Beta 2 Forex News, Jovi Overo, Beta 2 Ltd, Tuesday August 30 2011

Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).

The US dollar (USD) was seen trading mildly bearish early Monday as traders viewed comments by the Fed as a sign of potentially impending hawkish moves on the policy front. The sudden jolt to risk appetite generated by such movement pushed down on the greenback, but seems to have lifted following fears of bank interventions in Japan and a string of reports out of the euro zone today which could reverse much of the markets recently acquired short-term stability.

Data from the American housing market yesterday also signalled a downturn in home sales from the previous month, revealing a slump in housing demand, potentially linked to a string of foreclosures expected in September. The news has done little to the forex market, however, though it could ripple through longer-term analyses on US capital markets.

As for today, the US economic releases will focus mostly on housing and consumer confidence. Today’s publications, however, will mainly be Britain-centric. Liquidity will likely be higher in today’s early trading as several events are being published in rapid succession from Britain, Canada and the US. American liquidity will be heightened, and Canada will contribute to today’s movements with its inflationary data and current account (trade balance).

The euro (EUR) is expected to be seen trading with bullish results this morning ahead of a slew of reports from Great Britain, Canada and the United States. Against the US dollar (USD) the euro has been seen trading somewhat bearish as the greenback moves upward against its currency rivals.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data continues to reveal negative market directionality, the EUR is likely to remain bearish.

The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending interventions by the Bank of Japan (BOJ). Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavourable for longer-term growth in Japan’s current financial model. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.

Crude Oil prices held steady Monday as sentiment appeared to favour a mild uptick in global stocks following reports of monetary moves being made by several central banks. Data releases out of Europe and the US last week are beginning to generate some risk taking after statements by the Federal Reserve began to cause investors to seek out higher yields.

An expected dip in dollar values due to this week’s risk seeking environment has helped many investors ram up their long-taking positions on physical assets, but with the USD’s losses not materializing in large enough numbers, sentiment appears to have the price of crude oil holding steady. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.

Jovi Overo