Forex Market Updates & Commentary

EUR/JPY Breaks Out, Eyes Higher Levels
US Factory Orders Down
USDCAD can’t break above the 100 hour MA
EURUSD tests 100 hour MA and holds the line
EURGBP falls sharply today. Approaches key support
EURUSD extends the low in early NY trading
French Finance Minister pledges all measures will be taken to avoid default of Greece.
The NY Morning Forex Commentary is available for viewing
Greece Finance Minister says membership in the EU is not reversible
ECB’s Noyer
Eurozone retail sales (May) -1.1% vs. -1.0% expected and 0.9% prior reading.
Sterling gains following slightly better services PMI
S&P says disappointing economic data sugest that the global recovery has entered a “soft patch”.
Eurozone final services PMI 53.7 vs. 54.2.

Posted: 05 Jul 2011 07:07 AM PDT

EUR/JPY (daily chart) as of Tuesday (7/05/2011) has tentatively broken out above a descending resistance trendline extending back to the April 123.30 high. This trendline is part of a descending triangle consolidation pattern. The current pattern breakout occurs after price action formed a double-bottom around 113.50, which forms the bottom border of the noted triangle. Not only has price made a tentative breakout above the triangle, it has also approached the peak of the double-bottom formation, just shy of the 118.00 price region. In the event of a breakout above this resistance level, price will have confirmed the triangle breakout, with a key further resistance target to the upside residing around the 120.00 price region. Strong support continues to reside around the 115.50 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

US Factory Orders Down

Posted: 05 Jul 2011 07:02 AM PDT

USDCAD can’t break above the 100 hour MA

Posted: 05 Jul 2011 06:58 AM PDT

The USDCAD has inched up over the last few days after falling sharply over the previous 5 trading days. The correction higher (albeit very tame) has found the willing sellers against the 100 hour MA today. That level comes in at the 0.9637 level. The high for the day comes in at 0.9634. Until the price moves above the 100 hour MA, the bias remains the control of the bears.

On the daily chart, the sharp move down over the last week of trading took the price back below the 100 day MA and through the key Fibo retracement levels. The 61.8% level comes in at the 0.9623 level and this will also be a level for the USDCAD to get through (and stay above) to perhaps solicit more buying interest.

EURUSD tests 100 hour MA and holds the line

Posted: 05 Jul 2011 06:27 AM PDT

The EURUSD made new lows in NY trade, but momentum faded and a rotation back higher ensued. The price move higher has found willing sellers again at the 100 hour SMA. This level comes in at 1.4492 currently. The level (at 1.4492) also corresponds with the 38.2% retracement of the days trading range (see chart below). If the bias to the downside is to continue, staying below this level is essential today.

On the downside the 1.4446 level remains the target for the pair. This level corresponds to the 38.2% of the move up from the June 28th low (the last time the price was below the 100 hour MA).

The EURUSD has held up well despite the threat of default on Greek bonds and all that goes with such an event (ECB collateral issues, Greek bank collapsing, etc.). The expectation of a ECB rate hike on Thursday along with hawkish comments from Trichet, is perhaps keeping the pair elevated.

The price remains in the range that has prvailed over the last 3 1/2 days of trading. Moving below the 100 hour MA is a crack in the bullish armor, however, the ability to stay above the 38.2% suggests the bears are not fully committed yet (i.e., the large players have not entered with force). So traders can lean against support or resistance levels with your bias, and look for momentum on a break of either support or resistance, to tip the hand of the larger traders.

EURGBP falls sharply today. Approaches key support

Posted: 05 Jul 2011 05:51 AM PDT

The EURGBP is moving toward support on the daily and the hourly charts. On the daily chart, the price has trendline support at the 0.8974. Looking at the hourly chart the 200 hour MA comes in at the 0.8969 level.

If the market is able to fall below these levels, the next key support comes in at the 38.2% of the move up from the June 15th low. That level comes in a t the 0.8943 level.

EURUSD extends the low in early NY trading

Posted: 05 Jul 2011 05:25 AM PDT

The EURUSD has made new lows for the day in early NY trading at 1.4456. Worries about Greece and the implications from a default are increasing the bearish sentiment. S&P over the weekend said that the French Plan if enacted would be considered a “selective default” and therefore would cause an “event” for CDS market (Credit Default Swaps). A default would also put the ECB in a bind with regard to using the debt of a default nation as collateral for loans to the struggling Greek banks. Failure to be able to accept Greek debt would cause a collapse of the Greek banks.

Of course all is being done to avoid a default and getting to that point. The script has yet to be played out in its entirety. Stay tuned.

From a technical perspective, the next key target on the downside would be the 1.4446 level and below that the 1.4435 level. The 1.4446 level is the 38.2% of the move up from the June 28th low and also the low from June 30th and near the highs from June 28th (see chart above). The 1.4435 level was the low from Friday’s trade (which was quickly rejected).

On the topside of the hourly chart (see above) the price has been using the 100 hour MA (blue line) as a level to sell against. The price has tried to move above the MA level on a few occassions in the London session, but each time ran into sellers. The current level comes in at the 1.4492 level. The moving average level is flattening.

French Finance Minister pledges all measures will be taken to avoid default of Greece.

Posted: 05 Jul 2011 05:12 AM PDT

They will continue to work closely with Greece on the issue of Greek debt.
The Private sector involvement should be as large at possible but voluntary.

The NY Morning Forex Commentary is available for viewing

Posted: 05 Jul 2011 05:02 AM PDT

The currencies covered include the EURUSD, GBPUSD, USDJPY, USDCHF, USDCAD, EURGBP, and AUDUSD

Greece Finance Minister says membership in the EU is not reversible

Posted: 05 Jul 2011 04:30 AM PDT

ECB’s Noyer

Posted: 05 Jul 2011 02:12 AM PDT

Sees need to ensure shocks can be absorbed.
Financial reforms need to be applied globally.
Stronger bank capital buffers are not a substitute for supervision.
Closely monitoring the impact of new bank liquidity ratios.

Eurozone retail sales (May) -1.1% vs. -1.0% expected and 0.9% prior reading.

Posted: 05 Jul 2011 02:11 AM PDT

The euro weakened on the release.

Sterling gains following slightly better services PMI

Posted: 05 Jul 2011 02:10 AM PDT

The GBP gained nearly 30 points immediately following the release of the UK services PMI which came in at 53.9 vs. 53.5 expected and 53.8 prior reading.

On the hourly GBP/USD chart you can see that the pair tested resistance at the 1.60996 early today, but traded continually lower until it found some support at 1.59888. After the release, it moved higher through the 61.8% and the 1.60555 (where we find the 100 hour moving average and 50.0% line), and the 38.2% line. Momentum has since cooled down and the couple has since come off, most likely due to some quick profit takers. Currently we teeter between 1.60555 and 1.60752.