Source: ForexYard
After hitting a one-month high against the US dollar when markets opened for the week, the euro proceeded to give back some of its recent gains during the first half of the day yesterday. Investors attributed the bearish movement to investor uncertainty regarding high Spanish and Italian borrowing costs. Today, traders will want to pay attention to a batch of potentially significant news events, including the British Manufacturing Production figure as well as a speech from Fed Chairman Bernanke. Any signs that the global economic recovery is improving could result in risk taking which may help boost the euro.
Economic News
USD – Dollar Reverses Gains against Yen
The US dollar started off this week by reversing virtually all of last Friday’s gains against the Japanese yen. Analysts attributed the bearish movement to a return to risk aversion in the marketplace due to uncertainties among investors regarding plans to lower Spanish and Italian borrowing costs. The USD/JPY fell close to 40 pips over the course of the day, eventually reaching as low as 78.24. Against the Swiss franc, the greenback fell around 45 pips during the first part of the day to trade as low as 0.9683. The USD/CHF was able to stage a slight recovery and stood at the 0.9700 level by the end of the European session.
Turning to today, traders will want to pay attention to a speech from Fed Chairman Bernanke, scheduled to take place at 18:30 GMT. The Fed Chairman has repeatedly refrained from commenting on any plans to boost the US economic recovery, which has resulted in gains for safe-haven currencies including the USD. If he once again fails to outline specific steps to get the US economy back on track, the dollar may see a boost against higher-yielding currencies, including the AUD and EUR, during evening trading.
EUR – Euro-Zone Concerns Turn EUR Bearish
The euro gave up some of its recent gains against its safe-haven currency rivals yesterday, as doubts regarding the European Central Bank’s ability to combat the euro-zone debt crisis resulted in risk aversion in the marketplace. After hitting a one-month high at 1.2442 when markets opened for the week, the EUR/USD turned bearish and eventually dropped as low as 1.2341. The pair was able to make a slight recovery, and spent most of the day trading around the 1.2390 level. Against the JPY, the euro fell more than a 100 pips after markets opened, eventually hitting 96.68 before bouncing back to the 97.00 level.
Today, euro traders will want to continue monitoring announcements out of Spain. Analysts are warning that Spanish government is moving closer to requesting a full bailout package to aid its troubled banking sector. Any signs today that the request will soon be made could weigh down on the common currency for the foreseeable future. In addition, if the ECB continues to avoid outlining a clear plan to combat the debt crisis in the region, the euro may extend yesterday’s bearish trend.
Gold – Gold Extends Bullish Trend
Gold was able to extend its recent bullish trend during European trading yesterday, as investors remain convinced that the US Federal Reserve will need to initiate a new round of quantitative easing despite a better than expected jobs report last week. The precious metal advanced close to $10 an ounce during mid-day trading, to reach as high as $1613.05.
Today, gold could see additional gains during the evening session if Fed Chairman Bernanke indicates that the Fed is closer to beginning a new round of stimulus to boost the US economic recovery. That being said, if pessimism among investors regarding the ECB’s ability to combat the euro-zone debt crisis persists, risk aversion could return to the marketplace which may result in gold reversing its recent gains.
Crude Oil – Crude Oil Recoups Losses in Afternoon Session
After falling close to $1 a barrel during Asian trading last night, the price of crude oil was able to rebound during the second part of the day following a speech from Fed Chairman Bernanke. Investors remained convinced that the Fed will soon have to initiate a new round of quantitative easing to boost the US economy, despite a better than expected US jobs report last week. Crude gained some $.80 following the speech before stabilizing at $91.60.
Today, crude oil traders will want to pay attention to another speech from Bernanke, scheduled for 18:30 GMT. Any indications that a new stimulus plan is close to being implemented could result in risk taking in the marketplace, which may lead to further gains for oil.
Technical News
EUR/USD
While the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur, most other technical indicators signal this pair is in neutral territory. Taking a wait and see approach may be the best option, as a clearer picture is likely to present itself in the near future.
GBP/USD
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. The MACD/OsMA on the same chart has formed a bearish cross, signaling that the price shift could be downward. Traders may want to open short positions for this pair.
USD/JPY
The Williams Percent Range on the weekly chart is approaching the oversold zone, indicating that this pair could see an upward correction in the coming days. Furthermore, the Slow Stochastic on the same chart is close to forming a bullish cross. Traders will want to keep an eye on these two indicators, as they may signal an impending bullish correction in the coming days.
USD/CHF
The daily chart’s Williams Percent Range has dropped into oversold territory, signaling possible upward movement in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the best option at this time.
The Wild Card
Crude Oil
The daily chart’s MACD/OsMA has formed a bearish cross, indicating that downward movement could occur in the near future. Furthermore, the Williams Percent Range on the same chart has crossed into overbought territory. This may be a good time for forex traders to open short positions ahead of a possible downward breach.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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