Source: ForexYard
Worse than expected euro-zone data, specifically the German Flash Manufacturing PMI, led to moderate risk aversion during mid-day trading yesterday. Fears that the euro-zone debt crisis could be spreading beyond Greece and Spain were reinforced following the news, which signaled that German manufacturing has hit a three-year low. As we close out the week, traders will want to pay close attention to the German Ifo Business Climate, set to be released at 8:00 GMT. Should the indicator come in below the forecasted level, traders may continue shifting their funds to safe-haven assets.
Economic News
USD – Dollar Hits 1-Month High vs. Yen
The US dollar was able to stage an upward recovery against several of its main currency rivals during European trading yesterday, following the Fed’s decision to hold off on announcing a new round of quantitative easing earlier in the week. In addition, poor economic news out of the euro-zone caused investors to revert their funds to safe-haven assets. After spiking close to 75 pips during early morning trading to reach as high as 1.5731, the GBP/USD staged a downward correction and eventually stabilized at 1.5685. Against the Japanese yen, the dollar advanced close to 60 pips, eventually reaching the 80.12 level, a one-month high.
Turning to today, traders will want to pay attention to the German Ifo Business Climate, set to be released at 8:00 GMT. Investors are concerned that the euro-zone crisis could be spreading to the region’s wealthiest country. If today’s news disappoints, investors may continue shifting their funds back to safe-haven assets which could result in upward movement for the greenback to close out the week. At the same time, any better than expected euro-zone news could help higher-yielding currencies recoup their losses, which would turn the dollar bearish.
EUR – Euro Sees Mixed Trading amid Poor Euro-Zone News
The euro saw a mixed session yesterday, as it took moderate losses against US dollar while gaining on the Japanese yen. Against the USD, the common-currency fell following news out of Germany and Spain which signaled that the euro-zone debt crisis may be spreading. The EUR/USD fell as low 1.2622, down close to 80 pips for the day. The euro had slightly better luck against the Japanese yen. The EUR/JPY was up more than 90 pips during mid-day trading, eventually reaching as high as 101.61, before staging a mild downward correction during the afternoon session.
As we close out the week, euro-zone news is once again forecasted to create market volatility. The German Ifo Business Climate, which ranks current business conditions in Germany, is considered a valid indicator of overall economic health. Should today’s news come in below the forecasted level of 106.2, fears concerning the euro-zone crisis spreading to Germany may increase, which could in turn weigh down on the euro.
Gold – Gold Tumbles Following US News
The Fed’s decision not to initiate a new round of quantitative easing earlier in the week led to significant losses for gold during European trading yesterday. Investors, who now feel US interest rates could go up sooner than expected, went bearish on the precious metal, eventually bringing it down more than $25 an ounce. Gold eventually stabilized at $1584.
Turning to today, gold traders will want to pay attention to euro-zone news which has the potential to lead to risk aversion in the marketplace. Should investors determine that the euro-zone crisis is spreading to other countries in the region, they may choose to place their funds back with safe-haven assets which could help gold recoup some of yesterday’s losses.
Crude Oil – US Crude Inventories Keeps Oil Bearish
A higher than expected US Crude Oil Inventories figure released earlier in the week resulted in crude oil extending its bearish trend yesterday. Oil stockpiles in the US, the world’s largest energy consuming country, are near an 18-year high. More supplies are often taken as a sign of lower demand. As a result, the price of oil slipped below the psychologically significant $80 a barrel during afternoon trading.
As we close out the week, analysts are skeptical about whether crude oil will be able to recoup its recent losses. With negative data having been released from the US and euro-zone in recent days, investors continue to shift their funds to safe-haven assets. That being said, should German news come in above expectations, oil may be able to stage a moderate recovery to finish out the day.
Technical News
EUR/USD
While the Williams Percent Range on the daily chart has crossed over into the overbought zone, indicating that a downward correction could occur in the near future, most other long-term technical indicators show this pair trading 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.
GBP/USD
The Slow Stochastic on the daily chart has formed a bearish cross, indicating that this pair could see a downward correction in the near future. Furthermore, the Williams Percent Range on the same chart has crossed into overbought territory. Traders may want to go short in their positions for this pair.
USD/JPY
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. In addition, the Slow Stochastic on the same chart has formed a bullish cross, signaling that the price shift could be upward. Opening long positions may be the wise choice for this pair.
USD/CHF
Long-term technical indicators are providing mixed signals for this pair. On the one hand, the weekly chart’s MACD/OsMA appears close to forming a bearish cross. On the other hand, the daily chart’s Williams Percent Range is currently in oversold territory. Traders may want to take a wait and see approach for this pair.
The Wild Card
Silver
The MACD/OsMA on the daily chart has formed a bullish cross, indicating that upward movement could occur in the near future. In addition, the Williams Percent Range on the same chart has drifted into oversold territory. This may be a good time for forex traders to open long positions ahead of a possible bullish correction.
Forex Market Analysis provided by ForexYard.
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