The USD traded within its known ranges on Wednesday as investors appeared to be suffering from gridlock in most of the broad markets. The greenback did show strength during the day but essentially found itself back where it started as the day came to an end. The U.S. released its Core CPI numbers yesterday and they met expectations coming in at 0.1%. The broad CPI data produced a 0.1% rate, which was more negative than the forecast of 0.3%. These numbers clearly indicate that inflation is on the backburner and the concern should be deflation. Crude Oil Inventories were published and they showed another reduction in reserves, but the price of Crude didn�t manage to climb which might be correlated with the flat results on the equities markets that continue to show little in the way of positive movement. The struggle between bears and bulls has grown in the past week and the general direction of value based assets such as equities and commodities have been hit on the lack of ability to show exactly how growth is going to come about anytime soon.
Today the weekly Unemployment Claims figures are on schedule along with the Philly Fed Manufacturing Index. In a marketplace that seems like it is waiting for a trigger to be pulled, investors will be watching to see if one of these reports provides the power for an assault. Weekly Unemployment Claims are estimated to have a number of 608K compared to last week�s result of 601K. The Philly manufacturing data is anticipated to have a reading of minus -17.6. Having said this, the catalyst of day could very well be Treasury Secretary Geithner who will be answering questions in front of the Senate Banking Committee in Washington. There has been plenty of talk about new regulations and oversights that the government wants to impose on the financial sector and Wall Street will watching his words with extreme caution. Tomorrow will be a very light day of data. Look for the American trading session to set off fireworks with the combination of the Unemployment Claims and Geithner today. The USD will likely continue to trade in an inverse manner compared to the equities markets today.
EUR:
The EUR traded in a fairly tight range against the USD on Wednesday. Europe released its broad Trade Balance figures and the numbers were slightly better than expectations but did not provide any real impetus. Today the Italian Trade Balance numbers are due but like yesterday�s data is unlikely to be the crux of investor attention. Instead traders will be keeping their ears pinned to any speeches or news generated from the European Union summit that will be getting under way today. The meeting is certain to bring about plenty of dialogue on the financial crisis. The European Union like the U.S. is going to discuss a large amount of regulatory ideas and what investors will be looking for are not only signs of agreement but cracks in the armor which show discord. Tomorrow German PPI data is on schedule. However the events from Brussels today and tomorrow will take the spotlight and coupled with dollar centric action the EUR will find its path. The EUR has balanced uneasily the last two trading sessions and appears to be ready to see some pressure if equity markets should drop.
GBP:
The Sterling traded in a broad range on Wednesday as it lost ground to the USD in the European trading session only to find a bit of stability later on in the day. The U.K. released its Claimant Count data and it turned in a better result of 39.3K compared to the projection of 61.8K. Also the MPC Meeting Minutes were published and provided very little in the way of new insight. Last night BoE Governor Mervyn King gave an address saying that banks that were too big to conceivably fail should perhaps not be allowed to get so big in the first place. This was in stark contrast to Alistair Darling�s viewpoint that the financial system and the banking sector must be looked at with other considerations. Today the Retail Sales figures will be published and an increase of 0.4% is expected. However it may be the EU summit in Brussels that stirs the U.K. market and the Sterling. This because it is expected that the U.K. which is not part of the European Union�s monetary configuration, will tell Brussels that it should have no sway over its own financial regulatory bodies or rules, and the GBP could find itself impacted on these developments and the sentiment it causes.
JPY:
The JPY picked up further ground on the USD on Wednesday as cautious traders held sway. With equity markets flat-lining globally and the Nikkei trading in negative territory, Asian investors have found little in the way to increase their appetite for risk. Gold continues to be mired in an extremely tight pattern and found itself hovering around the 938.00 USD mark. There has been some talk that the JPY has gotten a little stronger against the USD because of fading expectations that the Federal Reserve is going to raise their interest rate anytime soon and this realization drowning any hopes of a new carry trade opportunity. Perhaps that affected some traders, but as recently as a few days ago the JPY was trading near the lower end of what has become a very tight range with the USD and this was long after many investors had already written off any action by the Fed. Thus the price action of the JPY looks to be nothing less than another scream by traders for a safe haven in what are uncertain markets.
Technical Analysis
EUR/USD:
This pair continues floating in a tight range between the price of 1.3890 to 1.3960. However the daily chart shows signs of a bearish move. The Slow Stochastic on the 4 hour chart also supports this notion. The preferred strategy today will be a short position.
Support level: 1.3790 resistance level: 1.4010
GBP/USD:
After a short bearish correction, the pair is now floating in a wide range between the price of 1.6300 to 1.6405. However all oscillators on the daily chart are showing bearish momentum and the Bollinger Bands are also indicating an upcoming bearish move. Going short appears to be right strategy.
Support level: 1.6210 resistance level: 1.6530
USD/JPY:
The pair is now floating around the price of 95.80 level. All oscillators on the daily chart are showing bullish momentum and the Bollinger Bands are also indicating an additional upcoming bullish move. Going long appears to be the right decision.
Support level: 95.10 resistance level: 97.10
USD/CHF:
The 4 hour chart is showing that the pair is in a bullish configuration as volatility is increasing and we can see that a bullish cross on the daily chart�s Slow Stochastic indicates the upwards momentum.
Going long appears to be preferable.
Support level: 1.0760 resistance level: 1.0990
The Wild Card
Crude oil
The crude oil is now floating with no distinct direction. Both the Daily RSI and the Slow Stochastic are floating in neutral territory. The preferred strategy today will be to wait for clearer signal before taking any position.
Support level: 68.90 resistance level: 72.90