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- Prelim UoM Consumer Sentiment Expected to Boost USD
- Forex: EUR/GBP Finds Support at 0.8500
- Debt Concerns Continue to Weaken the Euro
| Prelim UoM Consumer Sentiment Expected to Boost USD Posted: 12 Nov 2010 04:22 AM PST
The EUR/USD pair has been experiencing very volatile trading this week and the trend is likely to continue throughout the day with the release of the Prelim UoM Consumer Sentiment and Prelim UoM Inflation Expectations. According to the report, U.S. consumers' outlooks probably improved in November for the first time in three months. This is especially important heading to the Holiday season which is highly anticipated by retailers as sales tend to get a significant boost during the season. While the inflation expectation tends to have a lesser impact on markets, this release may be watched more closely in light of the Fed's recent decision to increase quantitative easing measures by pumping additional $600 billion in to the economy. This raised concerns that the oversupply of dollars may lead to hyperinflation in the long run. Though this scenario is highly unlikely, inflation expectations are, none the less, being watched very closely. Inflation expectations, within the desired limits or slightly higher, is actually a good thing since it means consumers are more likely to spend, stimulating economic growth, if they expect prices to increase. The recent rally in commodities, particularly oil prices helped push these expectations. The concern is, however, that the continuous drop in currency value combined with a continuous increase in energy prices and other commodities, particularly food, will counteract consumers' desire to spend as they will simply not be able to afford to do so. The recent economic data from the U.S provided some room for optimism. The recent release of the Non-Farm employment data showed increase in job offerings while yesterday's weekly unemployment claims dropped by more than expected. Retail sales and manufacturing are also showing modest signs of improvement. The release of the consumer confidence report will shed further light on the economic prospects and expectations in the U.S. if the report does indeed show improvement the USD will likely strengthen further versus the EUR, likely pushing the pair back to around $1.3600, particularly as the euro-zone is plagued with sovereign debt crises and recent data showed a slowing in growth in Germany and France. |
| Forex: EUR/GBP Finds Support at 0.8500 Posted: 12 Nov 2010 01:59 AM PST
The EUR/GBP has been receiving some support at its current price level. We can see on the chart below that the pair has touched the 0.8500 price mark and hurriedly bounced off. The EUR has been falling amidst debt concerns in the euro zone's periphery, but it appears the British pound's recent sell-off against other pairs, such as the USD and JPY, has assisted in a modicum of support for the EUR, at least against this currency. What is also worth noting is the fact that the RSI and Stochastic (slow) indicators both reached into the over-bought region during the pair's downward descent, but have since exited this area. Their breach of the over-bought region was an indication to sell, but their hasty retreat may indicate that technical pressure has begun to shift into a bullish posture. If the Stochastic (slow) on the chart quickly reaches into the over-sold region, where it appears to be heading, this could support the technical correction we're seeing on this pair. The RSI is less likely to provide direction unless the pair moves in a highly volatile manner. Traders should therefore pay closer attention to the Stochastic today. If it drops below the over-sold region, the pair may find further upward support. If not, we could see the downtrend of the EUR persist into the weekend's close. EUR/GBP – Weekly Chart |
| Debt Concerns Continue to Weaken the Euro Posted: 11 Nov 2010 09:59 PM PST
The main event that dominates the market at the moment is reports regarding the European sovereign debt concerns. There appears to be concrete concerns that Ireland will have real difficulties paying off its debts. There are more and more worries that the Irish government will need to seek euro zone aid to bail out its banks. Finance ministers from Germany, France and the U.K. met today to discuss Ireland's debt crisis. They are expected to issue a joint statement later today – and this statement is likely to instantly impact the market, especially on euro pairs. This, of course, has weakened the euro and thereby strengthened the U.S. dollar. One of the side effects of the dollar's strengthening is a wavering fluctuation in commodity prices. Both crude oil and gold saw sharp drops yesterday amid their solid uptrends. Gold fell below $1,386 an ounce and crude oil fell to $86.25 a barrel from a daily high of $88.60. Further reports regarding European debts have potential to extend these trends. Here are today's leading news events: • 07:00 GMT: EUR – German Preliminary Gross Domestic Product (GDP) – GDP measures the change in value of all goods and services produced by an economy. Positive result from the euro zone's largest economy is likely to support the euro. • 14:55 GMT: USD – U.S. Preliminary Consumer sentiment – This is a survey of about 500 consumers who are asked to rate their current and future economic conditions. Analysts forecast that the results will rise to 69.1. If the end result will be higher, the dollar is likely to see further bullishness. |
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