Daily Forex Market Analysis | 11 October 2011

Data on the Canadian housing sector today may indicate mild optimism that could drive the value of the Canadian dollar (CAD) higher in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts.

Summary

USD - US Dollar Stabilizes as Markets Come Off Holiday Break

EUR - EUR Trading Flat as Trichet Prepares Speech

JPY - Japanese Yen Consolidating as Traders Weight Global Sentiment

Oil - Oil Prices Holding Steady amid Market Turmoil

Forex Market Trends – 11 October 2011

Economic News

USD - US Dollar Stabilizes as Markets Come Off Holiday Break

The US dollar (USD) was seen trading mildly bullish early Tuesday morning as investors seemed somewhat less pessimistic about growth in Europe and Asia, but still uncertain due to an assumed temporary state of things at present. Sentiment does not seem to be as stable as many economists would like, though, as investment does seem to be shifting eastward away from the US.

Data on the North American housing sector today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts. Housing Starts in Canada are forecast to hold steady this week, which could have the effect of lifting the value of riskier assets, though this will need further data to be confirmed.

As for today, there will be only one US economic release, with most news focused on other economies. Liquidity will likely be higher in today's early trading as these data points are published, though the impact of Britain's Manufacturing Production reading may not be enough to force a surge in any direction on USD pairs and crosses. Housing and consumer confidence are in focus this week and traders will want to pay attention to the latter in the case of mounting pessimism and its affect on dollar values.

EUR - EUR Trading Flat as Trichet Prepares Speech

The euro (EUR) is expected to be seen trading with mildly bullish results this week ahead of a slew of reports on the region's consumer confidence and manufacturing sector. Against the US dollar (USD) the euro has been trending upwards from a recent flight to higher yields after the weekend's optimistic jobs reports. Today's speech by ECB President Jean-Claude Trichet could offer more insight into what is happening across the euro zone.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in global stocks at the moment has many investors on edge and looking for safety. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets make long strides.

Sentiment across the euro zone has turned slightly more positive, with many analysts and economists expecting moves towards higher yielding assets by traders this week. Great Britain, moreover, appears positioned for a relatively better quarter than its southerly neighbors. With several minor reports expected all week, most expecting bullish figures, the GBP is in a position to continue its recent streak, though the same cannot be said for the EUR.

JPY - Japanese Yen Consolidating as Traders Weight Global Sentiment

The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending intervention by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With industrial production data out this week, traders are waiting to see what the BOJ will do in the face of a downturn. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan's current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.

Oil - Oil Prices Holding Steady amid Market Turmoil

Crude Oil prices held steady Monday as sentiment appeared to favor a mild downtick in global stocks following policies of monetary stagnation being executed by several central banks last week. Data releases out of Europe and the US are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.

An expected jump in dollar values due to this week's risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD's gains leveling off this morning, sentiment appears to have the price of crude oil holding steady near $90 a barrel. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Technical News

EUR/USD

The EUR/USD cross has experienced a bullish trend for the past few days. However, it seems that this trend may be coming to an end. The RSI of the 8-hour chart shows the pair floating in the over-bought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

GBP/USD

The cross has experienced much bearishness yesterday, and currently stands at the 1.5630 level. There is much evidence in the chart's oscillators that supports a possible bearish correction today. This is supported by the 8-hour chart's Slow Stochastic. Going short with tight stops may turn out to bring big profits today.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

USD/CHF

The cross has been dropping for the past two days now, as it now stands at the 0.9040 level. The Slow Stochastic of the 4- hour chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by the RSI of the 2-hour chart. Going long with tight stops may turn out to be the right choice today.