The Euro opened weaker
but by mid-session had turned positive, driven higher by friendly
comments from European Central Bank President Jean Claude Trichet.
today, the EUR USD was under pressure on concerns that Greece was
coming close to defaulting on its debt. Greek Bond and German Bund
spreads had widened significantly this week indicating that traders
were taking protection against the possibility of default by Greece.
Euro stabilized close to the release of this morningâ€™s ECB Policy
Statement then began to rally once Trichet began to speak. During his
press conference, Trichet dismissed the prospect of a default by a
financially strapped and debt-ridden Greece. Trichet then helped the
Euro erase all of its earlier loss when he stated that the recently
agreed upon financial plan designed to bail out Greece was a â€śworkable
statementâ€ť. He also said it represented a â€śserious commitmentâ€ť to lead
Greece out of its financial dilemma. He concluded his statement by
saying default â€śis not an issueâ€ť.
His statement instilled
confidence in some traders, forcing weaker traders to cover their short
positions. Trichet tried to calm the markets by telling investors that
if the European Union acts as one unit, it should be able to offer
Greece a more favorable loan rate. Upon hearing this statement, the
Bond/Bund spread began to narrow.
At the mid-session, although
todayâ€™s rally has been impressive, it has done nothing to change the
trend to up. Furthermore, the fundamentals continue to remain weak.
Some bears insist that despite having the EU and International Fund
backing, the recent fears of default has done nothing to reassure
investor confident that a viable solution can be worked out.
GBP USD is trading higher at the mid-session boosted by the recovery in
the Euro. The trend continues to remain down; however, todayâ€™s action
has brought this currency close to a potential breakout area at 1.5297
to 1.5317. Officially, the main trend will not turn up until the last
main top at 1.5381 is violated.
Shortly before the opening of the
New York Forex Session, the Bank of England announced that interest
rates would remain at near historically low levels. In addition, the
BoE left its quantitative easing measures unchanged. Some traders felt
that the central bank would either expand or extend this program.
Analysts are now saying the BoE refrained from making any changes
because of the upcoming election on May 6th.
At the mid-session
the Dollar is giving up ground to higher yielding currencies. A rebound
in gold, crude oil and the equity markets is helping the Canadian
Dollar and Australian Dollar erase all of their early losses. Stocks
being pressured by Profit-taking; Greek Fears
U.S. equity markets
are called lower this morning after being drilled by a hard sell-off on
Wednesday. Some say that comments from Kansas City Fed President Hoenig
triggered the break when he talked about a potential asset bubble
forming and the need for higher interest rate. This gave worried
traders an excuse to take profits after stocks reached lofty levels
earlier in the week. The inability of the Dow to test 11,000 sent a
psychological message to the market that maybe equities are over-priced.
Treasury Bonds and Treasury Notes are under a little pressure this
morning following Wednesdayâ€™s short-covering rally. Yesterdayâ€™s upside
move was triggered by better than expected 10-Year auction demand.
Yields fell as traders looked for safety due to escalating default
problems in Greece. Treasury markets may weaken as traders do not
expect to see similar demand for 30-Year bonds during todayâ€™s auction.
conditions and a stronger Dollar have June Gold in a holding pattern
this morning. This market is trading lower, but not falling apart.
Speculators are being encouraged to buy gold on the premise that Greece
may default on its debt. This is triggering a flight into hard assets.
There is no threat of inflation at this time. Traders are buying gold
because of the lack of confidence in paper assets.
June Crude Oil
is under pressure because of the stronger Dollar and weaker Euro. In
addition, lower gold and equity prices are pressuring demand for higher
risk assets. Wednesdayâ€™s U.S. supply and demand report was bearish,
which means that the bulk of the recent rally can be attributed to
speculative buying. The chart indicates that a break to 83.43 is
possible over the near-term.
The U.S. Dollar is trading better
against the Euro and British Pound as Forex traders await todayâ€™s
European Central Bank and Bank of England Policy statements. The Dollar
is also gaining against the commodity-linked currencies, helped by
lower gold and crude oil. Weaker equity markets are putting additional
pressure on higher risk currencies while underpinning the lower
yielding Japanese Yen.
U.S. Treasury Secretary Geithner is in
Beijing this morning to discuss the Chinese currency and other economic
issues. The visit by Geithner is a good sign that China is open to the
idea of letting its currency rise against the Dollar.
Euro is trading lower overnight. Pressure continues to mount on this
currency because of growing concerns that Greece will default on its
debt. The spread between Greek Bonds and German Bunds is widening,
making it difficult for Greece to finance its debt.
German Industrial Production was unexpectedly flat in February is also
helping to pressure this currency. A surprise drop in Euro Zone Retail
Sales has solidified the thought that the European Central Bank will
leave interest rates unchanged this morning. Based on the worsening
Greek situation and the poor economy, some traders now believe the ECB
will leave interest rates at historically low levels until early 2011.
Investors will be watching ECB President Trichetâ€™s comments this
morning to see if he has anything new to say about Greece. Some traders
expect him to reassure investors that the situation is under control
and that nothing unexpected is developing.
market is getting dangerously close to the recent main bottom at
1.3267. If todayâ€™s ECB policy statement takes on a more dovish tone
than expected, then look for selling pressure to drive this market to a
new low for the year.
Traders were pleasantly surprised overnight
on the news that U.K. Industrial Production was higher than expected.
The report showed an increase of 1% versus a pre-report estimate of
0.5%. The June British Pound rallied on the news, but not enough to
change the trend to up. Technically, this market will remain in a
downtrend until the last swing top at 1.5381 is violated. This market
is also having trouble piercing a 50% retracement level at 1.5297.
Additional resistance comes in at a downtrending Gann angle at 1.5317.
morning, the Bank of England is expected to leave interest rates
unchanged at historically low levels. Despite some improvements in the
economy since the last meeting in March, donâ€™t be surprised if the BoE
announces an expansion or an extension of its current quantitative
easing program to give the economy an additional boost. The policy
statement by the BoE may also address the widening budget deficit and
its threat to the economic recovery.
Overnight, the June Swiss
Franc turned the main trend to down on the daily chart after breaking
the last main swing bottom at .9307. In addition, this currency pair
crossed to the bear side of an uptrending Gann angle and a major
retracement zone at .9355 to .9315. The weaker Euro is increasing the
possibility of an intervention by the Swiss National Bank.
weaker U.S. equity markets are helping to encourage Japanese investors
to seek protection against a substantial sell-off. This repatriation of
funds is supporting the June Japanese Yen.
market is strengthening because of the closing price reversal pattern
from earlier in the week. Based on the short-term range of 1.1148 to
1.0558, the current upside momentum and chart formation indicates a
test of 1.0853 is likely over the near-term.
weaker gold and crude oil is helping to pressure the June Canadian
Dollar. Technically, Wednesdayâ€™s closing price reversal top was
confirmed overnight. This pattern suggests a minimum 2 to 3 day break
or a 50% retracement to .9864.