Forex News and Events:
Commodity prices have continued to drop sending the South African Rand and Aussie dollar lower this morning. Risk appetite has taken a hit as increasing loan losses in the U.S and lower profits from companies in China saps demand for riskier assets. This has sent the dollar and Yen higher as the usual market mechanics continue to ring true. While the markets are largely anticipating the current bounce back in the economy companies are finding a hard time justifying this excessive optimism.
Yesterday President Obama was expected to announce Fed Chairman Bernanke's reappointment to another term at the head of the largest economies' finances. This news was widely expected in Asia and did little to counter the comments by Chinese President Wen Jiabao on blind optimism and the ensuing decline in stocks that brought the whole region with it. While investors largely believe conditions are getting better, more impetus is needed to keep this wave of optimism going at the risk of rekindling the bear market rally argument.
The EURUSD reacted by declining sharply, followed by a noteworthy attempt at 1.4300 but continuing downwards. The USDJPY initially traded the risk averse view but bounced off the 98.80 support. While the outlook may seem gloomier one must not discount the resilient bulls.
Today's Key Issues (time in GMT):
10:30 GBP BBA Loans for House Purchase
16:00 USD Consumer Confidence (AUG)
16:00 USD Richmond Fed Manf. Index (AUG)
16:00 USD House Price Index (JUN)
23:00 USD ABC Consumer Confidence
The Risk Today:
EurUsd After 24 hours of consolidation between 1.4277 and 1.4338 the pair is looking fairly lifeless from a directional viewpoint. Obvious range trading to be taken between those two levels and one of the medium term uptrend channels is coming into play around 1.4250. The lower uptrend line and support is at 1.4178 so the bias trend wise is to the upside. The major problem for the bulls is a clearance of 1.4338 and ultimately 1.4445 (major resistance) - failure to do so will continue to carve out a massive head and shoulders.
GbpUsd The JPY bears really arent having much luck as the Yen strengthened against the dollar and the pair dropped straight back into its 2 week downtrend. The pair has found support at the old level of 93.86 with hourly stochastics drastically oversold. The long term uptrend is just below at 93.09 so a test of that level would provide some interesting trading.
UsdJpy Looking at the 60 minute chart the pair is breaking the medium term uptrend channel at 1.6381 and next support is down at 1.6272. This 3 week downtrend seems to be pulling in some power, particularly since there is such a divergence between the S&P 500 and the risk currencies in the last couple of days. If the pair manages to break 1.6272 and get to the major support at 1.5947 then just like the EUR USD, the pair will be carving out a massive head and shoulders with 1.6663 as the top of the shoulders. If this plays out then we have some amazing trading opportunities coming up in Q3.
UsdChf The pair is continuing to catch a bid from the short term uptrend channel but still needs to break higher above 1.0632 to keep the bears at bay. Failure to break this level today is shaping the pair up for the more bearish scenario with regards to the descending triangle on the daily chart discussed last week. An hourly close above 1.0692 is required to break the 2 week downtrend. Right now, the trend is down on all time frames apart from intraday.
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|