Source: ForexYard
The US dollar tumbled vs. its major currency rivals throughout yesterday’s trading session, following the most recent economic predictions from the Fed which stated that a new round of quantitative easing could be initiated if US unemployment does not drop further. The EUR/USD shot up to a three-week high as a result of the news, reaching as high as 1.3262. Today, traders will want to pay attention to the US Advance GDP figure, set to be released at 12:30 GMT. A better than expected figure could help the USD rebound vs. riskier currencies, like the euro and AUD.
Economic News
USD – US GDP Figure May Help Dollar Recover Losses
The US dollar fell vs. several of its main currency rivals yesterday, including the euro and British pound. Investors began shifting their funds away from the greenback earlier in the week, following the conclusion of a Federal Reserve meeting which left the possibility open for a future round of quantitative easing. The EUR/USD was up over 50 pips during European trading, reaching as high as 1.3262. The GBP/USD saw similar gains to trade as high 1.6205, before staging a slight downward correction.
Turning to today, the US Advance GDP figure is forecasted to generate significant volatility when it is released at 12:30 GMT. Analysts are forecasting the figure to come in at 2.6%. While that figure is below last quarter’s, it would still signal growth in the US economy and could lead to dollar gains. That being said, should the figure come in below the predicted value, investors may take it as a sign that the US economic recovery is slowing down which could cause the USD to extend its recent bearish trend.
EUR – Italian Debt Auction May Lead to Euro Volatility
The euro hit a three-week high vs. the US dollar yesterday, as the combination of a positive Dutch debt auction earlier in the week and a cautious statement from the Fed regarding the US economic recovery caused investors to shift their funds to the common currency. That being said, the euro was not bullish across the board. A strengthening Japanese yen caused the EUR/JPY to tumble close to 100 pips during the mid-day session. Against the British pound, the euro continued to reverse gains made earlier in the week by dropping an additional 25 pips yesterday.
Turning to today, traders will want to focus on the results of the Italian debt auction. Should the auction fall below expectations, euro-zone debt fears may resurface which could cause the common currency to turn bearish. At the same time, a successful debt auction may generate risk taking in the marketplace, which could cause the euro to extend its bullish trend against the dollar. Attention should also be given to a US GDP figure. Any positive news out of the US could negatively impact the euro.
JPY – BOJ Monetary Policy Statement Set to Impact Yen
The Japanese yen saw gains against both the US dollar and euro yesterday ahead of today’s Bank of Japan Monetary Policy Statement and Overnight Call Rate. The USD/JPY dropped close to 60 pips during the European session yesterday, reaching as low as 80.80. Against the euro, the JPY gained close to 100 pips. The EUR/JPY fell as low as 106.87.
Turning to today, the yen may see additional volatility in the aftermath of the BoJ Monetary Policy Statement. Furthermore, traders will also want to pay attention to the US GDP figure. A disappointing figure may lead to additional dollar losses against the yen. With regards to the EUR/JPY, the Italian debt auction is expected to illustrate just how serious the euro-zone debt crisis is. A disappointing auction may lead to further losses for the euro.
Crude Oil – Crude Range Trades amid Mixed US News
Crude oil spent much of yesterday’s session range trading following mixed US economic news. On the one hand, the possibility of additional quantitative easing sent turned the USD bearish, which caused the price of oil to spike. That being said, a higher than expected US Crude Oil Inventories figure signaled decreased demand in the US, which caused the price of oil to fall.
Turning to today, oil traders will want to pay attention to the US Advance GDP figure. Investors are likely to use the figure as a gauge for the pace of the US economic recovery. Should the GDP figure come in above 2.6%, the USD could see gains which may result in the price of crude oil falling before markets close for the week.
Technical News
EUR/USD
Most long-term technical indicators show this pair range-trading, meaning that no defined trend can be predicted at this time. The one exception is the Williams Percent Range on the daily chart, which has crossed into overbought territory. Traders will want to take a wait and see approach for this pair, as a downward correction may take place in the near future.
GBP/USD
The Williams Percent Range on both the daily and weekly charts have crossed into overbought territory, pointing to a possible downward correction for this pair. Additionally, a bearish cross on the daily chart’s Slow Stochastic supports this theory. Going short may be the wise choice for this pair.
USD/JPY
A bullish cross on the daily chart’s MACD/OsMA indicates that this pair could see upward movement in the near future. That being said, most other indicators show this pair range trading at this time. Taking a wait and see approach for this pair may be a wise choice, as a clearer picture is likely to present itself in the coming days.
USD/CHF
The Williams Percent Range on the daily chart has crossed into oversold territory, indicating that a bullish correction could occur for this pair. The Relative Strength Index (RSI) on the same chart is pointing downward, and looks like it may also move into the oversold zone. Traders will want to keep an eye on the RSI. Should it cross below 30, it may be a sign of an impending upward correction.
The Wild Card
S&P 500
The Bollinger Bands on the daily chart are narrowing, indicating that a price shift could occur in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory, indicating that the price shift could be downward. This may be a good time for forex traders to open up short positions ahead of a possible bearish correction.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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