FOREXYARD: Forex News Blog | |
- Dollar Rally May Prove to be Short Lived
- Technical Tip – Buying EUR/USD on Price Dips
- Weekly Chart Indicates – Silver Will Break A New Record High This Week
- Stockholm or Bust: Sweden’s Powerhouse Economy
- GBP/CHF Bouncing Off 1.5000 Support Line
- German Factory Orders May Support EUR Today
| Dollar Rally May Prove to be Short Lived Posted: 08 Mar 2011 09:51 AM PST
Today's trading brought strong bids for the dollar as the price of oil declined and an economic report suggested an early end to the Fed's QE II. However, support for the greenback may prove to be only temporary as the fundamental picture still remains the same; the Fed's QE II is expected to be fully implemented and there has been no pause in the fighting in Libya.
A report from a an influential global macro think tank sparked a dollar rally when research released today pointed to a possible early end to the Federal Reserve's second round of quantitative easing. Citing improved economic data, the Fed could prematurely end its $600B government bond buying program. The market research added to the current sentiment that risks of a renewal of the European debt crisis could spark dollar buying as spreads on Greek and Portuguese CDS have widened to previous levels associated with a height of the crisis.
Also supporting dollar buying was a drop in crude oil prices. Over the past two days, spot crude oil has fallen to $104.64 from a high of $106.09.
The economic report and lower crude prices added to this sentiment and helped to induce dollar buying across the major currency pairs with the greenback rallying sharply higher. The dollar booked particularly strong gains versus the pound, yen, euro, and the Swiss Franc. However, by lunchtime during the New York trading session the dollar had given back much of today's gains.
One reason for the failure of the dollar to hold onto its gains versus the majors may be due to the current fundamental picture which has not changed. Instability in the Middle East continues, the Fed has shown no signs of its willingness to end QE II, and European interest rates continue to rise over those in the US.
The geopolitical picture remains relatively unstable with continued fighting in Libya. Despite reports of attempts by world leaders to broker a resolution and end the fighting, no agreement appears in sight with both government forces and rebel groups continuing the battle.
While today's report suggests the Fed may prematurely end its bond buying program, just last week Federal Reserve Chairman Ben Bernanke testified before Congress and gave no indication of an early termination of QE II.
Rising European interest rates have been driving much of the trading in the EUR/USD and the GBP/USD as both the ECB and BOE are forecasted to begin raising interest rates. Traders may have gotten ahead of themselves bidding the pound higher before Thursday's BOE Bank rate announcement as market forecasts are for the BOE to hold rates steady at this meeting. However, European interest rates are still expected to rise faster than those in the US which should still keep the dollar on its back foot.
Therefore, given the fundamental picture, we may expect this dollar rally to be short lived with a resumption of the dollar selling sometime this week. |
| Technical Tip – Buying EUR/USD on Price Dips Posted: 08 Mar 2011 07:28 AM PST
Today's drop in the value of the EUR/USD to an identified support level sets up an opportunity to go long following the price dip.
The sharp pullback in EUR/USD has created a long entry setup following the pair's failure to breach below the support level at 1.3860, a level that coincides with the February high. The trend remains robust with the major moving averages pointing up and a rising trend line off of the January low. Using the technical tip, traders can enter long on the price dip above the first support at 1.3860. The first resistance level is located at Monday's high at 1.4035. Resistance is also located at 1.4085, followed by the falling trend line off of the January and November 2010 highs which comes in today at 1.4150. A target of the November high at 1.4280 will be used. Traders should have a protective stop below the 1.3860 support line should the EUR/USD continue to fall and turn into more than just a price dip. Further support is found at 1.3740, a price that coincides today with the rising trend line from this year's low. Further support can be found at 1.3520 and the mid-February low of 1.3420.
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| Weekly Chart Indicates – Silver Will Break A New Record High This Week Posted: 08 Mar 2011 07:03 AM PST
Silver prices saw a little bearish correction yesterday and the precious metal fell from an all-time record high of $36.72 an ounce to as low as the $35.80 level. However, as the weekly chart indicates, the bearish move was nothing more than a mild technical correction, and another bullish session is likely to take place, with potential to lead silver prices towards a new record high. • The chart below is the spot-silver chart by ForexYard.
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| Stockholm or Bust: Sweden’s Powerhouse Economy Posted: 08 Mar 2011 03:00 AM PST
A variety of articles have analyzed the rising strength of the Swedish krona (SEK) to point of exhaustion. A key aspect emphasized, though – as is usual in this global economic environment – is caution. But is caution warranted when it comes to Sweden? Let's evaluate the claim. Sweden's krona is rising at a more-than-healthy rate. The USD/SEK has moved from 8.1311 last June to as low as 6.3614 today. The EUR/SEK witnessed a similar price movement from as high as 10.2695 in November 2009 to today's current price of 8.8760. The fear with this rising strength comes when viewing Sweden's concurrent economic growth, which rose 7.3% year-on-year in Q4 2010. Analysts have been forecasting a gouging effect from the rising SEK, which will eventually pull down on Swedish exports and dampening growth. This claim was made starting from late-2010, but has yet to bear any signs of occurring as expected. In fact, Sweden's economic growth appears dissonant with what is happening elsewhere in the world. As the Wall Street Journal recently pointed out, Sweden doesn't face many of the same problems as other global economies. Sweden faces no sovereign debt crisis like Europe; no deflationary fears like Japan; no unemployment or budgetary problems like the United States; nor fears of an over-strengthened currency by its central bank, like Switzerland. Indeed, the Riksbank actually raised interest rates to 1.5% in 2010, with an expectation to reach 3.0% by Dec. 2011. Swedish Finance Minister Anders Borg also told reporters lately that Sweden's government is expecting growth of 4.8% in 2011, an upward adjustment from the previous expectation of 3.7%. It appears that an apt metaphor for Sweden's trajectory is to view all global economies as being in a race to normalcy, with Sweden finishing first in Q4 2010. The prize is unprecedented growth lasting as long as the other global economies continue the race. The next logical question to ask, in regards to the caution urged by speculators, then, is “How close are the other economies to finishing?” |
| GBP/CHF Bouncing Off 1.5000 Support Line Posted: 07 Mar 2011 11:30 PM PST
The GBP/CHF has recently found solid support at the 1.5000 price level. Technical indicators, and the pair's general trend, now seem to suggest a steady upward movement is expected. The Pound/Swiss has been trading within a general downtrend since July 2007, when the price was peaking just under the 2.5000 level. The rapid plummet in value starting approximately around mid-November of last year has formed what appears to be an intermediate consolidation trend. The price looks to be narrowing towards a focal point, located in the vicinity of 1.5350. The oscillators on the chart below suggest that there may still be some laxity in the price and traders may therefore still see some further dips in value as the 1.5000 level is tested once more. However, these same oscillators do support the upward notion occurring in the next several hours. As you can see on the chart, the Stochastic (slow) and MACD are only hours away from completing a bullish cross, supporting the imminent bullishness of the pair. The upward target for traders to aim for within such a consolidation range will be somewhere within reach of the downward sloping trend line, near 1.5400. After which, the pair should see another mild decline as the consolidation trend clamors towards its spear-tip near 1.5350. GBP/CHF – Daily Chart |
| German Factory Orders May Support EUR Today Posted: 07 Mar 2011 09:30 PM PST
The Japanese yen experienced one of its most bullish trading days in recent weeks yesterday. The JPY made significant gains against many of its most traded currency pairs, such as the GBP and CHF. As for today, there are no major economic data releases on the calendar from the U.S. However, Europe and Canada appear to be releasing the bulk of today’s news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations. Here are today's leading events: 11:00 GMT: German Factory Orders This monthly report measures the change in the total value of new purchase orders placed with manufacturers. As a leading indicator of production, this report has a direct correlation with the strength of the euro zone economy. Today's forecast is expected to be higher than last month, indicating a positive return to economic normalcy is beginning to get underway. Such an outcome should boost the EUR. 12:15 GMT- Canadian Housing Starts This report reflects the annualized number of new residential building that began construction during the previous month. If the end result will be positive, the CAD is likely to strengthen as a result. |
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