Economic Data Posits Risk Taking This Week

Confidence and trade reports from the US and Canada last week portrayed a global economy somewhat stronger than what many had expected. The balance of imports to exports last Friday revealed a growing market, with smaller deficits , as businesses across the United States and Canada begin seasonal hiring for the holidays.

Forex Market Trends

Daily Trend up up down down down up
Weekly Trend up down up up down no
Resistance 1.3949 1.5899 78.05 0.9025 1.0387 0.8869
1.3924 1.5870 77.78 0.8998 1.0364 0.8836
1.3895 1.5838 77.45 0.8964 1.0332 0.8804
Support 1.3829 1.5771 76.84 0.8901 1.0271 0.8740
1.3798 1.5735 76.52 0.8868 1.0235 0.8709
1.3773 1.5701 76.29 0.8845 1.0200 0.8685

Economic News

USD – US Dollar Dips as Trade Data Supports Growth

The US dollar (USD) was seen trading mildly bearish Monday morning as traders saw a small decline in risk aversion following last week’s economic reports. The EUR/USD rose following the completion of a long-term consolidation trend, reaching a 4-day high. The GBP/USD saw somewhat higher gains, with the greenback inching the pair towards last week’s early high.

Confidence and trade reports from the US and Canada last week portrayed a global economy somewhat stronger than what many had expected. The balance of imports to exports last Friday revealed a growing market, with smaller deficits, as businesses across the United States and Canada begin seasonal hiring for the holidays. Such reports are likely to drive the US dollar lower as risk aversion declines and traders begin seeking out higher yields.

With a very light news day ahead, traders appear anxious for the week’s data which seems to be centered mostly on manufacturing reports. Today’s publications are somewhat limited to the US, however, with some figures on manufacturing due this afternoon. Liquidity will likely be held to a minimum making the market unlikely to experience any major swings, though.

EUR – EUR Trading Higher as Traders Seek Risk

The euro (EUR) was seen trading with largely bullish results this morning following last week’s mildly optimistic assessments from North American trade and confidence reports. Against the US dollar (USD) the euro was trading near a 4-day high, with few signs of halting the bullishness which appears to come on the coattails of a long-term consolidation pattern. Against the Great British pound (GBP), the EUR witnessed a similar, albeit weaker, gain in strength.

Traders appear to be clinging stronger to the 17-nation common currency with higher yielding investments in mind. With employment rising and trade increasing in the North American continent, it seems likely that more traders will opt for higher yields heading into the 2011 holiday season. Should data continue to move in such a direction, it is far more likely that the EUR will see further gains.

Economic sentiment across the euro zone remains negative overall, however, with many analysts and economists expecting moves towards safety by traders as early as next week. With a light news day ahead, many traders are awaiting more data releases later in the week before buying up further EUR. With today’s low liquidity, not much movement is expected, though random central bank statements could roil markets at any time.

JPY – Japanese Yen Expecting Little Movement

The Japanese yen (JPY) was seen trading higher versus most currencies this morning as its value as an international safe haven begins to get challenged by the prevailing economic conditions. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent.

The latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan’s (BOJ) latest rate statement. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. The persistence of the yen’s rising strength is causing some furrowed brows in Japan’s economic circles, and this may be a cause of its mixed trading behavior.

Silver – Silver Price Continuing in Bullish Channel

The price of Silver found modest support over the weekend amid the surging strength of the US dollar, the currency in which such assets are valued. Silver has been trading with stronger price action since early August, but traders have been awaiting a price correction from the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a sudden lift off in dollar values.

As investors seek safety, the value of Silver, which has been seen trading with mixed results since two weeks ago, is expected to rise following its current bullish channel, bouncing off a recent low near $39.60 an ounce after a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week’s uncertain environment is expected to assist the sentiment favoring Silver, however. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value, favoring an upside as Silver holds within its bullish pattern.

Technical News

The price of this pair appears to be floating in the over-bought territory on the daily chart’s RSI indicating a downward correction may be imminent. The downward direction on the 8-hour chart Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The cross has experienced much bullishness in the last few days, and currently stands at the 1.5810 level. There is much evidence in the chart’s oscillators that supports a possible bearish correction today. This is supported by the 8-hour chart’s Slow Stochastic. Going short with tight stops may turn out to bring big profits today.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The typical range trading on the hourly chart continues. The 4-hour chart RSI is floating in neutral territory. However, there is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.

The Wild Card

Crude Oil
Crude Oil prices rose significantly in the last week and peaked at $87.69 per barrel. However, the daily chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

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