Bullish Market Lifts Riskier Assets, Weighs on USD

Wednesday’s relatively thin market conditions have apparently granted support to the euro and other commodity-linked currencies. Tensions appear to be easing in regards to recent flare-ups in debt woes in the US and Europe, which have helped temper risk aversion in the market and pull down on safe havens like the USD.

Forex Market Trends

Daily Trend up up down down up up
Weekly Trend up up down down up up
Resistance 1.4690 1.6535 82.85 0.8950 1.0840 0.8955
1.4670 1.6515 82.65 0.8930 1.0820 0.8935
1.4640 1.6485 82.35 0.8900 1.0790 0.8905
Support 1.4580 1.6425 81.75 0.8840 1.0730 0.8845
1.4550 1.6395 81.45 0.8810 1.0700 0.8815
1.4530 1.6375 81.25 0.8790 1.0680 0.8795

Economic News

USD – USD Drops after Existing Homes Sales Data Boosts Risk Appetite

The US dollar lost some ground yesterday as positive figures from the existing home sales data helped generate risk appetite. This shift in sentiment has spurred a rebound in higher yielding currencies like the euro, British pound, Swiss franc and Canadian and Australian dollars as traders pulled out of safe havens and into currencies with slightly higher yields.

Wednesday’s relatively thin market conditions have apparently granted support to the euro and other commodity-linked currencies. Tensions appear to be easing in regards to recent flare-ups in debt woes in the US and Europe, which have helped temper risk aversion in the market and pull down on safe havens like the USD.

Coupling the home sales data with yesterday’s bullish figures out of Europe also helped the EUR/USD push up from Tuesday’s losses. Traders may begin to anticipate a modest bump in the pair as fundamentals tilt more and more towards riskier currencies. With today’s manufacturing and unemployment figures out of the United States, there is a chance that a positive reading out of today’s indicators may help drive investors deeper into riskier assets, further pulling down on the greenback.

EUR – EUR Bullish as Investors Turn to Higher Yielding Assets

The euro experienced an uptick yesterday as global investors took bullish reports out of Europe and the United States as a sign to buy into riskier assets. The EUR/USD bounced off its 1.4206 support line and currently trades near the 1.4530 level as of this morning. This week’s thin market conditions from the Easter holiday and Spring Break vacation period provides little support to move the price in either direction, but fundamentals appear to be shifting in favor of the euro as of mid-week.

Monetary policy adjustments have many currencies trading more volatile than they have been recently, with Sweden’s Riksbank the most recent example with a lifting of rates by 25 basis points yesterday. The British pound has experienced a few price swings and the move into and out of carry trades has made trading the Swiss franc, Japanese yen and even US dollar more unpredictable. But yesterday’s shift into riskier assets is providing some normalcy for short-term traders who now see riskier assets pushing higher against their rivals.

The economic calendar today is focused more intently on Britain and North America. Overall, traders are eyeing tomorrow’s retail sales figures out of Britain and Canada for a fuller picture of what is to come after the Easter holiday this weekend. Traders will want to keep a lookout for tomorrow’s German Ifo Business Climate report since it will be the last significant figure published by the euro zone in this week’s trading. It could push the EUR higher if it comes out above expectations, especially considering the recent move into riskier assets from positive fundamentals.

JPY – Yen Mixed as Risk Appetite Gains Momentum

This week’s talk of rising risk appetite may have found solid ground yesterday as American existing home sales data helped highlight growing consumer optimism, lower oil inventories signaled positive industrial growth in the US, and Australian import prices and inflationary data grew more than expected, leading many to speculate a tightening of monetary policy by the Aussie giant. The impact has been for safe havens, like the Japanese yen, to find its feet swept out from underneath it, but mixed versus other safe havens, like the US dollar and Swiss franc.

The yen has fallen against most of its currency rivals since yesterday. The USD/JPY, however, has remained flat near 82.50 since Monday. Against the British pound, traders have also witnessed a leveling-off effect as the pair consolidates around 135.50. With the economic calendar today focused on British and Canadian economic news, the yen will likely not experience much change unless the US economy continues to release positive data. If that is the case today, traders may want to anticipate a second rise in risk appetite as traders move to higher yielding currencies.

Crude Oil – Unexpectedly Sharp Drop in Inventories Lifts Oil Price

US crude oil inventories revealed an unexpectedly steep decline of 2.3M barrels this week. Traders have begun to assess what impact this will have on price and what it may mean for global industry. The connection of US stockpiles to the price of crude oil is difficult to gauge, however. A decline could either represent a short-fall in supply or simply an expansion of usage from bolstered demand. Either way it tends to suggest an increase in price, which is what traders witnessed yesterday.

The other side of this equation, however, may be that the US decided to release more of its inventories to alleviate pressure at the pumps since US gas prices have climbed to nominal record highs over the past few weeks. No matter what the reason, this shortfall in stockpiles is helping to fuel a buy-in on crude oil’s spot and futures market driving the price to an 8-day high. Traders may expect a corrective downturn if the USD finds support soon, otherwise it may be a safe bet to join the bullish trend.

Technical News

Most technical indicators are showing that this pair is overbought, and is likely to see a downward correction in the near future. On the 4-hour chart, the Williams Percent Range has crossed into the overbought zone, while the 8-hour chart’s Slow Stochastic shows a bearish cross has formed. Going short appears to be the wise choice today.
The Stochastic Slow on the 8-hour chart has formed a bearish cross, indicating that downward movement is likely to occur. This theory is supported by the Relative Strength Index on the 4-hour chart, which is currently well into overbought territory. Traders will likely want to short this pair today.
The Williams Percent Range is currently well into the oversold zone on the daily chart, indicating that an upward correction may occur today. In addition, the Relative Strength Index on the 8-hour chart is also oversold. Going long may be the wise choice today.
The Stochastic Slow on the 4-hour chart has formed a bullish cross, indicating that an upward correction is likely to occur in the near future. The Williams Percent Range on the daily chart is currently at the -90 level, giving further support to the theory of upward movement today. Going long with tight stops may be the preferred strategy today.

The Wild Card

The Williams Percent Range on the 4-hour chart of this pair is currently in overbought territory, indicating that a downward correction is likely to take place. This theory is supported by the Stochastic Slow on the same chart, as well as the 8-hour chart’s Relative Strength Index. Now may be a great time for forex traders to open up short positions before the downward breach occurs.

Written by Forexyard.com