Source: ForexYard
The euro took losses against several of its main currency rivals yesterday, after worse than expected economic data out of Germany led to risk aversion in the marketplace. That being said, analysts were quick to say that expectations for future ECB action to lower Spanish and Italian borrowing costs would likely limit any euro losses. Today, traders will want to pay attention to a batch of US data that has the potential to inject volatility in the marketplace. At 12:30 GMT, the Trade Balance and Unemployment Claims figures will be released. If either signals growth in the US economy, risk taking may resume, which could help the euro recoup some of yesterday’s losses.
Economic News
USD – US Data Set to Impact Markets Today
The US dollar saw a mixed day in the marketplace yesterday, as risk aversion resulted in gains against currencies like the CHF, while British news led to significant losses against the GBP. The USD/CHF advanced more than 50 pips during European trading, eventually peaking at 0.9743 before staging a slight downward correction and finding support at the 0.9730 level. The GBP/USD advanced more than 100 pips over the course of the day, after the Bank of England Governor refrained from announcing a new round of monetary easing, as some investors had been expecting. The pair traded as high as 1.5669 before dropping to the 1.5640 level.
Today, a batch of US news has the potential to lead to market volatility. Traders will want to pay attention to the Trade Balance and Unemployment Claims figures, set to be released at 12:30 GMT. While the US trade balance is forecasted to have slightly improved last month, the number of Americans filing for first time unemployment insurance is expected to have increased from last week. If any of the news signals a downtrend in the US economic recovery, risk aversion could return to the marketplace which may benefit safe-haven currencies like the greenback during afternoon trading.
EUR – Continued Hopes for ECB Action Limit Euro Losses
The euro took losses against several of its main currency rivals yesterday after a worse than expected German indicator led to risk aversion in the marketplace. The EUR/USD fell close to 60 pips as a result, eventually reaching as low as 1.2326. The EUR/GBP also took significant losses after the Bank of England refrained from announcing any new monetary easing steps to boost the British economic recovery. The pair fell almost 70 pips over the course of European trading to trade as low as 0.7878.
Turning to today, euro traders will want to pay attention to the ECB Monthly Bulletin, set to be released at 8:00 GMT. The bulletin provides an overview of the ECB’s economic forecast for the euro-zone. A positive outlook could help the common-currency recoup some of yesterday’s losses. In addition, traders will also want to continue monitoring announcements related to ECB plans to limit borrowing costs in Spain and Italy. Any details regarding the plan may result in risk taking and help the euro over the course of the day.
Gold – Gold Advances despite Risk Aversion
Gold saw fairly significant gains during mid-day trading yesterday, despite risk aversion in the marketplace which typically leads to losses for the precious metal. Analysts attributed the bullish movement to expectations that the ECB will soon move to initiate a new round of stimulus to boost ailing euro-zone economies. Gold moved up close to $14 an ounce yesterday to peak at $1616.55 before staging a slight downward correction.
Today, gold traders will want to pay attention to the US Trade Balance and Unemployment Claims figures, both set to be released at 12:30 GMT. Should either of the indicators come in worse than forecasted, investors may shift their funds away from higher-yielding assets which could cause the price of gold to turn bearish.
Crude Oil – US Inventories Figure Helps Crude Extend Gains
The price of crude oil advanced during European trading yesterday, as a lower than forecasted US Crude Oil Inventories figure signaled to investors that demand in the world’s leading oil consuming country has gone up. Crude advanced over $1.50 a barrel, reaching as high as $94.68 before staging a downward correction later in the day.
Today, traders should pay attention to US news and its impact on risk sentiment among investors. Any better than expected news could help boost risk taking and may also be taken as a sign that demand for crude in the US is still increasing. In such a case, oil could see additional gains during afternoon trading.
Technical News
EUR/USD
A bearish cross on the daily chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. Furthermore, the Williams Percent Range on the same chart is in overbought territory. Traders may want to open short positions.
GBP/USD
Most long-term technical indicators show this pair range-trading, meaning that no defined trend can be determined at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
USD/JPY
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. Furthermore, the Williams Percent Range on the weekly chart has dropped into oversold territory, signaling that the price shift could be upward. Going long may be the smart choice for this pair.
USD/CHF
The daily chart’s Slow Stochastic has formed a bullish cross, meaning that an upward correction could form in the near future. In addition, the Williams Percent Range on the same chart is currently close to being in oversold territory. Going long may be the wise choice for this pair.
The Wild Card
AUD/USD
The Relative Strength Index on the daily chart is close to crossing over into overbought territory, signaling that a downward correction could occur. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Forex traders may want to open short positions ahead of a possible downward breach.
Forex Market Analysis provided by ForexYard.
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