FOREXYARD: Forex News Blog | |
- AUD Price Deceleration Signals Reversal
- EUR/CHF Collapses
- News Out of Japan Continues to Dictate Market Movement
| AUD Price Deceleration Signals Reversal Posted: 17 Mar 2011 06:13 AM PDT
The shift in global risk sentiment has driven many currency pairs into above-average volatility. Japan's nuclear crisis is undermining the global recovery by forcing a policy reevaluation by central banks regarding risk exposure. The currencies experiencing the sharpest change in value are the Swiss franc (CHF), Japanese yen (JPY), US dollar (USD) and Australian dollar (AUD). The Aussie, in particular, has witnessed a wide swing in value over the past few weeks. As we can see in the charts below, the AUD/JPY dropped almost 1,000 pips, a change of 11%, while the AUD/USD fell over 400 pips before retracing some of these losses. What is striking about both pairs is the apparent deceleration of the AUD's uptrend versus both safe-haven currencies. Against the yen, the Australian dollar has just breached its trend-line but has yet to close below that significant support level. What this means is that the pair has suffered a downturn, but a trend reversal remains beyond the scope of this analysis for the time being. However, the trend-lines have become flatter since last June, suggesting that the pair's bullish strength is beginning to wane under shifts in risk appetite. AUD/JPY – Weekly Chart Pairing the AUD with the US dollar also shows a similar shift in sentiment. Most visibly, though, is the AUD/USD's more pronounced deceleration and possible head-and-shoulders formation on the weekly chart. The AUD/USD pair shows a similar attempt at a head-and-shoulders reversal between August 2009 and June 2010, but the "head" fell short of its shoulder levels, undercutting the formation's technical strength. We can see with the recent candlestick formation, between October 2010 and March 2011, that the "head" was indeed able to break above the shoulder line and we are beginning to see the technical downturn. If the pair can close below its support level near 0.9800 this should signal for a mass sell-off by technical traders, pushing the pair towards the 0.9400 level and perhaps beyond. AUD/USD – Weekly Chart A similar sentiment may be expressed in regards to the AUD/JPY. If the yen continues to strengthen unabated, with no currency intervention by the Bank of Japan (BOJ), then we could see a break below the 38.2% Fib line, with a more than 50% chance of a retracement to the 23.6% level just above 67.20. It doesn't seem likely that either Australia's or Japan's central bank would allow such a change in value for their respective currencies, but technical forces may push against their respective plans. Going short on the AUD appears like a solid choice for the foreseeable future as a result. |
| Posted: 17 Mar 2011 03:41 AM PDT
The Swiss franc continues to benefit from the disaster in Japan. Last night's sharp decline in the value of the EUR/CHF took the pair close to the 2010 low. Following today's SNB decision to keep rates on hold, the euro has received a bounce to a technical level and could see further gains before the downtrend resumes. In addition to the yen, the Swiss franc has been one of the strongest performers in response to the natural disaster in Japan as traders flock to the franc as a safe haven play. In overnight trading the pair plummeted lower, falling to 1.2416, a level near its 2010 low of 1.2400. The franc has also benefited from the flare up of euro zone fiscal problems. Over the past two weeks Greece, Portugal, and Spain have faced new their sovereign debt downgrades by the major debt rating services. A failure by Ireland to reach a deal to restructure the terms of its bailout also does not bode well for the euro. Today, as expected, the Swiss National Bank kept interest rates steady at 0.25%. In a written statement, the SNB increased their 2011 inflation forecasts to 0.8% from 0.4% while noting inflation expectations have not risen substantially. Growth forecasts were also raised to 2.0% from 1.5%. The SNB has also stated the Swiss economy shows continued signs of improvement. While the stronger Swiss franc has helped keep inflation in Switzerland under control, a continued recovery and stronger growth may add inflationary pressures. Today's release of stronger than expected industrial production numbers is one sign of the strengthening Swiss economy. 4Q 2010 industrial production rose by 7.4%, an output significantly stronger than the 4.7% economists forecasted. In early morning trade the EUR/CHF recovered to 1.2650, a level that coincides with a 38.2% retracement from the mid-March high to yesterday's low. Strong selling in the pair could resume at 1.2730 near the 50% retracement level. Stops may be found above the resistance at 1.2830. Should the EUR/CHF collapse once again, a move below the 1.2400 level (the pair's all-time low) would trigger stops and could send the pair further into unchartered territory.
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| News Out of Japan Continues to Dictate Market Movement Posted: 17 Mar 2011 12:23 AM PDT
The USD/JPY fell to a record low during the start of the overnight session, as the aftermath of last week’s devastating earthquake and tsunami in Japan continue to generate extreme volatility in the marketplace. The pair dropped over 300 pips in a matter of minutes, reaching as low as 76.40 before bouncing back up to its current rate of 79.45. While several potentially significant US news events are scheduled to be released today, traders are warned that any developments out of Japan are likely to have the highest impact on the market. Here is a roundup of the day’s main economic indicators: 12:30 GMT-US Core CPI The Core CPI figure measures the change in price in goods and services, excluding food and energy, over the last month. This is considered a vital gauge of inflation in the US, and tends to have a direct impact on the value of the dollar. Today’s CPI is forecasted to come in at 0.1%, which if true, would signal a slight drop over last month’s. The USD has been extremely bearish as of late. If today’s figure comes in at 0.1%, the currency is likely to take further losses. 12:30 GMT-US Unemployment Claims The weekly US Unemployment Claims figure is considered one of the more significant news events on the forex calendar. Analysts are predicting a slight drop in the number of people filing for first time unemployment insurance this week. If the predicted figure of the 388K turns out to be true, the dollar may be able to pull in some short term gains during the afternoon session. |
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