Forex Market Clock

New York

Tuesday, 22 June 2010

FOREXYARD Daily forex analysis on 22 June 2010

EUR/USD Nears $1.2500, but Declined Sharply Thereafter
The EUR/USD pair almost touched $1.2500 during yesterday's trading session, but declined sharply thereafter, following a rating downgrade. Fitch Ratings' downgraded French banking giant BNP Paribas from AA to AA-. The move increased analysts' concerns about the economy after the day passed with almost no major news events.

Economic News

Dollar Rallies on Renewed Euro-Zone Concerns
The USD traded higher against most counterparts yesterday, except the Yen, as excitement about China's decision to relax the Yuan's pegged exchange rate subsided and as concerns regarding the stability of the Euro-Zone banking system resurfaced.

The EUR/USD pair declined by more than 150 pips after it reached $1.2466 at the start of the New York trading session. Traders moved away from riskier currencies after China cautioned they will only gradually raise the Yuan against the USD. Looking ahead to today, traders are advised to follow the release of the Existing Home Sales report at 14:00 GMT. A better than expected result might back some optimism to the markets, supporting the EUR/USD pair slightly.

BNP Paribas Rating Downgrade Weakened EUR
The EUR weakened against all its major counterparts yesterday following a rating downgrade. Fitch Ratings downgraded French banking giant BNP Paribas from AA to AA-. The move increased analysts' concerns about the economy after the day passed with almost no major news events.

The EUR declined versus the U.S. Dollar yesterday as investors lost confidence in the European currency. Although the Bank's quarterly results improved, it is still exposed to vulnerable assets. Fitch's BNP rating downgrade reminded investors' of Europe's fragile economy.

The general mood towards the EUR remains negative, despite the rally of the past two weeks. It would not be surprising to see the EUR/USD pair trading back at lower levels, near $1.2000.

As for today, traders should follow the release of the German Ifo Business climate release at 8:00 GMT as well as continue to monitor statements from financial leaders and rating agencies as recently they tend to greatly influence the currency market.

Concerns about European Banks Turn the Yen Popular Again
The Yen appreciated yesterday versus riskier assets such as the EUR and GBP as investors turned to the safe heaven appeal of the currency following the downgrade of French Banking Giant BNP Paribas.

The Yen gained versus 13 of its 16 major counterparts after officials from the European Central Bank stated some banks in the 16-nation region are facing funding problems and as deep spending cuts are expected to be announced from Britain.

Japan's currency advanced to 111.90 per EUR from 112.18 in New York yesterday. The Yen is at 90.89 per USD from 91.11 yesterday.

Crude Oil
Crude Declined as the Dollar Appreciated
Crude Oil declined as excitement about China's plan to allow the Yuan to appreciate against the USD and as equities fell on renewed concerns that Europe's sovereign-debt crisis will affect economic recovery.

China is the world's largest Oil consumer outside the U.S; while the decision to loosen the exchange rate is expected to increase the country's Oil demand, the transition will likely be gradual and therefore the increase in demand will be more modest than initially expected.

Crude for July delivery dropped as much as 63 cents, or 0.8%, to $77.19 a barrel in electronic trading on the New York Mercantile Exchange yesterday. Currently Oil prices are back to trading near the $78.00 a barrel level.

Technical News

We can see from the daily chart that the two week period of strength from the EUR may just be a short term correction in the long term bearish trend. The appreciation in the price has stalled at a trend line that began on April 15th. The second point of contact is on May 10th, and the 3rd point of contact is yesterday. The three contact points show the trend line is a significant trend line. Therefore we may expect the pair to continue it's long term bearish trend with the next target the support line at 1.2150.
The pair seems to be exhibiting some mixed signals. While the hourly RSI is floating in the oversold territory and the MACD is near the lower limit, indicating an impending upward movement, a bearish cross can be seen on the daily chart's Slow Stochastic as well as the 8 hour MACD. Waiting on a clearer direction for the pair may be advised.
Some upward correction may be expected for the pair today as the RSI for the pair is floating near the over sold territory on the hourly chart while a bullish cross is evident on the 4 hour and 8 hour MACD. Going long for the day may be advised.
The pair may be seeing a much need upward correction today as the RSI for the pair is floating in the oversold territory on the 4 hour, 8 hour and daily chart with a bullish cross evident on the daily charts' Slow Stochastic. An impending bullish cross can be also seen on the 4 hour and 8 hour MACD. Furthermore, a breach of the lower Bollinger Band is evident on the daily chart indicating an imminent upward movement. Going long for the day may be advised.

The Wild Card
Gold prices dropped following a rise to a new record price at $1262.20. But the price then quickly fell and is now trading near the price of $1238. The buying binge may have exhausted itself for the time being as the daily chart's RSI 14 has dipped below the 70 line, indicating the potential for further price declines. A new buying opportunity for CFD traders may be found at $1216.

Source: ForexYard Newsletter


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