level: 1.4050
GBP/USD:
The sharp bearish channel on the daily chart continues with no signs of 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.
Support level: 1.6010 resistance level: 1.6250
USD/JPY:
Bollinger bands are tightened indicating that this pair could trade in a tight range today. However both the dailies and the hourly�s support a bullish move. It seems that the preferred strategy today will be to wait for a clearer signal before taking any position.
Support level: 91.90 resistance level: 92.90
AUD/USD:
There is a very nice bearish channel appearing on the daily chart. The Momentum and RSI also have a negative slope and support further bearish movement. The next target price seems to be around the 0.7650. The preferred long term trade will be a long position.
Support level: 0.7650 resistance level: 0.7810
The Wild Card
Crude oil:
The crude oil is now showing bearish momentum as seen by the hourly oscillators. Both the daily and hourly charts support another bearish move. Therefore, it seems that Forex traders will be able to maximize gains today by entering a short position.
Support level: 58.10 resistance level: 61.10