The USD lost a slight amount of ground to the EUR and GBP in trading on Wednesday. The U.S. did not release any critical economic data, but that will change today with the publication of the weekly Unemployment Claims figures and Existing Home Sales. The Unemployment data is expected to produce a number of 551K, which would be worse than last week�s outcome. Existing Homes Sales are expected to show an improvement. The employment picture in the U.S. remains a critical aspect of the economy. Statistics show that the number of unemployed is the highest since 1983 and that those out of work for longer than 26 weeks percentage wise is the highest it has been since 1948. This will make today�s outcome important for investors and will continue to build into a critical test of the Non Farm Payrolls numbers that will come out in two weeks time.
The U.S. stock market turned in a mixed performance again yesterday with technology stocks doing well but with some financial shares lagging. Essentially we are starting to see a realization that revenues for companies are good thus far within these quarterly reports but that sales have been bad. Having said this, the equities have gained significantly the past week and a half and have not given up their gains. This leaves a large question about how the real economy is performing and how it will do long term. Tomorrow the Revised University of Michigan Consumer Sentiment figures will be released but the crux of the story today and tomorrow will continue to be delivered from Wall Street. Investors did pay attention to Fed Chairman Ben Bernanke yesterday but it was basically an encore from the previous day of testimony without any new elements. The USD has been trading to the weak side of its range against the EUR and the GBP for a few days now and as long as the equities are able to maintain their stance, the greenback could face pressure.
EUR:
The EUR enjoyed a day of relative strength against the USD as it held onto its gains made earlier this week. Industrial New Orders from the European Union showed a drop of -0.2% compared to the estimated gain of 1.9% but this was not enough to stem the momentum the EUR has picked up in the wake of good returns on bourses. Today the Current Account data for Europe will be released and it has a forecast of minus -3.6 billion. Also the Italian Retail Sales figures will be released and they are expected to show a slight increase. The Italian number may prove interesting for some considering the French Consumer Spending data on Wednesday provided a slightly better result. Tomorrow the PMI reports are due from Germany and France and this could provide some impetus for the EUR in what has been very dollar centric trading for the past week in accordance with the strong results from equities. The EUR has had a good run the past week and a half and traders who have tried stepping in front of this short term trend have found a difficult road.
GBP:
Sterling staged another strong day on Wednesday refusing to give up its gains. It did find some pressure in the early part of the trading session but as the day grew longer the GBP found enough takers to stage another rally. This drive upwards interestingly enough, came after a poor CBI Industrial Order Expectations reading which produced a negative number of -59 compared to the estimate of minus -46. This result underscores that it is not economic data which is driving the currency market, but speculation on a recovery due to the positive sentiment on stock markets for the time being. Today the Retail Sales figures will be published from the U.K. and they are anticipated to show an improvement of 0.4%. Also Mortgage Approval data will come forth from the BBA and expected to be a bit better. Tomorrow could be an important day for the GBP, this because the Prelim GDP will be reported. Investors will watch this outcome closely and will have to weigh it carefully against existing sentiment from the FTSE which has made the trading in the Sterling strong.
JPY:
The JPY lost ground to the USD on Wednesday as Asian stock markets continued to climb higher. In what appears to be some risk appetite coming into the marketplace based on the gains from international bourse the past week and a half, the JPY has traded weaker. Having said that we are still deeply within the midst of a rather consolidated range for the JPY and USD and it shows little signs of relenting.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
EUR/USD:
This pair continues floating between the 1.4198 levels to 1.4255 with no distinct direction. The pair now seems to be consolidating around the 1.4230 as the volatility is beginning to decrease. The RSI is floating around the 50 level and all oscillators on the 4 hour chart do not provide a clear direction as well. The preferred strategy today will be to wait for a clearer signal before taking any position. Support level: 1.4140 resistance level: 1.4310
GBP/USD:
The bullish channel on the daily chart continues. However The Slow Stochastic and the RSI on the daily chart indicate the correction of the bullish movement. Going short appears to be the right strategy.
Support level: 1.6350 resistance level: 1.6520
USD/JPY:
A bullish head and shoulders structure is shown on the 4 hour chart which took this pair to 94.20 In addition a double top stochastic pattern with a positive slope is establishing which may indicate another upcoming bullish trend as the next target is located at 94.70. Therefore, going long seems to be preferable today.
Support level: 93.10 resistance level: 94.50
USD/CHF:
This pair has been floating in a very tight range with no distinct direction at the last tradiing day. The Oscillators are relatively flat on the hourly level and the RSI on the daily chart is floating near the 50 line. However we can see on the daily chart that the Slow Stochastic shows that the bulliish momentum might come. the range trading appears to be the correct strategy.
Support level: 1.0600 resistance level: 1.0700
The Wild Card
Silver:
This commodity has rallied over the last trading day and the Oscillators indicate the continuation of the bullish movement. The hourlies also support a bullish notion. Forex traders may be able to maximize gains today by entering a steady long position.
Support level: 13.50 resistance level: 14. 10