Ralph Shell @ 1:26 PM, Tuesday August 31 2010
Some of today's market moves seem to exceed the visible news propelling the market change. The rally from 1.2625 in the euro to better than 1.2740 seems to be a case in point. The German employment numbers were not outstanding but positive. Later, in the US, the y/y home price index showed a 4.2% positive number and the CB Consumer Confidence number was 53.5 better than the anticipated 50.7%. A Chicago PMI number was a little less than expected, so we have no compelling news which might move markets. In the futures markets, the speculators, although evenly balanced, do have over 41% of the total open interest, and might be inclined to cover some positions.
The daily chart shows this pair to be stuck in the 38.2 to 50% retracement area.
Yesterday we had some negative comments about the loonie, and stated we would be stalking the market to buy the USDCAD, but this pair may have marched off without us. The Canadian GDP number, on a m/m basis did come in as expected at +0.2% but this was not enough to help. Speculators have long been supportive of the C$, and were reported long 60.2% of the futures OI. With this pair showing recent weakness we may be seeing some spec selling today.
The pound, as we have observed has had a large futures open interest but the longs and shorts were very evenly divided. Today it looks like the bears may be taking charge, as we edge under 1.5350. Note the MACD has moved under the zero lone, a bearish signal.
The yen strength back to the 84 was expected after the inept response by the Japanese government concerning yen strength. From Tokyo this morning Bloomberg reported .."Japan Policy Tinkering Leaves Hugh Risk to Growth." They point out the feeble efforts to weaken the yen may destroy Japanese economic recovery. The Japanese stock market reflected this concern and was down over 3%.
The chief operating officer of Nissan, Toshiyuki Shiga said: “The number one priority is to curb the strengthening yen,” ....It was also reported by Bloomberg, that Nissan,to combat loses inflicted by the strong yen, has shifted production overseas.
"Nissan Motor Co., Japan’s third-largest
automaker, began selling a Thai-made compact car in July to counter the
rising yen. Panasonic Corp., the maker of Viera televisions, said Aug.
20 it will move part of its plasma display panel production to Shanghai."
If the Japanese government heeds these dire warnings, you would think they will be offering new plans to weaken the yen. At 84, it seems there is risk being long the yen so we prefer to try the buy side of the USDJPY.
Author: Ralph Shell - ForexRazor Analyst - Graduated from a small Ohio liberal arts college. Graduate studies in economics and history at Duke University. Ten years experience trading cash commodities in domestic and export markets. Former commodity analyst with Merrill Lynch in Chicago. Member of and floor trader at the Chicago Board of Trade for 18 years.