Swift USD Movement Stuns EUR

By mercaforex

USD:
After a few sessions of retracing and losing ground, the USD bounced back with a vengeance when the American trading session opened. After Monday’s banking holiday in the U.S., followed by a day of giving back some of its gains, the greenback pushed back in a strong manner on Wednesday and now finds itself near nine month highs versus the European currency. Building and Housing numbers were released yesterday and met expectations nearly head on. Wall Street turned in another rather positive session across the broad indexes also. Weekly Unemployment Claims will be published today along with the Philly Fed Manufacturing reading. Unemployment Claims are forecasted to match last week’s report, while the Philly Fed numbers are anticipated to see an outcome of 17.2 which would be a better result than the previous index.

The U.S. will only release CPI data tomorrow, so going into the weekend today’s statistics may be the last of the vital numbers that could provide impetus barring any surprises on Friday. Investors are still facing a strong debate which pits optimists versus skeptics. Risk sentiment appears to be increasing on Wall Street and at the same time the USD has maintained and even picked up strength against the EUR. Part of this divergent parameter may be developing because investors not only continue to fear what is taking place regarding the debt situation in Europe, but also because the U.S. may be the first economic power to return to ‘normal’ economic circumstances. This could mean that the Federal Reserve may be the first major Central Bank to begin changing its interest rate policy. No matter the complexity that exists in the long term regarding economic issues that the U.S. economy is facing, it is clear that short term sentiment has undergone a seismic shift that may be bringing about new market correlations. The USD goes into the next two days of trading with some muscle and traders will have to carefully weigh their opportunities.

EUR:
Nearly a week has gone by since it was announced by the European Union that an agreement was nearly in place that would stabilize the Greek debt situation. As time has gone by it has become clear that no such agreement exist and that many questions are still being raised about not only budget issues but accounting irregularities too. Europe did not release any major data that had a significant impact on the slide that ensued against the USD Wednesday. Trade Balance numbers were published but investors attention is definitely elsewhere. Today there will be little in the way of releases, but tomorrow will see plenty of PMI Services and Manufacturing reports from the continent including France and Germany. When the week began the EUR was able to recover some of its lost ground but yesterday’s weakness came in a swift manner and took the European currency to new lows. News that Greece may have falsified debt data with the help of banks such as Goldman Sachs is emerging. Angela Merkel of Germany is also publically slamming these accounting discrepancies and this may be causing some investors to question any guarantees that were implied but do not exist on paper. The EUR finds itself within a brutal run and its backbone may be tested the next two trading days.

GBP:
The Sterling lost ground to the USD on Wednesday as the Claimant Count numbers were weaker than expected. Jobless claims rose 23.5K compared to the estimated decline of minus -14.6K. The CBI Industrial Order Expectations reading will be published today and it is anticipated to have an outcome of minus -35, which would be an improvement compared to last month’s numbers. Inflation data from the U.K. is beginning to show a bit of movement and the Bank of England is pleased by this, however concerns remain for the overall economy. Retail Sales figures will be brought forth on Friday and this will give investors a nice round picture for the U.K. taking into consideration the inflation and jobless data already released this week. Also creating awkward tides for the Sterling is the continuing shadow that lingers from the European debt questions, which puts the GBP in the way of any possible aftershocks from their neighbors.

JPY:
The JPY has lost some ground to the USD as international equity markets have seen improved performance. One difference that will have to be watched now is the possible divergence that may be occurring regarding a stronger greenback even as bourses improve. If this scenario continues to play out it could mean that the JPY is about to see a reversal. Caution is still high in the broad marketplace and traders must be aware that short term trends sometimes are quite different from long term movements. Gold is trading near the 1100.00 USD mark and continues to traverse an interesting pattern taking into account the greenback, which means we could see a strong move in the precious metal occur if its consolidation fails.

USD/JPY:
The JPY has been one of the more volatile pairs to trade over the last year and half. The JPY bounced off of the 200 day MA back in early January and proceeded to fall below the 50 day MA. At the beginning of February the 50 day MA crossed the 100 day MA, a signal that the USD gaining strength.

Since reaching its most recent low of 88.56 the Dollar has had 7 positive price action days out of 9. On Tuesday the Yen closed at the 100 day MA while Wednesday's price action catapulted price above the 50 day MA. Using the Fibonacci Retrace from the JPY's high and low of 2009, a Retrace level of 38.2% strikes at 91.18. A close above that handle and the next target will be the 200 day MA, currently at 92.31.

USD/CHF:
The CHF has been trending since mid December. Price action took out the 50, 100, and 200 day MA's and has come no where near retesting them. Although we see on the chart below that Tuesday's price action was fairly significant, and so was yesterdays. The Candle that formed Wednesday on the daily CHF chart is referred to as an engulfing candle. As the name suggest, the candle body engulfs the candle body of the previous day. In this case it suggests continued Dollar strength.

EUR & GBP:
As a follow up to yesterday's segment regarding both the EUR and GBP's inability to close above resistance: We see the importance of technical analysis. An inexperienced trader would have bought just when the EUR and GBP were peaking. The Technical Trader would have remained vigilant waiting for a close above resistance before making any trade decisions. For those that trade support and resistance it was an ideal time to jump in. EUR hit 1.3788 on Tuesday and fell back below 1.36 on Wednesday. The GBP hit 1.5792 on Tuesday and then sank below 1.5675 on Wednesday.

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