Source: ForexYard
Safe haven currencies, in particular the Japanese yen, started off the week on a bullish note as investors continued to digest last week’s disappointing US Non-Farm Payrolls figure. The US added just 120K jobs last month, significantly below the forecasted 207K. Today, traders will want to note the results of the Japanese Overnight Call Rate and the Bank of Japan (BOJ) Press Conference. Any indication that the BOJ will intervene in the markets to limit yen growth could result in the currency reversing some of its earlier gains.
Economic News
USD – Jobs Data Continues to Weigh Down USD
The dollar extended its bearish trend against the Japanese yen during yesterday’s session, as a disappointing US jobs report released last week continues to weigh down on the greenback. The worse than expected news prompted fears among investors that the Federal Reserve may initiate a new round of quantitative easing in the near future. As a result, investors flocked to the safe haven yen and drove the USD/JPY to a one month low at 81.19.
Turning to today, a lack of significant news out of the US means that any dollar movement is likely to be determined by international fundamental data. Traders will want to note the result of the Japanese Overnight Call Rate and the subsequent BOJ Press Conference. Any indication that the BOJ could step in to limit yen growth could result in the dollar recouping some of its earlier losses. In addition, the Chinese Trade Balance figure could influence the markets. A worse than forecasted figure could result in further risk aversion and may boost the dollar against currencies like the euro and AUD.
EUR – Debt Concerns Cause EUR to Remain Bearish
Following a disappointing debt auction out of Spain last week, the euro remained bearish against virtually all of its main currency rivals during yesterday’s trading session. The debt auction reinforced investor fears that the euro-zone debt crisis is far from over. As a result, the EUR/USD dropped as low as 1.3032 before staging a mild recovery during the evening session. Since last week, the pair had dropped almost 300 pips. Against the Japanese yen, the euro dropped an additional 75 pips yesterday, reaching as low 106.13.
Turning to today, euro traders will want to continue monitoring any news out of the euro-zone, particularly with regards to countries like Spain and Portugal. Any negative news may result in additional risk taking and could cause the euro to drop further. That being said, traders will want to note the result of the euro-zone Sentix Investor Confidence figure. A better than forecasted result may help the euro recoup some of its earlier losses.
Gold – Gold Turns Bullish
The price of gold went up during yesterday’s session, following negative US news released last week. Disappointing US employment data has led to the possibility of the Fed initiating a new round of quantitative easing in the coming months. As a result, investors have sought out alternative safe-haven assets, gold being one of them. Gold reached as high as $1648.55 an ounce during European trading, up 1739 pips for the day.
Turning to today, a lack of significant US news means that gold could maintain its upward momentum going into the rest of the week. Analysts are warning that without substantially better global data, particularly out of the US, the price of gold and other precious metals may continue to go up for the foreseeable future.
Crude Oil – US Data, Iran News Cause Oil to Drop
The price of crude oil fell during yesterday’s trading session as the combination of negative US data and positive developments regarding the conflict with Iran caused investors to abandon the commodity. Negative US employment data last week has led to investor concerns that demand in the US will go down. At the same time, Iran has recently agreed to resume negotiations with the West regarding its nuclear program. The news led to a reduction in fears that Iran would cut off oil exports. The price of crude dropped as low as $101.29 a barrel yesterday, down from $103.23.
Turning to today, oil traders will want to continue monitoring any developments regarding the situation with Iran. Any signs that negotiations will not take place as planned could result in renewed fears that supplies could be in danger, and may cause the price of oil to stage an upward reversal. That being said, as long as market sentiment toward the US dollar remains negative, oil may extend its recent bearish run.
Technical News
EUR/USD
While most long-term technical indicators show this pair in neutral territory, the weekly chart’s Bollinger Bands are narrowing, which is typically a sign of an impending price shift. Traders will want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
GBP/USD
The weekly chart’s Williams Percent Range is currently at -20, indicating that this pair could see downward movement in the coming days. That being said, most other long-term indicators show this pair trading in neutral territory. Traders will want to monitor the Relative Strength Index on the weekly chart. If it crosses above the 70 line, a bearish correction may take place.
USD/JPY
After tumbling in Friday’s trading session, long-term technical indicators show that this pair may extend its bearish run. The weekly chart’s Williams Percent Range and Relative Strength Index are both showing that further downward movement may occur. Traders may want to go short in their positions ahead of a downward breach.
USD/CHF
The weekly chart’s Slow Stochastic, Williams Percent Range and Relative Strength Index all show this pair trading in neutral territory, meaning that no major price shift is forecasted at the moment. Taking a wait and see approach for this pair may be the wisest choice, as a clearer picture is likely to present itself in the near future.
The Wild Card
Dow Jones Industrials
A bullish cross on the daily chart’s Slow Stochastic appears to be forming, indicating the possibility of an upward correction in the near future. This theory is supported by the Williams Percent Range on the same chart, which is currently around the -70 level. Forex traders may want to go long in their positions ahead of a possible upward breach.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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