News in Sweden has recently added the possibility of a rise in consumer confidence as the Riksbank has extended its 50 billion SEK bailout program by an additional 6 months in order to ease lending throughout the country. The program is designed to add liquidity to banks feeling the crunch of the Baltic financial crisis. By extending this program, financial institutions will feel more comfortable about investing in business deals, but may also signify that national confidence about a speedy recovery from recession may actually have fallen; which could be telling about future monetary policy decisions, such as lending rates.

In other news, Denmark’s Krone has risen from its 15-day low against the USD, back towards 5.3300, and is forecast to continue upwards in the long-run. Not far off from this prediction is news that the Norwegian Krone may also experience long-term upward mobility. Many analysts have begun to anticipate a rebound in the NOK as its companies have experience profits lately, and falling oil prices have helped boost Norway’s exports by bringing its currency down in value. Despite continued ripples from the Baltic crisis, the Scandinavian countries appear poised for a rebound in the mid- to long-term.

USD/DKK 4-Hour Chart

- Above is the 4-hour chart for the USD/DKK by ForexYard.

- The indicators used are the Bollinger Bands, RSI, and Slow Stochastic.

- First indication to take note of is that the Bollinger Bands on this chart appear to be getting tighter, although they have not yet signaled that they are indeed tightening for a significant movement.

- Point 1: There is a clear bullish cross on the Slow Stochastic, signaling that the next movement will be upward.

- Point 2: The price bounced off the over-sold border of the RSI and is now in an upward direction. This takes some... [Read More]

With perpetually low interest rates, carry trade plays a big part in Japan’s exchange rate. Carry trading is a strategy in which an investor sells a certain currency with a relatively low interest rate, typically the JPY and currently also the USD, and uses the funds to purchase another higher yielding currency. The higher the interest rates in a country the higher the yield of its assets. A trader using this strategy attempts to capture the difference between the rates.

After the fall of Lehman Brothers and the onset of the financial crisis, carry trades have practically disappeared as risk aversion ruled the markets and traders turned to the safe haven status of the Japanese and American currencies. However, with an increasing influx of optimistic economic data in the past few months carry trades have started to come back into the picture with traders betting on an eminent economic recovery which prompted them to search for higher yielding assets, pushing them to purchase riskier currencies, financed with the Yen.

The recent return to risk aversion following the worse than expected employment data from the U.S has pushed investors back to the safety of the Yen as global stock markets fell and traders fled from carry trade activity. This played a role in Yen’s recent rally as unwinding of carry trades means that traders now need to liquidate their investments of the higher yielding assets and purchase Yen in order to repay their Yen denominated loans.

Currently market conditions continue to be mixed and directionless, with the weak employment data bursting the quick global recovery bubble. In the current market state it is unlikely carry trades will return as long as the economic fundamentals remain shaky.

On Tuesday the US Commerce Department will report retail sales for June, and traders are looking for a gain of 0.5%, matching the prior month’s result. Retail sales in the U.S. probably rose for the 2nd straight month as price cuts brought shoppers back into stores, economists said before a report today.

The general consumer environment remains challenging, with personal consumption no longer in freefall as it was at the end of 2008, but it’s not booming either, analysts have said. Although the worst may be over for U.S. consumers, personal consumption is expected to remain essentially flat even as government stimulus boosts personal income.

Forex traders are advised to take a closer look at the Retail Sales report. A data that comes in line with expectations or higher will likely boost the greenback immediately after its release. On the other hand, a weaker number will signal that U.S consumer spending is under strain indicating that people are less willing to spend money, thus throwing the Dollar back to the bears.

• The chart below is the GBP/CAD 4-hour chart from ForexYard.

• The technical indicators used are the Bollinger Bands, the Slow Stochastic and the Relative Strength Index (RSI). The Fibonacci Retracement Lines were used as well.

• A doji candlestick, located at the 38.2% line, indicates that a sharp movement is impending, with the potential to reverse the trend.

• Currently, it seems that the pair’s bearish momentum was halted upon reaching the 1.8700 level, which is the 38.2% level on the Fibonacci.

• A bullish cross has taken place on the Slow Stochastic, suggesting that a bullish reversal might take place soon.

• The RSI has bottomed below the 30 line, meaning that the pair is currently over-sold. However, it is recommended to wait until the RSI points back upwards, as this indicates a much stronger signal.

• All of the above indicates that an upward move is likely to happen soon, yet the signals are not certain. If the bullish move will indeed take place, it has the potential to reach all the way up until the next Fibonacci Retracement line, located around the 1.8950 level.

GBP/CAD 4-Hour Chart

After extremely bullish session last week, the Yen was little changed against other major currencies today, with traders looking to moves in risk assets like equities and oil to set the market’s direction. The USD/JPY is currently traded around 92.40.

Crude Oil prices experienced another day of depreciation as the oft-traded commodity dropped below $60 a barrel during today’s trading session. Much of this bearish movement in Crude Oil can be attributed to fears of a drop in fuel consumption due to poor economic outlook in the major world economies. It seems that the direction for today continues to be bearish.

Leading publication for today:

18:00GMT: U.S. Federal Budget Balance

· This indicator reflects the difference in value between the federal government’s income and spending during the previous month.

· The release of this indicator typically creates a volatile trading

· The result of this data release may set the pace for the USD going into the rest of today’s trading

· Traders may find good opportunities to enter the market following this vital announcement.

• The charts below are the 4-hour chart and daily chart for CAD/JPY by ForexYard.

• The technical indicators used are Slow Stochastic, RSI and MACD.

• Point 1: The RSI on the 4- hour chart signals that the price of this pair currently floats in the over-sold territory, indicating upward pressure.

• Point 2: The MACD indicates a bullish cross, signaling that the next move maybe in an upward direction.

• Point 3: The RSI on the daily chart also support the upward direction.

CAD/JPY 4-Hour Chart

CAD/JPY Daily Chart

• The charts below are the hourly chart and daily chart for USD/JPY by ForexYard.

• The technical indicators used are the Slow Stochastic and RSI.

• Point 1: The RSI on the daily chart signals that the price of this pair currently floats in the over-sold territory, indicating upward pressure.

• Point 2: The Slow Stochastic indicates a bullish cross, signaling that the next move maybe in an upward direction.

• Point 3: The RSI on the hourly chart also support the upward direction.

USD/JPY Daily Chart

USD/JPY Hourly Chart

After an extremely bearish session yesterday, the USD is rebounding. Currently the EUR/USD is reaching towards the 1.3900 level, and the GBP/USD is traded around the 1.6270 level.

The strongest instruments for today continue to be the Yen and Crude Oil. The JPY continues to show bullish activity against all the major currencies. Next possible support levels for USD/JPY are 149.80 and 148.60.

Crude Oil continues its freefall and currently a barrel of oil is traded for less than $60! It seems that the direction for today continues to be bearish, with the next support level located at the $57 level.

Leading publications for today:

• Canadian Employment Figures – 2 leading employment indicators are scheduled from the Canadian economy today at 11:00 GMT. Both the Employment Change and the Unemployment Rate are expected to show that the employment condition in Canada is getting worse. If the actual results will indeed be similar to forecasts, the Canadian Dollar is expected to drop against the other currencies.

• U.S Trade Balance, 12:30 GMT – The Trade Balance measures the difference between importing and exporting in the U.S during May. The expected result is -30.0B, which means that the importing value in May was higher by 30.0B from the exporting value. Such result, if indeed takes place, will mark the worse figures in 4 months, and has the potential to weaken the dollar once again today.