Source: ForexYard
The US dollar hit a fresh one-month high against the Japanese yen after a better than expected US Building Permits helped boost confidence in the US economic recovery. That being said, the dollar did take losses against some of its higher yielding currency rivals during afternoon trading, after the positive news led to risk taking among investors. As markets get ready to close for the weekend, traders will want to pay attention to US Prelim UoM Consumer Sentiment figure, set to be released at 13:55 GMT. If the news signals additional improvements in the US economy, the dollar could see further upward movement against the yen.
Economic News
USD – Consumer Sentiment News Set to Impact Dollar
Risk taking in the marketplace following better than expected US news led to a mixed trading session for the US dollar yesterday. On the one hand, the greenback advanced to a new one-month high against the Japanese yen at 79.39 during mid-day trading. The dollar eventually staged a minor downward correction before stabilizing at the 79.25 level. On the other hand, higher yielding currencies, including the Swiss franc, were able to capitalize on the positive US news. The USD/CHF fell more than 80 pips to trade as low as 0.9709 by the end of the European session.
Turning to today, the US Prelim UoM Consumer Sentiment figure is forecasted to generate dollar volatility during afternoon trading. Analysts are currently predicting today’s news to come in at 72.5, which if true, would represent a slight improvement over last month’s figure and may signal to investors that the US economic recovery is gaining momentum. In such a case, the dollar could see bullish movement against the yen before markets close for the weekend.
EUR – Euro Recovers amid Increase in Risk Taking
After tumbling against the British pound and US dollar in morning trading yesterday, the euro was able to stage a recovery later in the day after positive US news led to risk taking among investors. The EUR/GBP fell more than 30 pips following a better than expected UK retail sales report. After trading as low as 0.7811, the common currency was able to bounce back, eventually reaching as high as 0.7842 during the afternoon session. Against the greenback, the euro was able to advance more than 75 pips over the course of the European session to reach as high as 1.2339.
Today, in addition to US consumer sentiment data which could have a significant impact on risk appetite, euro traders will also want to pay attention to any announcements from euro-zone officials regarding the region’s debt crisis and any plans to lower borrowing costs in Spain and Italy. Positive developments with plans to revive the euro-zone economic recovery could lead to broad gains for riskier currencies, including the euro, before markets close for the weekend.
Gold – Gold Gains Following US News
The price of gold advanced more than $11 an ounce during European trading yesterday, amid an increase in risk taking brought on by better than expected US news which boosted investor confidence in the global economic recovery. By the beginning of the evening session, the precious metal was trading just above the $1612 level.
Turning to today, whether or not gold can extend its recent gains further will largely be dependent on US consumer sentiment data, set to be released at 13:55 GMT. If the data comes in above expectations, investors may seek out higher yielding assets, which could help boost the price of gold before markets close for the weekend.
Crude Oil – Middle East Tensions Send Oil Higher
Supply side fears due to an increase in tensions between Iran and Western powers sent oil prices to a three-month high during European trading yesterday. In addition, an increase in oil consumption in the US, the world’s leading consuming country, drove prices higher. Overall, crude advanced more than $1 a barrel to trade above the $95 level.
Today, news out of the Middle East is likely to continue influencing the direction oil takes. Any escalation in the dispute with Iran may result in additional fears that global supplies could be disrupted and drive the price of oil higher.
Technical News
EUR/USD
The weekly chart’s Bollinger Bands have begun to narrow, signaling that a price shift could occur in the near future. In addition, the MACD/OsMA on the same chart has formed a bullish cross, indicating that the price shift could be upward. Traders may want to open long positions ahead of a possible bullish correction.
GBP/USD
While the Williams Percent Range on the daily chart has crossed over into overbought territory, signaling a possible future downward correction, most other technical indicators place this pair in neutral territory. 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
In a sign of an impending shift in price, the Bollinger Bands on the weekly chart are narrowing. Furthermore, the Williams Percent Range on the daily chart has crossed into overbought territory, indicating that the price shift could be downward. Traders may want to open short positions ahead of a possible bearish correction.
USD/CHF
The Relative Strength Index on the weekly chart is approaching the overbought zone, signaling a downward correction could occur in the coming days. Additionally, the MACD/OsMA on the same chart has formed a bearish cross. Going short may be the wise choice for this pair.
The Wild Card
USD/CAD
A bullish cross on the daily chart’s Slow Stochastic points to a possible upward correction in the near future. Furthermore, the Williams Percent Range on the same chart has crossed below the -80 level into oversold territory. Forex traders may want to open long positions for this pair ahead of a possible upward correction.
Forex Market Analysis provided by ForexYard.
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