Forex - Risk appetite returns to the markets – Dollar reaction is mixed after speeches.
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Forex News and Events:
The speeches by President Obama and Fed Secretary Bernanke aimed to reassure markets got mixed reactions today as equities are up but the dollar posts gains only against the distressed Yen. The dollar was weaker across the board as risk sentiment improved after Bernanke assured the markets that jeopardizing the current public-private franchise in the financial markets by nationalizing the nation’s largest banks would be un-necessary. This said, both Bernanke and President Obama were resolute on the fact that the economy remains in dire straights and will continue to ask for substantial efforts by the U.S Fed and Government. The Bernanke performance yesterday has been hailed as a clear and precise response to the questions of the Senate Banking committee and those of the market, succeeding in convincing pundits where others had failed – case in point; Geithner.
The EURUSD continues to trade slightly higher as the dollar retreats on the return of risk appetite. We see that the 61.80% retracement on the 1.2992 – 1.2663 that transpired on Monday hasn’t stuck, the pair settling into a 1.2830 – 1.2860 range bearish sentiment continues. The Yen continues to suffer from it’s faltering economy. While a weaker Yen might benefit some exporters it seems the damage has been done, exports decreased by 49.2% on a year on year basis.
Cable continues to hold strong, benefitting from the return of risk appetite. This said, the broad range of 1.4382 – 1.4662 could see a breakout on the downside if the dollar decides to react to yesterday’s developments. U.S Futures are currently flat ahead of the N.Y open at 15:30 CET – a break below 1.4382 leaves the door open for further sterling weakness.
The Swissy continues to benefit from its historical haven status as its moves against the dollar are more subdued than on other currencies. Wedge is forming after last week’s Swissy bull move. While the pair’s dynamic can’t be likened to the one we observe on USDJPY it seems the Swiss currency’s special status has moves dampened somewhat for now.
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Today's Key Issues (time in GMT):
15:00 USD Existing Home Sales (JAN) 4.79M Vs. 4.74M
15:00 USD Existing Home Sales (MoM) 1.1% Vs. 6.5%
15:00 USD Bernanke Gives monetary policy report before house panel.
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The Risk Today:
EurUsd Momentary dollar weakness against the Euro sees the pair test a strong psychological support at 1.2900. Neutralizing the bearish trend would have need the pair to confirm a break above 1.3060. Initial support stands 1.2760, then focus on 1.2702.
GbpUsd Testing strong support at 1.4382 at time of writing. Confirming break below this level will renew the bear threat as it would exit from 1.4382 – 1.4662 broad range we have been trading this week. Initial resistance at 1.4422 with a cap at 1.4500.
UsdJpy Slowing of Yen bears as we near the 97.00 resistance. While we passed and traded above for some time, a failure to break from the 97.00 key level has set the stage for a rebound to the downside. Initial resistance at 96.80. Focus on support at 96.26.
UsdChf Trading around key level of 1.1600. Wedge formation around this level sets the stage for a breakout if we confirm a break above 1.1641. Initial support at 1.1552.
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Resistance and Support:
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EURUSD |
GBPUSD |
USDJPY |
USDCHF |
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1.2900 K |
1.4609 M |
97.34 M |
1.1797 S |
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1.2855 M |
1.4500 K |
97.00 K |
1.1710 M |
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1.2789 M |
1.4422 M |
96.80 M |
1.1641 M |
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1.2779 |
1.4383 |
96.56 |
1.1615 |
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1.2766 M |
1.4382 M |
96.26 M |
1.1600 K |
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1.2702 M |
1.4363 S |
94.26 M |
1.1552 P |
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1.2660 K |
1.4151 M |
92.77 M |
1.1463 S |
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S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot |
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