The Saga Continues!

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By Mike Conlon | May 25, 2011

Overnight, the Euro was lower and tested support vs. USD at 1.40 after a rumor was floated that Greece was going to have a “snap election” which would essentially allow the public to weigh in on the austerity measures. This rumor has since been denied, but it is obvious to see how this could have a negative effect on the Euro as it is highly unlikely Greek voters are supportive of these measures. As a friend of mine likes to say, ” 100% of the people enjoy a free lunch!”

With little other news emanating from the Euro zone, our attention has turned to the UK and the release of its GDP figures which came in as expected. While personal consumption was lower, exports were higher making up for the lack of domestic demand.

In Japan, trade deficit figures rose the fastest in nearly 2-years though this was expected as the supply-chain disruptions that occurred as a result of the natural disasters there have hurt exports. However, the BOJ is apparently ready to boost lending to help in the rebuilding effort, mostly likely in coordination with further government spending.

US durable goods orders are due out later this morning and are expected to show a decline of some 2% and the home price index is also expected to show declining prices. With economic expectations this low, the worst might already be factored in.

Stocks are slightly lower to start the morning as is oil, though gold is trading higher.

In the forex market:

Aussie (AUD): The Aussie is lower across the board as mild risk aversion and a lower than last month leading indicators index have reduced demand.

Kiwi (NZD): The Kiwi is mostly higher despite the risk aversion as it is still catching a bid from yesterday’s inflation expectation report.

Loonie (CAD): The Loonie continues to move lower as oil retreats and the market expectation is that slowing growth will keep the Bank of Canada from raising rates any time soon. (Click chart to enlarge)

Euro (EUR): The Euro was lower but has since bounced higher after the rumor of the snap election was squashed by Greece. Allowing the fate of Greek austerity to be determined by the populace would be disastrous.

Pound (GBP): The Pound is mostly higher after GDP figures came in as expected showing .5% quarterly growth and 1.8% YoY. Private consumption figures came in lower at -.6% vs. an expected gain of .1%, but this was largely offset by exports which were up 3.7% vs. an expected 2.1%.

Dollar (USD): The Dollar is showing strength this morning after durables goods orders came in worse than expected, showing a decline of 3.6% vs. the expected decline of 2.5%. This may invoke further risk aversion as the trading day moves forward, but the house price index due out later this morning could surprise.

Yen (JPY): The Yen is mostly weaker as trade balance figures showed a deficit, though not as bad as had been expected. It is widely assumed that the Bank of Japan will take further action to help the economy re-build, though they may wait to coordinate with the government on further spending. (Click chart to enlarge)

So far this week, not much has changed. The risk in the marketplace is still looming, there is nothing positive coming out of the Euro zone regarding the debt crisis, and the economic data continues to point to a slowing global economy.

It is always times like this that put me on heightened alert as I hate to wait. The uncertainty of the situations and the fact that the various currency pairs are trading at critical levels means that sentiment may be about to shift as we breach these support and resistance levels.

For now, it looks as though the markets will trade around these levels until the next significant piece of news can establish a market direction. What that news will be is anyone’s guess, and it may not be something as obvious as what we know about today. While the Euro debt crisis is likely to drag on for some time, it will be interesting to see if the summer trading season brings opportunity or disinterest.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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Topics: What To Look At In The Market |

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