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| Dollar Strengthens While Commodities Weaken Before Housing Data Posted: 28 Mar 2011 05:51 AM PDT
During the European trading session the dollar continued to book gains and commodities declined. The lone exception was the Aussie dollar which hit a new high versus the greenback. This morning's trading lacked economic data as markets were still being influenced by the weekend's events in Europe and the Middle East. The euro was down on the day, booking declines versus both the dollar and the Swiss franc following this weekend's elections in Germany and France. Both ruling parties of Angela Merkel and Nicolas Sarkozy lost in their respective regional elections. This helped to weaken the euro as a loss of political clout in their nations will not strengthen their hand in EU negations to end the European debt crisis. The EUR/USD was trading lower on the day at 1.4034, down from the weekly opening price of 1.4053. Yesterday's overnight low of 1.4020, a level that coincides with the 20-day moving average will serve as the initial support level. A breach below this level may target the 38.2% Fib retracement from the February to March move. The Aussie dollar hit a new all-time high versus the greenback today at 1.0313 as the commodity boom boosts growth rates expectations of further interest rate increased by the RBA may help to strengthen the currency further. Commodities were down following a stronger dollar. Spot crude oil was lower at $104.00 from $105.05 with support at $102 while gold was off at $1,413 from $1,425 with support at $1,393. This afternoon traders will be focusing in US pending home sales. Expectations are not high as most economists forecast a decline of -0.5%. Last month's pending home sales fell by -2.8%. A surprise to the upside would feed into dollar strength and extend today's commodity sell off. |
| Buying EUR/USD on Rising Momentum Posted: 28 Mar 2011 02:48 AM PDT
The euro has been fairly resilient in the face of significant negative news events surrounding the failure to reach a bailout agreement for Portugal and the subsequent ratings downgraded. The pullback in the value of the EUR/USD is only natural but the lack of a major decline shows a strong trend. As such, traders may find a short term trade setup with a rebound in momentum. Last week's failure to take out the 1.4280 resistance does not bode well for the EUR/USD in the short term. Significant resistance now lies at 1.4250 off of the falling trend from the 2008 and 2009 highs. A move above this resistance would spur further buying to the 1.4580 level. Last week the pair reached a high of 1.4247 before falling to a low of 1.4020 during today's Japanese session. However, the declines were limited to roughly two cents The market's muted reaction to the negative news should be taken as a positive for the euro. Traders may look to enter long on the pair following an exhaustion of the correction. One signal may be a rebound in the Momentum (7) indicator rising above the 100 level. The weekly chart shows the stochastics are in an overbought state which may signal a further decline in the pair. A move below 1.4020, a level that coincides with the 20-day moving average could send the pair lower to the trend line that rises off of the January 2010 lows. A sharp decline could take the pair to its next support level at 1.3860 where a breadth of stop loss orders may be found.
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