Source: ForexYard
Riskier assets saw major gains during the European session, following a speech from ECB President Draghi in which he pledged to do everything necessary to preserve the European Union. That being said, analysts were quick to mention that the speech did not contain any specifics on different ways to combat the region’s debt crisis, and any gains made by higher-yielding assets could be temporary. As we close out the week, traders will want to pay close attention to the US Advance GDP figure, scheduled for 12:30 GMT. It is expected that the news will indicate a further slowdown in the US economic recovery, which if true, could lead to dollar losses during afternoon trading.
Economic News
USD – Dollar Tumbles amid Increase in Risk Taking
The safe-haven US dollar fell against most of its main currency rivals yesterday, following a speech from the President of the European Central Bank, which resulted in risk taking in the marketplace. The AUD/USD shot up more than 100 pips after the speech, eventually peaking at 1.0414 before staging a mild downward correction and leveling out at the 1.0395. The USD/CHF tumbled some 155 pips over the course of the European session to reach as low as 0.9749. The pair did see minor upward movement later in the day, and eventually stabilized at 0.9770.
Turning to today, the dollar is forecasted to see another volatile session when the US Advance GDP figure is released at 12:30 GMT. Most analysts expect today’s news to come in around 1.5%, which if true, would represent a slowdown in the US economy and could lead to further losses for the USD before markets close for the week. That being said, traders will also want to pay attention to any developments out of the euro-zone. Negative European news could result in another round of risk-aversion, which could help the dollar recover some of its recent losses.
EUR – Analysts Warn Euro Gains Could be Limited
The euro surged in mid-day trading yesterday, following a positive speech from the President of the European Central Bank in which he said all necessary steps would be taken to preserve the common-currency. The EUR/USD spiked close to 200 pips as a result of the speech, eventually peaking at the 1.2315 level. The EUR/JPY, which only recently hit a 12-year low, gained over 150 pips before hitting resistance at 96.25. Furthermore, the EUR/AUD, which hit a record low earlier in the week, moved up around 80 pips.
As markets prepare to close for the weekend, analysts continue to warn traders that the euro’s recent upward trend may be temporary. While yesterday’s speech from the ECB President did boost confidence in the euro-zone economic recovery, it did not provide any specific plan for combating the region’s debt crisis. Any negative announcement today regarding rising Spanish bond yields or a slowdown in the German economy could result in losses for the euro.
Gold – Gold Gains Close to $20 during European Trading
The price of gold soared above $1620 an ounce yesterday, following a speech from ECB President Draghi which resulted in risk taking in the marketplace. Overall, the precious metal increased by just under $20 for the day before staging a minor downward correction and leveling out around the $1615 level.
Today, the direction gold takes will largely be dependent on how investors interpret the US Advance GDP figure, set to be released at 12:30 GMT. If the indicator signals a slowdown in the US economy, the dollar may extend yesterday’s bearish trend against the euro, which could help gold extend its recent upward movement.
Crude Oil – Crude Oil Benefits from Euro-Zone News
The price of crude oil increased by over $2 a barrel yesterday, as an increase in risk taking benefited commodities during the European session. A bearish dollar made crude oil more affordable for international buyers, resulting in the upward correction. Oil peaked at $90.43 before turning downward and stabilizing at the $90.10 level.
Today, crude traders will want to continue monitoring developments out of the euro-zone. Any signs that the debt crisis in the region is spreading to Germany may outweigh the positive outlook from the ECB President yesterday. Downward movement by the euro could result in oil giving back some of its recent gains.
Technical News
EUR/USD
The Relative Strength Index on the weekly chart has crossed into oversold territory, indicating that this pair could see upward movement in the coming days. This theory is supported by the Slow Stochastic on the same chart, which is currently forming a bullish cross. Going long may be a wise strategy for this pair.
GBP/USD
A bullish cross has formed on the daily chart’s MACD/OsMA, signaling that an upward correction could occur in the near future. Furthermore, the Williams Percent Range on the weekly chart has fallen into oversold territory. Opening long positions may be the right choice for this pair.
USD/JPY
While the weekly chart’s Williams Percent Range has dropped into oversold territory, most other long term technical indicators place this pair in the neutral zone. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
USD/CHF
A bearish cross on the weekly chart’s Slow Stochastic appears to be forming, indicating that a downward correction could occur in the near future. Additionally, the Relative Strength Index on the same chart has crossed into overbought territory. Going short may be the wise choice for this pair.
The Wild Card
USD/CAD
A bullish cross has formed on the daily chart’s MACD/OsMA, signaling that an upward correction could occur in the near future. Furthermore, the Williams Percent Range on the same chart has dropped into oversold territory. This may be a good time for forex traders to open long positions ahead of a possible upward breach.
Forex Market Analysis provided by ForexYard.
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