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Confidence Is The Name Of The Game

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Feb 4, 2010.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    Proving that the waters remain treacherous, the USD gained back the territory it had lost in previous trading this week on Wednesday. The currency prices showed that the broad marketplace remains cautious and is likely to remain that way as investors await tomorrow’s Non Farm Employment Change numbers. Yesterday’s ADP Non Farm jobless report was slightly better than anticipated, but Wall Street was promptly reminded of the rather uncertain economic environment when President Obama spoke about his desire to follow through on new banking regulations. The ISM Non Manufacturing PMI underperformed as well yesterday, missing its anticipated reading of 51.1 with a result of 50.5. Today jobless figures will remain an important issue with the publication of the weekly Unemployment Claims - and an improved number is projected.

    After losing a bit of ground earlier this week to the EUR and GBP the greenback showed that it continues to find backers in the current economic climate which remains uncertain. Wall Street, likewise, gave back some of its gains after two steady days of trading. In many respects the broad marketplace mirrors the caution that is being voiced by a wide spectrum of investors who are keen to see better jobless data on their desks. Also the short speech by President Obama yesterday reminded market participants that the present White House administration may continue to be rather pro-active, which may be viewed as interference by advocates of a ‘free market’. The Unemployment Claims numbers will share some of the spotlight today with Factory Orders figures, but traders are almost certain to be fixated on the jobless questions and how equities are acting before tomorrow’s key data. Having shown enough strength to regain its momentum yesterday, the USD is moving in an interesting range as traders prepare themselves for the next two days.

    The EUR let the gains it had made earlier in the week slip from its grasp on Wednesday. The broad Final Services PMI reading yesterday for Europe turned in a mark of 52.5, slightly better than the estimate of 52.3. However the Retail Sales figures proved disappointing coming in flat with a 0.0% statistic, below the forecasted gain of 0.4%. The European Central Bank will be meeting today and announcing their monetary policy. While no changes are expected – and certainly no interest rate increase will come – the EUR may find itself under pressure as President Trichet takes center stage. His Q & A session is sure to focus around the Greek budget crisis and Sovereign debt. Trichet’s answers will be watched for their tone. In many respects investors will have their confidence tested today per the remarks that will come from Trichet. The EUR showed that caution remains the name of the game in the currency markets yesterday and traders today will have to be ready for ECB President Trichet.

    The Sterling struggled on Wednesday against the USD. Although the Services PMI proved disappointing with a reading of 54.5 compared to the estimate of 56.6, it may have been the overall marketplace that had more of an effect on the GBP. Cautious winds have once appeared and today’s Bank of England MPC monetary statement looms large. The BoE is certain not to shift its policy in a spectacular manner but investors are keen to hear if any insight is given regarding the prospects for the U.K. economy. After being pushed back several days, the Halifax HPI appears ready for publication also and the anticipated outcome is a gain of 0.9%. Like the U.S. the housing market in the U.K. remains a critical issue and investors will be ready for any surprises. Only PPI data is on schedule tomorrow and this means that today’s BoE statement could be the main impetus for the Sterling the next two days.

    The JPY and USD performed in a rather ritualistic range on Wednesday. As caution grew within international equity markets the Asian bourses declined as well. Before going into the weekend the JPY is sure to face a constant test of sentiment as investors weigh their risk appetite. Dollar centric news is certain to factor into Asian bourses and the JPY.

    Technical Analysis

    In the past month of trading, Gold has failed to find the desired support that many traders wished. If we take a closer look at the chart, Gold did show signs of strength. In hindsight, the buyer’s market was short term. Interestingly, the price has decreased since this period. With a lack of buyers in the market, Gold may struggle to rise to highs, such as those that we saw in November. The current levels of support lie at $1,024.62 and $1,072.91. Resistance is $1,126.01, $1,162.23 and $1,225.80.

    If I had to trade on the XAG/USD chart, I would probably buy on highs and sell on lows. With the commodity trading between the $15.9736 and the $16.9407 levels in the past week, I feel that this remains a very risky commodity to trade. If Silver does start to trade outside this range by the conclusion of this week’s trading, then we may see past volatility return back to Silver. Current levels of support lie at $15.9736 and $16.1500. The resistance is currently at $16.9407, $18.0500 and $18.8391.

    The EUR/USD pair continues to trade between the ranges of $1.3740 and $1.4574. Take a look at the last doji candle on the chart. In addition to the down move, the candle is accompanied by a great selling tail. We are now pushing down to the $1.3730 support level. The pair would need to break below this support level to demonstrate a significant breakout. Support is $1.3420 and $1.3730. Resistance is $1.4574 and $1.5157.

    From 10th to the 20th January, the pair recorded an intensive upwards trend to peak near $1.6500. Since this peak, we witnessed a price correction for the pair. Thus the market is clearly a seller’s market. Right now, I wouldn’t bet against the market. With the pair showing so much weakness, there’s no saying how low it’s going next. The levels of support lie at $1.5711 and $1.5832. Resistance is $1.6379 and $1.6872.

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