Source: ForexYard
The euro remained bullish for most of the European session yesterday, as investor hopes that the European Central Bank will soon step in to lower borrowing costs in Italy and Spain helped boost risk appetite. Today, euro traders will want to pay attention to the results of a German ten-year bond auction. If demand for German bonds remains high, investor confidence in the euro-zone economic recovery may increase, giving the euro another opportunity to gain against its main currency rivals. That being said, poor demand for German bonds may weigh down on the euro, causing it to give up some of its recent gains.
Economic News
USD – Dollar May Extend Losses if Risk Taking Persists
The US dollar extended its recent bearish trend yesterday, as the combination of Australian and euro-zone news led to an increase in risk taking among investors. The AUD/USD hit a four-month high at 1.0602 during early morning trading, after the Reserve Bank of Australia left interest rates unchanged at 3.5%. The pair saw slight downward movement later in the day before stabilizing at the 1.0590 level. Against the euro, the dollar stayed near a recent one-month low for much of the day, as investor hopes that the ECB will soon take action to lower Spanish and Italian borrowing costs boosted confidence in the euro-zone economic recovery.
Today, a lack of significant US news means that dollar traders will want to pay attention to announcements out of the euro-zone which could impact risk appetite. Any signs that the ECB is closer to taking action to boost the economic recovery in the region may lead to additional risk taking, which could in turn weigh down on the greenback. That being said, analysts continue to warn traders that the euro-zone crisis is far from over, and any indication that the ECB is not able to lower EU borrowing costs could cause the dollar to reverse its current downward trend.
EUR – German Bond Auction Could Lead to Further EUR Gains
The euro was able to hang onto most of its recent gains yesterday, as signs that ECB was getting ready to move in to lower borrowing costs in Italy and Spain helped boost risk appetite. The EUR/JPY gained close to 50 pips during early morning trading, and eventually peaked at 97.42 before staging a mild downward correction later in the day. Against the Australian dollar, the euro traded steadily at the 1.1720 level for much of the day. Since the end of last week, the EUR/AUD has gained well over 100 pips.
Today, the euro may be able to extend its recent upward trend following the ten-year German bond auction. If demand for German bonds remains high, confidence in the euro-zone economic recovery could go up and help the euro remain bullish. At the same time, traders will want to remember that ECB plans to boost euro-zone economies have yet to be announced, and analysts continue to warn that if the plans fall short of investor expectations, the euro could quickly reverse its upward momentum.
Gold – Bearish Dollar Helps Boost Gold Prices
The price of gold continued to move up throughout European trading yesterday, as a weakened dollar led to increased demand among investors. Typically, gold prices go up when the dollar is weak, as it makes the precious metal more affordable for international buyers. Gold peaked at $1616.23 an ounce during mid-day trading, before staging a very slight downward correction.
Today, gold may be able to extend its recent gains if the USD maintains its current downward trend. At the same time, the euro-zone economic recovery remains extremely fragile. Any disappointing news out of the region may result in risk-aversion which could weigh down on the price of gold.
Crude Oil – Middle East Tensions Boost Oil Prices
The price of crude oil increased further during European trading yesterday, as tensions in the Middle East led to supply side worries among investors. Furthermore, an increase in risk taking in the marketplace caused investors to shift their funds to commodities like oil. Crude advanced close to $1 a barrel, reaching as high as $92.60 during mid-day trading.
Today, in addition to any developments in the Middle East, traders will also want to pay attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Oil saw significant gains last week after the indicator signaled to investors that demand in the US has gone up. Should today’s news once again come in below forecasts, crude may extend its upward momentum.
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
EUR/NOK
The Williams Percent Range on the daily chart has crossed over into oversold territory, indicating that this pair could see upward movement in the near future. Additionally, the MACD/OsMA on the same chart has formed a bullish cross. Forex traders may want to open long positions ahead of a possible bullish correction.
Forex Market Analysis provided by ForexYard.
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