FXstreet.com (Barcelona) - EUR/USD has reached a new 5-month high at 1.4170 but it has been rejects strongly about 70 pips to tests 1.4100 level. Currently the pair is trading around 1.4125/35, 1.30% above today's opening price.Valeria bednarik, FXstreet.com collaborator, comments: "Close to next key weekly level at the 50% retracement of the 1.6018/1.2330, pair could extend today’s rally to the 1.4180 zone, as despite the overbought state in smaller time frames, no signs from reversal are seen yet. Greenback is closing the week signaling further losses ahead, and if managed to break above the mentioned zone, 1.4600 will become a probable target in the midterm. Strong rebound at the mentioned level, could send euro back to test the1.3740 zone without harming general bullish tone. In the short term, I expect the 1.4180 zone to hold the upside today, and some downside corrections to the 1.4060 zone if breaks under.Friday, May 29, 2009
Forex: EUR/USD rejects from 1.4170, back to 1.4100
FXstreet.com (Barcelona) - EUR/USD has reached a new 5-month high at 1.4170 but it has been rejects strongly about 70 pips to tests 1.4100 level. Currently the pair is trading around 1.4125/35, 1.30% above today's opening price.Valeria bednarik, FXstreet.com collaborator, comments: "Close to next key weekly level at the 50% retracement of the 1.6018/1.2330, pair could extend today’s rally to the 1.4180 zone, as despite the overbought state in smaller time frames, no signs from reversal are seen yet. Greenback is closing the week signaling further losses ahead, and if managed to break above the mentioned zone, 1.4600 will become a probable target in the midterm. Strong rebound at the mentioned level, could send euro back to test the1.3740 zone without harming general bullish tone. In the short term, I expect the 1.4180 zone to hold the upside today, and some downside corrections to the 1.4060 zone if breaks under.
Fundamental Factors behind Major Currencies
Every currency traded in Forex is influenced by the conditions in its country of origin, and the external relations that affect its value. Economic Indicators (GDP growth, import/export trade accounts), social factors (unemployment rate, real estate market conditions) and the country’s central bank policy are the factors that determine the currency value in the Forex market. Each one of the six major currencies has its particularities, and we are going to analyze the fundamentals that drive the currencies individually.
The U.S. dollar (USD) is the most traded currency in the Forex market. It is also used as a measure to evaluate other currencies and commodities. The reserves in USD are by far the largest being held by different nations, and they compose 64% of the world reserves. Globally speaking, the fundamentals that drive the U. S. Dollar are several. Since the largest amount of metallic commodities and the oil are mostly traded with prices in USD, significant demand variations in these markets will reflect directly on the currency value, as it happened in 2008 with the EUR/USD reaching 1.60, being the oil price a big contributor for this event. In the domestic market, the biggest factor that has been moving the dollar are the industry indicators and the real estate boom, and both were caused by an unsustainable credit system which could not be paid, causing a domino effect in the United States economy, and consequently, worldwide. During the last few years, the USD has been losing ground for other currencies, thanks to the credit bubble, and erroneous social policies, but it will still remain as one of the most powerful currencies for an undetermined period of time.
The euro (EUR) is by far the newest currency traded among the major pairs traded on Forex markets. It is used by 16 European Union member countries and it tends to enlarge during the next few years. The fundamental factors that move the Euro are often based on the strongest economies using the new common currency, such as: France, Italy and mainly Germany. The countries’ indicators regarding export trade, inflation and unemployment rate tend to have a high impact on the EUR movements, considering that countries such as Germany are larger exporters of manufactures and technology. Europe still remains an energy dependant from the Russian gas and the Middle Eastern Oil, making higher demands for these commodities to have a negative reflect on the European Union common currency.
The pound sterling (GBP) is the national currency of the United Kingdom, and the fundamental factors that move it are as complex and variable as the British economy and its global influence. The London commodity market plays a fundamental role in the GBP trends, being a reference for oil and gold trading. Nevertheless, as a powerful and globally dynamic economy, the United Kingdom indicators, social situation and the housing sector are perhaps the main determinant factors for the GBP price. Lately, the British economy has faced inflation issues, which led the interest rates to be cut, industrial recession, and other domestic factors that made the trading movements to naturally flow from the GBP towards other strong economically backed currencies, such as the EUR.
The Japanese yen (JPY) is the strongest and by far the most traded currency in the Asian market. Japan’s economy is mainly orientated to the industrial production exportation, and the economic situation of its main commercial partner, the USA, tends to have a direct influence on the JPY market. The JPY is a low-yield currency, being the GBP/JPY the most volatile pair traded on Forex, usually the scalper’s favorite one.
Switzerland is a small country located in the European Alps, yet, its strong international trade and money influx, made the Swiss franc (CHF), one of the main currencies traded on Forex. The CHF is often preferred by low yield investors. In times of financial instability, such as for the last years with the USD, many traders choose the CHF as a safe investment. The CHF trends can be often compared to those of the gold, increasing their value while other markets’ tends to depreciate during economic downturns.
The Canadian Dollar (CAD) faces a similar situation with the other commodity currencies, being majorly an export-dependable. Most of the Canadian production is exported to the USA. Facing the very same credit bubble problem that dragged America into recession, Canada has to deal also with a decreasing demand for all commodities. The CAD usually correlates positively with the prices for the all commodities
The U.S. dollar (USD) is the most traded currency in the Forex market. It is also used as a measure to evaluate other currencies and commodities. The reserves in USD are by far the largest being held by different nations, and they compose 64% of the world reserves. Globally speaking, the fundamentals that drive the U. S. Dollar are several. Since the largest amount of metallic commodities and the oil are mostly traded with prices in USD, significant demand variations in these markets will reflect directly on the currency value, as it happened in 2008 with the EUR/USD reaching 1.60, being the oil price a big contributor for this event. In the domestic market, the biggest factor that has been moving the dollar are the industry indicators and the real estate boom, and both were caused by an unsustainable credit system which could not be paid, causing a domino effect in the United States economy, and consequently, worldwide. During the last few years, the USD has been losing ground for other currencies, thanks to the credit bubble, and erroneous social policies, but it will still remain as one of the most powerful currencies for an undetermined period of time.
The euro (EUR) is by far the newest currency traded among the major pairs traded on Forex markets. It is used by 16 European Union member countries and it tends to enlarge during the next few years. The fundamental factors that move the Euro are often based on the strongest economies using the new common currency, such as: France, Italy and mainly Germany. The countries’ indicators regarding export trade, inflation and unemployment rate tend to have a high impact on the EUR movements, considering that countries such as Germany are larger exporters of manufactures and technology. Europe still remains an energy dependant from the Russian gas and the Middle Eastern Oil, making higher demands for these commodities to have a negative reflect on the European Union common currency.
The pound sterling (GBP) is the national currency of the United Kingdom, and the fundamental factors that move it are as complex and variable as the British economy and its global influence. The London commodity market plays a fundamental role in the GBP trends, being a reference for oil and gold trading. Nevertheless, as a powerful and globally dynamic economy, the United Kingdom indicators, social situation and the housing sector are perhaps the main determinant factors for the GBP price. Lately, the British economy has faced inflation issues, which led the interest rates to be cut, industrial recession, and other domestic factors that made the trading movements to naturally flow from the GBP towards other strong economically backed currencies, such as the EUR.
The Japanese yen (JPY) is the strongest and by far the most traded currency in the Asian market. Japan’s economy is mainly orientated to the industrial production exportation, and the economic situation of its main commercial partner, the USA, tends to have a direct influence on the JPY market. The JPY is a low-yield currency, being the GBP/JPY the most volatile pair traded on Forex, usually the scalper’s favorite one.
Switzerland is a small country located in the European Alps, yet, its strong international trade and money influx, made the Swiss franc (CHF), one of the main currencies traded on Forex. The CHF is often preferred by low yield investors. In times of financial instability, such as for the last years with the USD, many traders choose the CHF as a safe investment. The CHF trends can be often compared to those of the gold, increasing their value while other markets’ tends to depreciate during economic downturns.
The Canadian Dollar (CAD) faces a similar situation with the other commodity currencies, being majorly an export-dependable. Most of the Canadian production is exported to the USA. Facing the very same credit bubble problem that dragged America into recession, Canada has to deal also with a decreasing demand for all commodities. The CAD usually correlates positively with the prices for the all commodities
Yuan Falls as China Doesn’t Want Appreciation
The Chinese yuan declined at a fastest pace during the last two months as the country’s central bank lowered the reference exchange rate to stimulate the exporting industry.The China’s yuan lost about 0.1 percent during one day today after the People’s Bank of China fixed the reference exchange rate of the yuan to the U.S. dollar at 6.8285 — down by 0.07 percent compared to the previous rate. China uses the regulated foreign exchange rate to keep the yuan from appreciating too fast and thus helps the domestic companies compete globally.
U.S. Treasury Secretary Timothy Geithner will start his visit to China on June 1. The aim of the visit is to discuss trading relations and Geithner will probably insist on the fast yuan’s appreciation. The previous visit of the Treasury Secretary (Henry Paulson at that time) was in early December 2008.
Analysts say that the latest downward reference rate change means that the monetary authorities in China don’t plan to float the yuan’s exchange rate and won’t allow its appreciation. The economic growth is still a priority for China after the slowest gain of GDP in almost ten years in the first quarter.
USD/CNY advanced from 6.8235 to 6.8307 as of 7:40 GMT today. The highest intraday rate was set near 6.8309.
Yen Slides on U.S. Economy Recovery
After a rebound in the North American consumer confidence, Asian stocks rallied, decreasing demand for safer investments such as the Japanese yen.
The yen lost ground against currencies like the South Korean won and the Taiwanese dollar on speculations that today, a report will indicate a rise in the current home sales in the United States, which would be another evidence that the global slump is having its last days. The Japanese currency did not only decline against Asian high-yielding currencies, but also against the euro and the pound sterling, which have been favored by a rebound in domestic economic data.
Analysts’ opinions relate the revival of the North American economy and the current rally in global equity markets to a risk appetite recovery among investors and traders, creating a cyclic «snowball» effect pushing the markets up. As a natural consequence for the boost in the price of stocks and confidence, assets that had a sharp rise during the worst moments of the global crisis, mainly the yen, are witnessing a downtrend in their attractiveness, and as long as the markets remain bullish, a reversal in their price trend is unlikely to happen.
The USD/JPY currency pair traded at 95.21 from 94.64 in the intraday comparison, GBP/JPY rose to 152.16 from 149.91 following the EUR/JPY trend from a previous price of 131.90 to 132.91.
The yen lost ground against currencies like the South Korean won and the Taiwanese dollar on speculations that today, a report will indicate a rise in the current home sales in the United States, which would be another evidence that the global slump is having its last days. The Japanese currency did not only decline against Asian high-yielding currencies, but also against the euro and the pound sterling, which have been favored by a rebound in domestic economic data.
Analysts’ opinions relate the revival of the North American economy and the current rally in global equity markets to a risk appetite recovery among investors and traders, creating a cyclic «snowball» effect pushing the markets up. As a natural consequence for the boost in the price of stocks and confidence, assets that had a sharp rise during the worst moments of the global crisis, mainly the yen, are witnessing a downtrend in their attractiveness, and as long as the markets remain bullish, a reversal in their price trend is unlikely to happen.
The USD/JPY currency pair traded at 95.21 from 94.64 in the intraday comparison, GBP/JPY rose to 152.16 from 149.91 following the EUR/JPY trend from a previous price of 131.90 to 132.91.
Brazilian Real Continues Rise on Current Account Surplus
The Brazilian currency had the sharpest rise in seven days after the country’s first current account surplus in 19 months was posted this week, pushing the national equities market up.After 19 months in deficit, the Brazilian current account, which is the broadest measure of a country’s trading activity, had a surplus of $146 million, pushed mainly by a recovery in commodity prices together with a decrease in multinational companies profit remittances. The Brazilian real suffered drastically when the global slump hit Latin American in the second semester of the last year, losing ground against virtually all main currencies, but since economic conditions improved in the past months, mainly in Asia, the demand for commodities increased, causing the Brazilian stock market to rally and spurring demand for the national currency.
Brazil is a main exporter of grains and several metallic commodities, and the rising demand improved confidence in Brazilian markets, according to experts. Being the real a high-yielding currency, it has been favored by a new wave of risk appetite on world markets, which has also favored several Asian currencies and the euro. The recovery in the Brazilian equities market is also attracting foreign investors back to this Latin American nation, adding attractiveness to the country’s currency profile.
USD/BRL traded at 2.0054 from 2.0185. Brazil’s real also posted gains against European currencies being the EUR/BRL traded at 2.8020 from 2.8231 and the GBP/BRL at 3.2086 from 3.2147.
Yen Declines Further as Investors Purchase Assets Overseas
The yen hit a 8-week low against the dollar and also lost ground against the euro, as Japanese investors, driven by a new wave of confidence on world markets, return to overseas investments.The Ministry of Finance in Japan affirmed that national investors had the highest rise in foreign bonds purchases during the current month, this declaration reflected immediately in the Japanese currency market, making the yen to lose against all of the 16 most-traded currencies. The yen also lost ground against high-yielding currencies in Asia, such as the Malaysian ringgit and the South Korean won. Standard&Poor’s raised the outlook for the New Zealand’s debt rating, pushing it sharply up in the Pacific trading area.
Japanese investors are more comfortable to take riskier positions, since the global financial situation has been reporting sequential signs of recovery, the attractiveness of higher-yielding currencies is once again alluring for Asian traders. Analysts confirm that the Standard&Poor’s report on New Zealand may bring interesting profits for traders willing to enter long in the NZD/JPY currency pair. For the time being the safety profile of the yen as an investment is strongly not recommended among trading experts.
USD/JPY rose enormously from 95.15 to 96.79 and following the same trend GBP/JPY traded at 152.05 to 154.31 and NZD/JPY also rallied from 59.05 to 60.05.
Stocks Rally Push Dollar Down as World Economy Improves
The month of May posted the biggest losses for the U.S. currency in a one-year period against the euro, as equities markets continue to rise on optimism about improvements in the global economic situation.The greenback lost ground against currencies around the world, and after South Korea affirmed that its state pension fund will sell Treasury bonds and diversify their investments to other assets, the Australian dollar and its New Zealand counterpart rose sharply against the North American currency. In Europe, the dollar lost ground against the pound after an unexpectedly favorable report on house pricing in the United Kingdom damped demand for refuge currencies. Among the main currencies, the Japanese yen also slid together with the dollar, also due to improved confidence in markets spurring risk appetite among traders.
The dollar and the yen are under pressure, according to financial consultants. Instability still penetrates several sectors of the world economy, but signs of recovery coming from multiple reports in different corners of the globe brought risk appetite to markets sooner than what most economists could predict, and currencies like the yen and the greenback, regarded as safe investments, are threatened in a new scenario of diminished risk aversion.
EUR/USD traded at 1.4030 from 1.3825, The GBP/USD currency pair also rose from 1.5935 to 1.6087. AUD/USD rallied to 0.7941 from 0.7800.
British Pound Climbs as House Prices Rebound
The pound sterling rallied against the dollar and the yen after a report on house prices revealed an unexpected rise in May, boosting confidence among investors that the real estate crisis may be easing.The excellent news for the United Kingdom currency revived hopes for this European nation, one of the most hit by the global crisis and the credit crunch. A report on consumer confidence this month showed the highest level in almost a year, reversing a trend of extremely low marks, adding to that, the house prices, which had constant and severe losses since the second semester of the past year, jumped sharply in May, against most of the expert forecasts, adding an extra stimulus for the improved attractiveness of the pound.
According to analysts, the pound has been favored this week by a combination of two distinct factors: the positive house survey and the gradual recovery in markets boosted by evidences that the global slump is easing considerably. Specialists also indicate that multiple domestic and international news brought the pound down to levels which do not reflect the real value of the currency, and as the scenario is not so gloomy for the moment, the pound is coming back to a more reasonable pricing level.
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