EUR/USD Wrap Up form Forex-Nation.com

[Forexwatchman]

The dollar lost ground across the board today, but it's nothing major as of yet. Probably a mix of reactions concerning the recently announced EU Greek debt plan and what effect it will truly have other than a temporary rebound in risk appetite. Fitch announced today that it has decided to maintain its negative outlook regarding Greece's financial security calling for clarity on Greece’s financing strategy. They went on to state that the EU statement of support for Greece is positive for the their credit profile but they are maintaining their negative outlook due to uncertainty of fiscal adjustment within Greece.

News from Moscow regarding the terrorist attack might have given the market more to think about towards risk aversion, but more emphasis has been focused on the progress of the Greek 7 year bond issue which seems to be going ok. Greece is selling 5 billion euros ($6.7 billion) of seven-year bonds, its first debt offering since the European Union agreed to help the nation finance the region’s biggest budget deficit. IMF’s Strauss-Kahn made the statement today: We have provided Greece with technical assistance. Greeks still haven’t asked for financial help. It's still not obvious today that financial help for Greece will be necessary.

This plus decent euro zone economic sentiment data has continued to add support to the modest rally that the EUR/USD has enjoyed so far. European confidence in the economic outlook improved to the highest in almost two years in March, beating economists’ forecasts and signaling the recovery is gathering strength as a weaker euro helps exporters by making euro-area goods more competitive abroad. It was the highest since May 2008, four months before the collapse of Lehman Brothers Holdings Inc, when things really began to fall apart globally.

I have stayed on the sidelines and will continue to do so as the EUR/USD continues to be real choppy as it digests all the fundamental events of late, and will look to plan my trade setups after the close of the New York session. No major news events scheduled for tomorrow so look towards a continued consolidation and formation of a new range for the EUR/USD as we await Wednesday's economic releases. Good luck to you!

 

[Forexwatchman]

Last night I posted a video of the trade setup I used to catch yesterday's break from the range with a decent selloff and scored some easy pips. I also mentioned my analysis for today and why I was predicting another decent rally on the EUR/USD. So I feel the need here to toot my own horn and brag a little, as we've seen the euro rally from last week's low of 1.3385 to a fresh session high at 1.3543 and the pair has taken back all the ground lost on Tuesday's selloff. As I went over briefly in yesterday's video, this rally might be attributed to the end of the month flows that several fundamental forces produce. One of which is when out-performance in US securities markets relative to overseas markets causes investors to sell the “extra” dollars they’ve accumulated in their accounts and rebalance their portfolios buy buying currencies in the markets that have under-performed. Secondly, UK clearing banks typically make a payment to the EU on the last business day of the month which usually results in a significant amount of EUR/GBP needing to be bought up. It is usually transacted by a European central bank at the 10:00 GMT London fixing, and this is exactly when the rally upwards really took off.

Moving into today's news, one thing that has been abundantly clear this week is the overwhelming number of analysts who are predicting a largely positive NFP this Friday, but as with most things related to forex, the picture got a whole lot more complicated today as economists, who were expecting the private sector to show a rise of 40,000 in the ADP employment report for March, got blindsided with a fall of 23,000. Thus hopes for a big jump in payrolls on Friday have been dashed by today's data, which has become increasingly reliable in recent months at predicting the NFP. Analysts believe that loads of temporary census jobs should provide a boost in non-farm payrolls on Friday, but I'd have to say that that is an optimistic outlook that might not prove true anymore. We also saw the Chicago PMI come in at 58.8, lower than expected.

The euro zone data was a mixed bag:

German March jobless change -31k, better than median forecast +10k

Euro zone March inflation estimated at 1.5% y/y, up from 0.9% in February, stronger than median forecast of 1.3% and highest since December 2008

Euro zone February unemployment hits 10% vs 9.9% in January, highest since August 1998. EU unemployment 9.6% from 9.5%, highest since data started in January 2000

Combining high inflation figures with high unemployment equals a bad sign for the euro zone. Add to that the fact that the bonds sold yesterday by Greece as part of their debt consolidation plan performed horribly in the in the secondary market and Greece failed to sell all of the 12-year bonds it offered, placing less than 40% of them.

Looking ahead, I don't believe the markets will be too lively at this point as the mother of all economic data edges closer towards us; the NFP of course. Look for a continued rally perhaps as high as 1.3568 but no higher than 1.3600 before we see a range begin to form as we head into Thursday's trading. Good luck to you all!

 

[Forexwatchman]

Heading into the new week, let’s take a quick review of last Friday’s NFP report and what effect it could have on the dollar for this week. Nonfarm payroll employment increased by 162,000 in March. We also had February’s number revised to a much better –14K compared to the previously reported -36K. So what that comes down to is that the US economy added an average of 54K jobs a month in the first quarter, which will likely have the effect of boosting the dollar in the week to come. The manufacturing sector also has shown an increase of 17K jobs, 45K for the first quarter. Many analysts will also take into account that many of the jobs that were recently created for the U.S. census (48K, nearly one-third of the total jobs added for March) will be off the books in the second half of the year, so the recovery is still a work in progress. The pick up in jobs needs to continue for several months in a row.

Adding more fuel to the selling pressure on the euro is the recent report from Reuters that the CFTC has reported currency speculators increased their bets on the U.S. dollar in the latest week. Traders have also increased their short positions on the euro to a record number of contracts, thus confirming that selling pressure has returned for the euro. As I mentioned in a number of my video analysis, the 1.3600’s continue to be a significant level of possible resistance for the euro and we could see a return to the lower 1.3200’s this week. Watch those trendlines on your charts closely as the current uptrend has obeyed my line that I have drawn from 1.3267 and 1.3384 lows on the hourly chart. This line was obeyed at the end of the sell-off on Friday so any break of it will signal another possible deep sell-off for the EUR/USD. Look for a new video analysis soon at Forex-Nation. Good luck to you all!

 

[Forexwatchman]

The market has moved precisely as I said it would minus one prediction that had the EUR/USD finding support at the weekly S1. It actually blew through it at the open of the New York session and continues to give way to selling pressure. I have been told that there are lots of rumors in the market today of wealthy Greeks moving money offshore, perhaps into London and the U.S. I can believe it, especially with renewed concerns for Greece's debt popping up as credit default swaps moved 65 basis points higher on the day through the 400 bp level. The higher the bp, the worse the outlook for the euro gets. As spreads widen and talk swirls of wealthy Greeks moving money offshore, traders will turn their attention to the stock prices of Greek banks, particularly the National Bank of Greece which just happens to be traded on the New York Stock Exchange (NBG is the symbol). It is down 6.3% so far today. Also in the headlines today were contradictory reports that Greece was seeking to reconsider the whole IMF role in the debt relief plan drawn up at the previous EU Summitt. The Greek finance minister says Greece has not sought to activate the EU aid mechanism and that they have taken no action to change the term of the deal forged at the EU summit in March, this is according to Reuters. Somehow reports differ wildly depending on sources, so my guess is that there's a leak somewhere and we just happened to come across it earlier in the European session before the Greece Fin. Min. spoke up. Separately, the IMF says its staff will begin a two-week technical visit on Wednesday.

Little data to speak on out of the U.S. The U.S. Treasury Secretary Timothy Geithner, speaking from New Dehli today, says the US economy is looking substantially stronger. Earlier in the day, he said he expects China to begin allowing a stronger CNY. This is another not so veiled attempt to put pressure on China to basically stop manipulating the value of their own currency to further commerce between businesses in that nation and abroad. He’d better more than hope, since his move to postpone the currency report which would basically call China out on their currency manipulation if they don't change things will look very cowardly, indeed. I mention this to give further reasoning fundamentally to expect a strong dollar going forward this month.

I am currently still in the trade that I went over in my most recent video and I am fully prepared to add more onto an already winning position as the selling pressure on the EUR/USD shows no signs of letting up. This is one of those times in the market where the fundamentals and technicals are in agreement and thus adds more reasoning behind bulking up your order sizes when entering the market. Hope you are continuing to follow along with me, since so far my analysis have been very accurate, indeed. Good luck to you all!

 

[Forexwatchman]

It's been a rough week for the EUR/USD as anyone who's remotely aware of the ongoing issues with Greece and the euro zone are well aware. The selling pressure that's been a result of fundamental forces between the two countries' economies. A German bank is rumored to have been a big seller on the recent push down below 1.3300. Also the move came as the yield gap between Greek and German government bonds continues to widen which I first mentioned in an earlier post. But the sell-off met the technical level of support that I've been predicting would temporarily boost the EUR/USD back up; the weekly S2. Price action met the weekly S2 to the pip before rallying back up 82 pips as I write this. It goes to show the power of weekly pivot points as a simple yet effective indicator that even the big boys pay attention to.

Also adding to the current rally on the EUR/USD was poor US jobless claims and falling US bond yields which are prompting some modest short-covering, while central bank bids below the 1.3300 level also contributed to the present bounce. Job claims came in higher than expected at 460,000 vs 433,000. Nothing to major though. Yesterday was a busy day for U.S. financial government spokesmen who were mostly all still cautious in expressing optimism about the current state of the U.S. economy, although the picture is definately a lot brighter than it was 4 months ago.

But today's highlight, or might I say low-light, was seeing the president of the ECB, one of the smoothest communicators on the global stage, appear to lose his composure on several topics brought up by reporters concerning Greece. Some say it was his worst press outing ever! It would now appear that Trichet is melting under relentless questioning which will certainly have a negative effect on the euro if this continues. Some of my personal highlights included a response out of frustration where he says “the market is right, the market is always right”, when asked about the market’s reaction to the Greek turmoil. He says it will be right the day after tomorrow when spreads come down again as well… Also Trichet refused comment on the impact of the dive in Greek bond markets impacting Greek banks, which I have brought up on several recent analyses. He refused to comment on the potential for Greek banks to be shut out of the repo markets. Perhaps his biggest blunder was denying having said that inclusion of the IMF in a Greek rescue would be “very, very bad”. Actually here's the exact quote: If the IMF or any other authority exercises any responsibility instead of the euro group, instead of the governments, this would clearly be very, very bad. Trichet said that on France’s Public Senat television.

Some other data from the euro zone:

Euro zone February retail sales -0.6% m/m, -1.1% y/y, weaker than median forecasts of -0.1% m/m, -0.7% respectively

German February industry output flat m/m, weaker than median forecast +0.6%

Go by Forex-Nation and check out the recent video I've posted describing my trades for the week for more detailed analysis. Good luck to you all!

 

[Forexwatchman]

A major development happened over the weekend that should have a boosting effect on the euro beyond what we've already seen. Bloomberg reported on Sunday that: European governments offered debt- burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the euro. But Greece says they will need a further 50 bln in the years ahead in addition to the EUR 30 bln offered up yesterday by the EU and IMF. The effect of this news produced one of the biggest gaps I ever seen in price action over the weekend. EUR/USD closed in NY on Friday at 1.3490 but after the news which I just mentioned above, the pair opened at 1.3590 in interbank trade, a 100 pip gap. The EUR/USD went on to rally higher during Asia and early Europe sessions to a high of 1.3699, but has steadily slipped farther down once European trading got up and running. Euro skeptics continue to pour out of the woodwork spurred on by a German government spokesman who said a summit agreement would be needed to activate aid to Greece. While the stand ready to help Greece, they seem to be extremely reluctant to actually do so. Clearly they are playing domestic politics here, but domestic politics also plays into the hands of the euro-skeptics. More than likely they are simply trying to keep the euro from recovering too strongly.

Speaking of a euro recovery, both technicals and fundamentals seem to be suggesting that we are preparing to enter a new bullish phase on the EUR/USD. Despite the 100 pip opening gap that I mentioned earlier, we still see less selling pressure than one would usually expect to see after such an opening. Also we have a double-bottom pattern in place on the EUR/USD charts with a possible move back up to the 1.3910 level. Double bottoms in EUR/USD and bullish breaks in AUD/USD and Gold after periods of consolidation, cannot be ignored and with all four taken together it really does look like we should be preparing ourselves for a bearish USD phase. My sources tell me breaks above .9410 in the AUD/USD and $1225 in the Gold price would even strengthen the bearish USD case. In cases where fundamental data conflicts with technical analysis, you must remain skeptical and choose you entries carefully, but always side with the technical analysis. Good luck to you all!

 

[Forexwatchman]

EUR/USD worked its' way ever so slowly higher during the Asian session to 1.3666 as a ‘risk on’ move developed after reports from Singapore about tightening monetary policy by effectively revaluing the Sing Dollar around 1.4%. Talk of massive stops above 1.3700 combined with Moodys comments that Greece's chance of a rating cut is now greater than 50% also played a role in bringing a halt to the modest rally. Moody also followed those comments up with Greek default risk as a low probability event. That said the Greek stock market is down another 4% today and thus a rally looks to be out of the picture for today. One other development that casts its shadow over today's trading are reports from the EU that Portuguese growth may be lower than expected and that they need to boost competitiveness and productivity. Another kick in the pants for yet another euro zone country.

Some good news out of the Euro zone today was Industrial Output data, which was better than expected but the EUR/USD did not react to the data due to reasons mentioned above. The market is truly divided this week over Greece, with some thinking that the Greece problem can be put on the backburner for a little while others continue to remain very skeptical indeed. Euro skeptics rule in London but in other timezones we've witnessed some decent rallies. Many are continuing to call for an expected rally up into the 1.3900's, yet the market remains predominately short. The gap created after the Greece loan deal that I mentioned in my last post continues to remain open and thus makes me wonder if we were truly going to see renewed selling pressure then I would have expected to have seen it by now. I believe you can just consider the gap closed at this point.

The dollar continues to strengthen as we have four S&P companies reporting earnings including JPMorgan whose shares were up 2% in pre-market trading following the release of their Q1 results – net income of $3.8bln or 74 cents a share on revenue of $28bln. Fed Chairman Bernanke will be speaking at 10:00 am, I would expect Mr Bernanke to remain dovish as usual. Also out of the U.S. this morning:

US retail sales rose to 1.6%

CPI was up 0.1%

Core CPI was flat.

Core retail sales (ex-autos, gas, and building materials) rose 0.5%

So far, this month's data shows strong growth with low inflation and stock markets up because of it. It continues to be a difficult task to predict where things are headed fundamentally, and therefore you should continue to stick to your technical analysis in the days ahead. Good luck to you all!

 

[Forexwatchman]

We spent Friday and Monday in a risk off mode as worries about the Goldman Sachs SEC charges took over and sent the bulls running for cover. While we've seen some moderate bounces during the European sessions on Monday and Tuesday, and strong data out regarding the better than expected ZEW data (German April economic sentiment coming in at 53.0 from 44.5 in March, above median forecast of 45.1), short-covering appears to be the main thing at play in the markets with positioning all wrong after NY basically ignored Goldman Sachs woes for reasons I'll speculate on later in this post.

Today Goldman Sachs' reported first quarter profits of $3.5 billion which also helped cushion the inevitable fall from grace that the company will soon face. Don't be fooled by the large profits though, the company simply scaled back on adding to its compensation pool which was the source of the firm's famously large bonuses. That helped send Goldman's overall profits up 91% from a year ago's earnings of $1.8 billion. So instead of paying themselves this time, they let the money remain on the ledger as profit, how unselfish.

The EUR/USD closed in New York at 1.3488 on Monday and has struggled to maintain a rally in Asian trading. I think Asia basically gave up at that point and early European traders sold once more with the pair hitting an intraday low of 1.3449. This same sell-off was interrupted by the good economic data out of the Euro zone and helped the pair rebound sharply but once above 1.3500 it has been a struggle to make further headway. I would say at this point that EUR/USD sellers have won the first battle this week after the better than expected German ZEW caused a spike to 1.3515 before being knocked back down so quickly. Being unable to consolidate gains above 1.3500 is a definite sign of weakness for this pair right now. But it's only round one for the week. Also Greece’s 3-month treasury bill auction went pretty well, selling 1.95 bln euros of 13-week securities at a 3.65% yield. Investors bid for 4.61 times the securities offered.

I am not sure what the market is running on out there but there appears to be little substance at the moment. NY was not as interested in the Goldman Sachs fallout as one would have assumed considering the economic times we are in right now. I guess since this is earnings season where companies display there first quarter profits, the risk on option doesn't seem out of the question just yet. Unfortunately Goldman Sachs like Greece is unlikely to go away anytime soon but the US market is somewhat ambivalent at this stage. Although we can almost certainly expect things to get ugly for reasons already mentioned above, I'm still very cautious of any sell-off being stronger than any rally we see. Right now I am short on the EUR/USD but not expecting to see a major move in either direction, I'm simply playing it candlestick by candlestick. As I am writing this, it appears that the NY session is consolidating at the 1.3450/70 areas with a break to the downside a strong possibility. I'll post a video soon regarding this week's trade activity, so check back at Forex-Nation for more. In the meantime, good luck to you all!

 

[Forexwatchman]

EUR/USD made it's way once more back below 1.3300 as the Greek tragedy continues and new data paints a bleak picture for the euro zone. Moody’s Investors Service once again downgraded Greece’s government bond ratings to A3 from A2 and stated that a further possible downgrade might be coming upon further review. Hardly a major surprise there, but it did help send the euro much lower today. As I've mentioned before in previous posts, the bonds market is something to keep an eye on when evaluating the strength/weakness of the Greek situation and it's impact on the currency market. Today Greek 5-year CDS rose to a record 616 bps after Moody’s announcement. Portuguese Finance Minister went to say risk of a contagion effect from Greece exists, and is being reflected in the bond markets. One other thing driving the bears right now was Eurostat data showing Greek budget deficit is up to 13.6% of GDP in 2009 vs government’s projection of 12.7%. Perhaps the scariest part was that Eurostat expressed reservations on the quality of data reported by Greece.

In the U.S., Obama made a public speech from Cooper Union in Manhattan and expressed several points:

Goal of regulation measures is to make sure taxpayers never again “on the hook” because firm deemed to big to fail; Reform would put a stop to taxpayer-funded bailouts

Economy growing, fastest growth turnaround in almost three decades, more work to do

Will bring market transparency, help ensure derivatives trading takes place “in the light of day"

Also we had some economic data out of the NY session:

US March existing homes sales came in at 5.35 mln unit annual rate; Above consensus 5.28 mln

March PPI has come in at +0.7% m/m, +6.0% y/y, firmer than median forecasts +0.4%, +5.8% respectively.

Ex food and energy +0.1% m/m, +0.9% y/y, exactly in line with median forecasts.

US initial jobless claims week April 17 fell to 456K from 480k prior week

So in summary, it doesn't look good for the EUR/USD bulls going into Friday as the insurmountable problem continue to build for that region without much hope any near future relief. On the other hand, the U.S. seems to be in good shape and continuing to recover. I would expect new lows for this pair to be reach by this time next week. What will be interesting to see is how much of a fight the bulls will be able to carry out as the Greek bailout plan has already been revealed now, which is what helped the pair avoid a continuation of the main downtrend this month. It would now appear that the plan isn't enough to restore confidence and fears of a "contagion effect" in the bond markets are going to take center stage in the near future. As I type this I am actually long on the EUR/USD after the pair found support at the 1.3282 level and the daily S3 and now appears to be in the process of a slight corrective move. I'm still VERY bearish on this pair and am looking at the 15 minute chart MA's to signal a change in momentum back in the direction of the main downtrend while hoping to score at least 30 pips off the corrective move.

 

[Forexwatchman]

Fundamental data out of the U.S. and Euro zone paint a very murky picture as of today, as concerns over financial regulation in the U.S. is put on center stage today with Goldman Sach's CEOs testifying before congress in the U.S., while Greek unions declare they will strike May 5 against austerity, Germany continues to stall finalizing the aid package, and 10 year bonds spreads are up to a full 4 points today (U.S. 10 year bonds trade at 1/64th of a point for comparison).

EUR/USD continues to rally and then fade as more news from Germany weighed down the recent rally attempts. A German coalition member recommends a Greek debt restructuring in order to get aid. Not a crazy idea but it is a bit late in the game to change the whole program and discussions like these only delay the inevitable while making the politicians look strong in the eyes of their supporters. If they were truly serious about such talks, they should have proposed this three months ago. French FinMin Lagarde says “some” European governments are engaging in parliamentary debates for “posturing” to deal with public opinion. Time is of the essence in dealing with Greece, she says from New York, according to Reuters.

Data out of the euro zone was mixed today:

• German March import prices +1.7% m/m, +5.0%, stronger than median forecasts +1.1%, +4.2% respectively

• French April consumer confidence -37, down from -34 in March and worse than median forecast -33

• Italy April consumer confidence rises to 107.9 from 106.3 in March, better than median forecast of 106.6

• European stocks have followed their Asian counterparts lower.

• Oil off 3/4’s of a buck, gold lower etc

• Consumer confidence was up while home price indices were down in the U.S., but that data has been of little value to the dollar and was largely ignored.

Worries surrounding PIGS in general, and Greece in particular, just keep growing. Despite the facts though, the sell-off has met very strong rally attempts from the big boys as the BIS and central banks have all been seen buying around 1.3365 and other fresh lows. Asian sovereigns have also been reported buying in 1.3330/50 area and another sovereign labeled “top tier” seen around 1.3315. Stops next seen through 1.3280 along with S/L orders just below there and this is a key price level to watch for in the coming days.

As far as the charts go, last night's rally which strangely began at the close of the NY session met resistance at the trendline I have drawn in on the hourly chart from 1.3585 from April 15th to 1.3523 on the 20th. This leads me to believe that this is a valid trendline for the near term rallies to meet continued resistance at, conversely it is also a good indicator if broken of a much greater rally perhaps into the 1.3700's. As mentioned above, near-term support comes into play above 1.3280, and if price action can shove its way through that level, we will certainly see a renewed selloff perhaps below 1.3200. That is where the weekly S1 comes into play as well. My opinion is that the EUR is taking a harsher beating than it perhaps deserves, mostly due to the posturing from Germany as mentioned above, and that once the aid is fully realized, we will see investors willing to get on board at least temporarily and ride this currency pair back into the upper 1.3700's. Watch your support/resistance levels and trendlines for clues as Wednesday and Thursday are the biggest days for new trends to take shape. Good luck to you all!