US Home Sales Signal Market Expansion

Data from the American housing market yesterday also indicated a positive message as new home sales jumped, representing an expanding market in consumer spending, mortgages and bank lending.

Forex Market Trends

Daily Trend up up down no up no
Weekly Trend down down down up no up
Resistance 1.4250 1.6450 79.80 0.9340 0.9080
1.4210 1.6180 77.80 0.9115 1.1010 0.8880
1.4100 1.6040 77.10 0.8970 1.0760 0.8795
Support 1.3830 1.5890 75.70 0.8710 1.0270 0.8670
1.3800 1.5800 0.8630 1.0110 0.8550
1.3650 1.5630 0.8550 0.9920 0.8285

Economic News

USD – US Dollar Trading Mildly Bearish, Movement Restrained

The US dollar (USD) was seen trading mildly bearish early Thursday as traders viewed data on housing and manufacturing as a sign of potential bullishness in global markets. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted ahead of a string of reports out of the US today which could reverse much of the markets recently acquired short-term stability.

Data from the American housing market yesterday also indicated a positive message as new home sales jumped, representing an expanding market in consumer spending, mortgages and bank lending. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets towards the end of the year.

As for today, the US economic releases will focus mostly on housing and GDP. Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Japan, the euro zone and the US. American liquidity will be heightened, and Japan has contributed to today’s early movements with its interest rate statements being published earlier this morning.

EUR – Euro Gains from Sudden Interest in Risk

The euro (EUR) is expected to be seen trading with bullish results this morning after a slew of reports from Japan and ahead of news from the region and the United States. Against the US dollar (USD), the euro has been seen trading somewhat bearish as the greenback moves upward against its currency rivals, this morning’s maneuvers, however, put the pair on a muted bullish trajectory.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data continues to reveal negative market directionality, the EUR is likely to return to a bearish posture.

JPY – Japanese Yen’s Strength Challenged

The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of diminished industrial activity and production. 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 JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating some downturn following this week’s industrial activity releases. 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. As industry slumps in Japan, this uptrend may meet resistance.

Crude Oil – Oil Prices Holding Steady amid Market Turmoil

Crude Oil prices held steady Wednesday as sentiment appeared to favor a mild uptick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are beginning to generate some risk taking after statements by the Federal Reserve began to cause investors to seek out higher yields.

An expected dip in dollar values due to this week’s risk seeking environment has helped many investors ram up their long-taking positions on physical assets, but with the USD’s losses not materializing in large enough numbers, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Technical News

The EUR/USD has moved above its consolidation pattern from the previous week and has a technical retracement towards 1.4040, the 50% Fibonacci retracement off of the move stemming from the 1.4940 high in May to the October low of 1.3145. Both daily and weekly stochastics are moving higher and as such further resistance is located near 1.4100 where the 100 and 200-day moving averages rest. To the downside support is seen at last week’s low of 1.3650.
Cable has jumped out to new 6-week high to its 50% Fibonacci retracement at 1.6010 from the move lower covering the April high to the October low. A break of this retracement level would put in play the 1.6110 resistance from the August low followed by the 61% retracement level at 1.6180. 1.5850 can be eyed as the first significant support line followed by 1.5630.
Last Friday the sleepy USD/JPY awakened from its slumber and quickly set a new all-time low of 75.78, triggering a plethora of stops before moving back above the 76 yen mark. While the range trading environment may continue, a quick move below the 75 yen level could invite an additional round of intervention from the Ministry of Finance which would likely take out the initial resistance levels at 77.85. The post intervention high of 80.25 may find willing sellers of the pair at more attractive levels.
The one way price move in the USD/CHF has ended with the pair forming what looks to be a falling wedge pattern. The chart pattern typically brings about a breakout to the upside but forex traders should follow the price action. The consolidation pattern has resistance at 0.9025, a level that coincides with the rising trend line from the August low which was broken last week. Additional resistance is located at 0.9340-0.9315. Support is found at 0.8640 and 0.8550.

The Wild Card

Forex traders may be looking to fade the recent rally in the AUD/USD as expectations are growing for an interest rate cut based on Wednesday’s CPI data. However, traders may want to think again as improving risk sentiment is helping the AUD to recover and the technicals are beginning to turn bullish once again with the MACD rising above the 0 level and the price climbing past the 200-day moving average. Resistance is located at 1.0765 from the September 1st high followed by the 2011 high of 1.1080. Support comes in at 1.0270 from the previously broken trend line off of the July and September highs.

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