FOREX TIPS: May 2011

Tuesday, May 31, 2011

FOREXYARD: Forex News Blog

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Dollar Declining as FX Markets Look Past Greek Debt Crisis
Kiwi Hits 3-Year High Versus US Dollar
Canadian GDP Due Out Today

Dollar Declining as FX Markets Look Past Greek Debt Crisis

Posted: 30 May 2011 04:54 AM PDT

Greece remains the key question going forward though towards the end of last week the debt crisis was beginning to weaken its impact on the FX markets and the euro.

Talks between the EU and the IMF were continuing as scheduled and should end within the next few days. The German newspaper Der Spiegel reported the EU may withhold a 50B euro package for Greece should the indebted nation fail to reach its proposed austerity measures.

While the question over Greece remains unanswered, markets may have come to the conclusion that new funds will be provided to the indebted nation and Greece will eventually undertake a restructuring of its sovereign debt. Should the Greek situation be put on the back burner, this may allow for the euro to rally in the near term as the underlying fundamentals between the euro and the dollar have not changed over the month of May when the EUR/USD declined 3.5%. EU interest rates are still expected to rise while the Fed continues its QEII program into June. A close above the 50-day moving average at 1.4350 would put the bulls back in the driver's seat with a target at the May high of 1.4940.

The dollar is on its back foot again versus the G10 currencies following a week of disappointing data releases. Lower than forecasted durable goods orders, disappointing GDP, and a steep decline in pending home sales on Friday all point to a US economy that is not firing on all cylinders. Given the downturn in US data releases, the dollar could continue to be sold versus the G10 currencies in the near term.

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Kiwi Hits 3-Year High Versus US Dollar

Posted: 30 May 2011 02:36 AM PDT

Overnight the New Zealand dollar reached its highest level versus the US dollar since February 2008 on the strength of significantly better than forecasted trade balance data as the Kiwi builds on gains from last week.

Comments by New Zealand Prime Minister John Key touched on the strength of the Kiwi which knocked the NZD/USD off of a 3-year high. Earlier in the Asian trading session the pair reached as high as 0.8214 before trading back to 0.8170.

Helping to boost the Kiwi was significantly stronger than expected trade balance which showed a surplus of 1,113M NZD for the month of April. The data handedly beat expectations for 603M NZD. The tone of the report was further boosted by the March numbers which were revised higher to 578M NZD from a previously reported 464M.

The trade balance numbers are quite the feat following the Christchurch earthquake in February and show the improvement in New Zealand exports and terms of trade. Today's trade balance data should further support a bullish case for the Kiwi. Last week the New Zealand dollar rose sharply following reports of Chinese interest in diversifying the nation's FX reserves and setting aside up to 1.5% to invest in New Zealand assets and government bonds.

While the NZD/USD hit a 3-year high overnight the AUD/NZD also reached a significant technical level, falling to the trend line off of the November and January lows at 1.3010. A breach here and the AUD/NZD would target a range between the January pivot at 1.2775 and 1.2470, the latter being the 61.8% retracement level from the 2010 low to the May 2011 high. The November low at 1.2640 would be a last stand for the Aussie dollar.

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Canadian GDP Due Out Today

Posted: 30 May 2011 12:32 AM PDT

With UK and US markets closed today liquidity may be on the light side. However, the economic calendar will not be taking a break as monthly Canadian GDP numbers will be released later today.

CAD – GDP m/m – 12:30 GMT
Expectations: 0.2%. Previous -0.2%.
Canadian GDP for the month of April is forecasted to grow following a disappointing month of February which had economic growth slipping into the red. Expectations are low and any decent growth numbers would be a positive for the Loonie. Initial support for the USD/CAD is found at 0.9740 followed by the low on March 20th at 0.9640. To the upside the recent rally has been capped at 0.9815. A breach here opens the door for gains towards 0.9970, a level where the mid-March high coincides with the 200-day moving average.

JPY – Preliminary Industrial Production m/m – 23:50 GMT
Expectations: 2.5%. Previous: -15.5%.
A fall in industrial output was expected after the earthquake and tsunami and is reflected in April numbers which declined by 15.5%. A 2.5% gain may be expecting too much from a feeble Japanese economy and could induce further declines in the USD/JPY. Initial support comes in at 80.35 followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10.

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Saturday, May 28, 2011

FOREXYARD: Forex News Blog

Dollar Under Pressure as Euro Recovers

Posted: 27 May 2011 05:12 AM PDT

The euro came off of its daily lows versus the dollar but traders may be tempted to unwind long euro positions prior to the holiday weekend. Japan was downgraded by Fitch Ratings which allowed the dollar to come off yesterday's lows versus the yen.

The dollar was down a day after disappointing US GDP data carried over and the euro came back from its sharp losses despite lower than expected inflationary pressures in Germany. The EUR/USD traded up at 1.4240 from 1.4133. Heavy buying has been seen in the Asian trading sessions followed by heavy selling in the US session. One may not have to look very far to identify the source of the buying as yesterday a Financial Times report cited Chinese interest in the Portuguese debt auctions from the European Financial Stability Facility. This would be a positive for the euro in the medium term. For the remainder of the day the EUR/USD could see its gains capped at 1.4280 near the upper boundary of a short term consolidation pattern due to the reluctance of traders to hold positions going into the holiday weekend. A breach below 1.4180 could take the pair lower to the 1.4130 level.

Japan was downgraded by Fitch Ratings to negative from stable which allowed the dollar to claw back from yesterday's declines versus the yen. The move by Fitch is not a surprise after the fiscal trouble combined with the earthquake/tsunami/nuclear reactor issues the country faces. The USD/JPY rose to 81.11 from yesterday's weekly low of 80.83. Support comes in at 80.35 with resistance at the previous trend line off of the May low at 81.60.

Traders will be following the release of US personal spending later today and judging from recent US data releases could come in on the low side as inflationary pressures in the States have been minute. Pending home sales may also offer a bit of late afternoon volatility as the long weekend approaches with holidays on Monday in both Britain and in the US.

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Friday, May 27, 2011

FOREXYARD: Forex News Blog

Euro Gains on Chinese Interest while Gold Falls $10

Posted: 26 May 2011 05:22 AM PDT

The FX markets have calmed following the sharp price moves seen in the Asian session as traders await US economic data later. The euro and equities are higher spurred by Chinese interest in Portuguese bailout debt and dollar block currencies.

The Nikkei finished the day up 1.48% following a Financial Times report citing Chinese interest in the Portuguese debt auctions from the European Financial Stability Facility. The euro was a prime beneficiary of this move and the currency is trading higher today across the board. The report helped to put the Greek debt crisis on the back burner and turn the focus on global reserve managers and FX diversification which had previously been a catalyst for the euro. The EUR/USD easily took out the 1.4130 resistance in the Asian session, moving as high as 1.4194 from 1.4081 before settling at 1.4170. A breach of today's high and the EUR/USD could add another 1.5 cents as the next resistance level lies at 1.4350 off of last Friday's high and the 50-day moving average.

Sterling is weaker versus the euro but higher against the dollar as the rebound in equities has kept both the dollar and sterling lower. The EUR/GBP traded higher at 0.8693 from 0.8652. Cable is up at 1.6310 from 1.6271. Cable's gains have been capped today at the previous trend line rising off of the January lows. A break of this level could take the GBP/USD higher to 1.6515.

Dollar bloc currencies are up with the New Zealand dollar bid as the Kiwi rose to a high of 0.8111 where the NZD/USD failed to break above the high from earlier in the month. Next resistance for the pair lies at 0.8215 off of the double top pattern in 2008. AUD/USD is up as well but still remains locked in a consolidation pattern with resistance at 1.0710 and support at 1.0430.

Commodities are notably softer with crude oil down at $100.75 and silver shedding $2.20 after earlier reaching a 2-week high. Spot gold prices are also lower by$10 on the day. Resistance is at $1,532 followed by the all-time high at $1,576. Support comes in at $1,503. The pullback in oil and metals is surprising given the sharp gains in Asian equities as well as the euro. Perhaps this indicates bearish positioning ahead of the US preliminary GDP and weekly unemployment claims later this afternoon.

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FX Technical Analysis – AUD/NZD – More Downward Pressure

Posted: 26 May 2011 01:22 AM PDT

Following today's sharp appreciation ofthe New Zealand dollar the AUD/NZD made a breach below a key support level.

Expanding on this morning's Wild Card selection from the FOREXYARD Daily Analysis, the AUD/NZD has hastily fallen from its early May high and this morning the pair has moved below the significant 1.3190 support level from the mid-April low. The AUD/NZD briefly fell below the psychological support level of 1.3100 but was unable to hold this mark after the European open.

Downward pressure is building on the pair after the breach and the selling may continue. Initial support is found at the trend line off of the November and January lows which comes in today at 1.3015. A breach here and the AUD/NZD would target a range between the January pivot at 1.2775 and 1.2470, the latter being the 61.8% retracement level from the 2010 low to the May 2011 high. The November low at 1.2640 would be a last stand for the Aussie dollar.

To the upside, the mid-April low will now switch from support to the first resistance level followed by the mid-May low at 1.3350. The pivots from May and March also deserve a mention at 1.3700 and 1.3790 respectively.

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AUDNZD_Daily

Thursday, May 26, 2011

FOREXYARD: Forex News Blog

Sterling and Spot Silver Make Gains
Japanese Yen – Fundamentals and Technicals (Part II)
Japanese Yen – Fundamentals and Technicals (Part I)

Sterling and Spot Silver Make Gains

Posted: 25 May 2011 05:16 AM PDT

A drop off in risk overnight fueled by rumors of a crack election in Greece faded as the day went on but the euro continues to trade lower. Sterling was bid this morning as was spot silver with markets awaiting the release of US core durable goods orders.

The euro was lower overnight following the election rumor and a reduced US GDP forecast by JP Morgan, but the EUR/USD recapped most of the losses during the London trading session. German consumer numbers came in below expectations and the EUR/USD dipped to its daily low at 1.4013 before recovering to 1.4080. Interestingly enough, today's low coincides with the neck line of a potential head and shoulders pattern, a long term chart reversal pattern. In the near term, a break of the 1.3970 level could spur declines to the 1.3910 where the 50% retracement lies from the January to May move.

Sterling was bid across the board this morning as the Organization for Economic Cooperation and Development (OECD) suggested UK interest rates will need to be increased. While the report from the Paris based think tank should have little impact on the Bank of England's Monetary Policy Committee, the did spur buying interest for traders to bid sterling higher. Cable rose as high as 1.6240. Initial resistance for the GBP/USD is found at 1.6320 from the broken trend line off of January low. The EUR/GBP fell to as 0.8652 before pulling back to 0.8670. The pair could continue its move lower as the Greek debt crisis keeps the euro on its back foot. A target may be 0.8620, the 61% retracement from the February to May move.

Global bourses were mixed with the Nikkei down -0.57% and the London FTSE trading even on the day. Commodities are higher with silver receiving strong bids, trading as high as 37.30. Resistance for spot silver comes in at $39.50. Support for spot silver is below the $34 level.

This afternoon US core durable goods orders are due out shortly and could be a high impact data release following JP Morgan's trimmed US GDP forecast. Stronger US data would likely feed into USD selling and help to push sterling and spot silver higher.

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Japanese Yen – Fundamentals and Technicals (Part II)

Posted: 25 May 2011 04:31 AM PDT

The technicals for the USD/JPY are beginning to signal a potential move higher, a move that is in-line with the fundamentals.

Weekly stochastics are rising, indicating longer term momentum is swinging to the upside. The daily chart's 14-RSI is also moving steadily higher confirming the short term bullish run. The USD/JPY has already retraced 38% of the April to May move lower and a rebound in the pair could continue further. The 50% and 61.8% retracement levels stand out as potential targets, coming in at 82.55 and 83.25 respectively. Before these retracement targets, near term resistance comes in at 82.20 followed by 82.80.

The rising trend line off of the May low should prove to be supportive with significant support at this week's low at 81.30.

Click here to read Part II, fundamental analysis of the Japanese yen.

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USDJPY_Daily

Japanese Yen – Fundamentals and Technicals (Part I)

Posted: 25 May 2011 02:34 AM PDT

The yen continues to ease as both fundamentals and technicals are aligning against the Japanese currency. Below is part I of II discussing the fundamentals of the yen and the Japanese economy

Yesterday the Bank of Japan meeting minutes from the April 28th meeting showed a single board member, Deputy Governor Kiyohiko Nishimura, came out in favor of additional credit easing to aid the Japanese economic recovery. Nishimura said, "The need for additional momentary easing had increased, taking into account the current outlook for the economy and prices".

Exports declined 12.5% for a year-over-year decline in April. The number was in-line with consensus forecasts for a decline of 12.4%. Due to the drop in exports the trade balance fell to a deficit of -463.7B JPY. This is the first deficit in 3-months.

Earlier in the week the BoJ issued a negative economic assessment. The report for the month of May shows production has fallen and domestic private demand continues to weaken following the earthquake and tsunami on March 11.

Q1 GDP contracted by 3.7% on an annualized basis.

Fundamentals point to a potential easing of monetary policy and a weakening economic position, all negatives for the Japanese yen.

Click here to read Part II, technical analysis of the USD/JPY.

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