{"id":12782,"date":"2010-09-08T08:06:31","date_gmt":"2010-09-08T12:06:31","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=12782"},"modified":"2010-09-08T08:06:31","modified_gmt":"2010-09-08T12:06:31","slug":"dollar-rallies-on-weak-german-data","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/09\/08\/dollar-rallies-on-weak-german-data\/","title":{"rendered":"Dollar Rallies on Weak German Data"},"content":{"rendered":"

Source: ForexYard<\/a><\/strong><\/em><\/strong><\/span><\/p>\n

Less than expected German factory orders and worries over the Irish fiscal situation \u200ehad traders bidding equities lower and buying into safe haven assets as USD\/JPY and \u200ethe EUR\/CHF fell to new lows.\u200e<\/p>\n

Economic News<\/h2>\n

USD – Greenback Rises on Safe Haven Buying<\/h3>\n

The dollar put in a strong showing for a second day versus most of the major \u200ecurrencies. Traders were quick to buy the dollar following a Wall Street Journal article \u200ethat highlighted European banks’ exposure to risky government bonds that were \u200epreviously not reported in this summer’s European banking stress tests. While the \u200earticle did not bring to light any new information that was not previously known in \u200ethe FX market, it did refocus the spotlight on weakness in the European financial \u200esystem.\u200e<\/p>\n

Less than expected German factory orders hurt risk sentiment in the market. The \u200echange in the in the total value of new purchase orders from manufactures fell by \u200e\u200e2.2% over the previous month. Expectations were for an increase of 0.6%.\u200e<\/p>\n

The lone data release from the US will be the Fed’s Beige Book, set to be released at \u200e\u200e18:00 GMT. The Fed’s analysis of the markets helps the central bank set policy \u200edecisions and interest rate levels. \u200e<\/p>\n

The EUR\/USD has declined for the past two days, pulling back into the symmetrical \u200etriangle pattern that had formed. Support is found at the rising lower leg of the \u200etriangle pattern at a price of 1.2660 followed by 1.2580.\u200e<\/p>\n

EUR – European Banking Fears Drops Euro<\/h3>\n

A lack of economic data from the US had traders looking to Europe for signals on the \u200edirection of the major currencies. A Wall Street Journal article influenced traders and \u200ereignited fears of the European fiscal crisis. Also weak German factory orders did \u200elittle to calm traders’ nerves about the state of the euro zone economy. \u200e<\/p>\n

Fiscal troubles in Ireland also hurt the euro. The Irish Finance Minister said he does \u200enot expect Ireland to seek emergency loans from the EU and Ireland will resume its \u200eregular capital raising activities from the public debt markets. However, the market \u200ereaction did not emphasize this statement. The spread between Irish government debt \u200eand safe haven German debt rose to an all-time high.\u200e<\/p>\n

Further signs of traders’ aversion to risky assets were apparent as the DAX was down \u200e\u200e0.6% and the euro was lower versus the major currencies. The EUR\/USD fell to \u200e\u200e1.2680, from an opening day price of 1.2806. The EUR\/CHF fell to a fresh all-time \u200elow at 1.2808. \u200e<\/p>\n

Significant data releases are on the British economic calendar for today. Traders will \u200ebe looking at the Halifax HPI and the monthly manufacturing production numbers. \u200eBetter than expected data may help support the weakening pound. Support and \u200eresistance levels for the GBP\/USD are found at 1.5320 and 1.5490.\u200e<\/p>\n

JPY – Interest Rate Decisions from Japan and Australia<\/h3>\n

As expected, both the Bank of Japan (BOJ) and the Royal Bank of Australia (RBA) \u200eleft interest rates steady at 0.10% and 4.50% respectively. \u200e<\/p>\n

The BOJ stated the bank is continually monitoring the outlook for economic activity \u200eand did not change its economic forecasts. The BOJ also sees a continued moderate \u200eeconomic recovery in the Japanese economy.\u200e<\/p>\n

The RBA also held its base rate steady while the accompanying rate statement \u200eindicated that policy is appropriate for the time being but it did highlight some \u200euncertainty in the market. Also newly elected Prime Minister Julia Gillard successfully \u200eformed a minority government. \u200e<\/p>\n

Continued European banking worries touched off a bout of safe haven buying. The \u200eyen was one of the benefactors in yesterday’s trading. The USD\/JPY dropped to a 15-\u200eyear low at 83.50 before finally closing at 83.79. Should safe haven buying continue, \u200ethe USD\/JPY could push its all-time low at 79.70.\u200e<\/p>\n

OIL – Recovery Fears Weaken Spot Crude Oil<\/h3>\n

The price of spot crude oil fell during yesterday’s trading following renewed concerns \u200eover the global economic recovery. This time around it was Europe that sparked fears \u200eof a weakened banking system and fiscal concerns in Ireland. \u200e<\/p>\n

Spot crude oil prices fell to $73.80, after opening the day at $74.04.\u200e<\/p>\n

Also affecting the price of spot crude oil was a strengthening dollar. As the dollar \u200eappreciates, this makes it more expensive for holders of foreign currencies to by crude \u200eoil. \u200e<\/p>\n

Traders may have been influenced by an explosion at a Mexican government owned \u200eoil refinery near the US Mexico border. This sparked worries over short term supplies \u200eand helped to reduce the overall drop in spot crude oil prices.\u200e<\/p>\n

The weekly crude oil inventories release from the US Department of Energy \u200eAdministration is scheduled for Thursday due to the shortened holiday week in the \u200eUS. Expectations are for an increase of 300K barrels.\u200e<\/p>\n

Support and resistance for spot crude oil prices come in at $71 and $75.70\u200e<\/p>\n

Technical News<\/h2>\n

EUR\/USD<\/h3>\n

The pair has recorded much bearish behavior in the last 2 days. However, the technical \u200edata indicates that this trend may reverse anytime soon. For example, the daily chart’s \u200eStochastic Slow signals that a bullish reversal is imminent. An upward trend today is \u200ealso supported by the RSI. Going long with tight stops may turn out to pay off today. \u200e<\/p>\n

GBP\/USD<\/h3>\n

The cross has been dropping for the past month now, as it now stands at the 1.5380 \u200elevel. However, the daily chart’s RSI is already floating in the oversold territory \u200eindicating that a bullish correction might take place in the nearest future. Going long \u200ewith tight stops may turn out to be the right choice today<\/p>\n

USD\/JPY<\/h3>\n

The USD\/JPY has gone increasingly bearish yesterday, and currently stands at the \u200e\u200e83.47 level. The daily chart’s Slow Stochastic supports this currency cross to fall \u200efurther today. However, the hourly chart’s Stochastic Slow signals that a bullish \u200ereversal will take place today. Entering the pair when the signs are clearer seems to be \u200ethe wise choice today.\u200e<\/p>\n

USD\/CHF<\/h3>\n

This pair’s sustained downward movement has finally pushed its price into the over-\u200esold territory on the daily chart’s RSI. Not only that, but there actually appears to be a \u200ebullish cross on the Slow Stochastic pointing to an imminent downward correction. \u200eForex traders have the opportunity to wait for the upwardward breach on the hourlies \u200eand go long in order to ride out the impending wave\u200e<\/p>\n

The Wild Card<\/h2>\n

Oil<\/h3>\n

Crude Oil is displaying significant bearish signals after yesterday’s failed breach of the \u200e\u200e$75 price level. The hourly chart has the pair trading in the overbought zone on the \u200epair’s Relative Strength Index, indicating a possible move lower. The chart also shows \u200ea bearish cross has formed on the Slow Stochastic Oscillator that may support this \u200edownward move. Forex and commodity traders may want to be short on Crude Oil \u200etoday as a significant price move may be in the making. \u200e<\/p>\n

Forex <\/strong>Market Analysis provided by ForexYard.<\/a><\/strong><\/em><\/p>\n

\u00a9 2006 by FxYard Ltd<\/p>\n

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.<\/p>\n","protected":false},"excerpt":{"rendered":"

By ForexYard – Crude Oil is displaying significant bearish signals after yesterday’s failed breach of the \u200e\u200e$75 price level. The hourly chart has the pair trading in the overbought zone on the \u200epair’s Relative Strength Index…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-12782","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/12782","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=12782"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/12782\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=12782"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=12782"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=12782"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}