The USD turned in a mixed day of trading which effectively reflected what took place on Wall Street Tuesday. The U.S. did not release any major data and today�s economic releases will remain relatively light. Crude Oil Inventories will be issued, but the commodity has largely been trading in the middle of its range and its price will be fueled more by speculative results from the equities markets. Quarterly earnings continued to feed trading sentiment on Tuesday and it will continue to do so today. Ben Bernanke testified in Washington and produced little in the way of surprises. He did field questions about the all encompassing powers the Federal Reserve maintains on monetary policy and left no doubt that this should remain its domain. Chairman Bernanke will be in Washington again today and investors will keep an eye on the happenings.
Other developments that could factor into the markets today and tomorrow are reports that CIT Group still is considering a bankruptcy filing, this if it cannot come to a full agreement with bondholders regarding possible insolvency. Also worthy of note is the planned speech by President Obama coming tonight about health care proposals. The initiative which is being pushed by the administration is important because of the costs involved that are hard to quantify from an accounting standpoint. The U.S. has taken on a huge amount of debt over the last year and it is questionable how a new program such as national healthcare coverage could be effectively instituted. Tomorrow the U.S. will release weekly Unemployment Claims and Existing Home Sales figures. Both of these numbers are important because of the implications they directly resonate within American consumers. It is the fear of unemployment that shifts spending habits among consumers and weakening home price values do little good for confidence either. The USD continues to trade deeply within an equity correlation and the consideration traders must gear themselves for is how much conviction this latest rally from Wall Street really has. If stocks should waver then the USD could strengthen.
EUR:
The EUR had a rather consolidated day of trading like its counterparts as the currency found little in the way of impetus. There was no major economic data from Europe on Tuesday. Today the broad Industrial New Orders for the European Union will be released and a gain of 1.9% is the estimate, this would be an improvement on last month�s negative return of -1.0%. Also French Consumer Spending is on the calendar and is forecasted to produce a rise of 0.4%. Tomorrow the Current Account data for Europe and the Italian Retail Sales data will be published. The scheduled economic reports may not be significant enough to counter the dollar centric trading that the EUR has been experiencing the past week. Large issues remain for the European Union concerning its banking sector and the exposure that exists to Eastern Europe, but the run up in the equity markets the past week and a half have managed to push doubts to the side for at least the time being.
GBP:
Sterling found itself languishing within a fairly tight range on Tuesday as a mix of caution entered its trading. Public Net Borrowing numbers showed a drop yesterday, producing a result of 13.0 billion compared to the estimate of 15.7 billion. Today the MPC Meeting Minutes publication will be presented and investors will look it over carefully to see what the Bank of England�s thinking is regarding its quantitative easing measures. Also the CBI Industrial Order Expectations reading is on the calendar and a number of minus -46 is expected. Tomorrow Retail Sales and Mortgage data will come from the U.K. and traders will be keen to study the housing numbers. The GBP has had another good showing against the USD the past week and a half while climbing to the stronger side of its range. It did this however as the equity markets also climbed, calling into question what would take place if the FTSE were to hit a road-bump.
JPY:
The JPY got stronger against the USD in what qualifies as another round of range trading within the currency pair. The Bank of Japan commented yesterday that they do not think Japan is at risk from greater deflation, but cautioned that their current policy of putting money into commercial paper � thus companies � has not concluded and will not for a while. Gold and Crude Oil moved insignificantly on Tuesday showing that the entire market may have taken a breath and is waiting to see what type of results the international equity markets can muster these next few days.
Written by: Robert Petrucci, Chief Commodity Expert and Forex Analyst.
Technical Analysis
EUR/USD:
On the 4 Hour chart the RSI and Momentum are beginning to flatten out indicating neutrality. Howevr the Slow Stochastic has crossed the 70 level indicating that we are in overbought territory. Traders should exercise caution before entering this one as a correction may be imminent.
GBP/USD:
The Oscillators on the daily chart are negatively sloped indicating that yesterday’s downward move still has room to run. The next target price will be around the 1.6290 level and if we see a breach beyond this point then it set up another stronger bearish move.
USD/JPY:
Bollinger Bands are tightened indicating decreased volatility as this pair has been trading in a range over the last few days. The Oscillators are also neutral supporting the notion that this pair is likely to remain range bound. Therefore the preferred strategy today will range trading.
USD/CHF:
The daily chart is showing range trading with no specific price direction and oscillators that float in neutral territory. The 4 hour chart is showing moderate bullish momentum due to a bullish cross on the Slow Stochastic. Therefore it seems that the preferable strategy today will be to enter a long position with tight stops.
The Wild card
Silver
We can see that the ADX on the daily chart is giving us a strong sell signal. This is further supported by the Stochastic Slow which is negatively sloped and slowly moving away from overbought territory. Forex traders may be able to maximize gains today by entering a short position