Source: ForexYard
After hitting a seven-week high against the US dollar earlier in the week, the euro took moderate losses against several of its main currency rivals during the first part of the day yesterday. That being said, an increase in US existing home sales led to some risk taking in the marketplace, and the common currency was able to recoup most of its earlier losses. Today, a batch of euro-zone and US news is expected to generate significant market volatility. Traders will want to pay attention to manufacturing and services data out of Germany, France and the euro-zone as a whole, followed by the US Unemployment Claims and New Home Sales figures later in the day.
Economic News
USD – Safe-Haven Dollar Takes Losses amid Risk Taking
The US dollar took losses in afternoon trading yesterday, after an increase in US existing home sales led to risk taking in the marketplace. The home sales figure came in at 4.47M, slightly below the forecasted level of 4.52M, but higher than last month’s 4.37M. As a result, the USD/CHF fell more than 40 pips to reach as low 0.9618 before bouncing back to the 0.96.30 level. Against the Japanese yen, the dollar spent most of the European session stuck in a bearish trend. The USD/JPY fell more than 20 pips to trade as low as 79.14.
Today, traders will want to pay attention to the weekly US Unemployment Claims at 12:30 GMT, followed by the New Home Sales report at 14:00. Both indicators are forecasted to show growth in the US economy. If true, investor confidence in the pace of the global economic recovery may go up, which could lead to more risk taking in the marketplace. In such a case, safe-haven assets like the dollar could extend yesterday’s losses during afternoon trading.
EUR – French, German Data May Lead to EUR Volatility
After starting the European session yesterday on a bearish note, the euro was able to bounce back during afternoon trading after positive US data led to risk taking in the marketplace. The EUR/USD gained more than 50 pips following the US news to trade as high as 1.2483, just below a recent seven-week high. Against the Australian dollar, the euro was able to capitalize on negative Chinese news earlier in the day to gain more than 40 pips before peaking at 1.1950. As Australia’s biggest trading partner, news out of China tends to have a direct impact on the AUD.
Today, traders will want to pay attention to manufacturing and services indicators out of both France and Germany. As the euro-zone’s biggest economies, French and German news tends to create volatility in the marketplace. Should any of the news come in above expectations, the euro may be able to extend its recent upward trend. At the same time, with investors still unsure regarding ECB plans to boost the euro-zone economic recovery, analysts are warning that any euro gains could be limited.
Gold – Gold Remains Close to a 3 ½ Month High
The price of gold remained close to a recent 3 ½ month high throughout European trading yesterday, as speculations about future ECB steps to combat the euro-zone debt crisis kept prices elevated. After reaching as high as $1644.85 an ounce during early morning trading, the precious metal took moderate losses later in the day and was trading just below the $1640 level by the evening session.
Today, gold traders will want to continue monitoring developments out of the euro-zone, which still have the potential to create market volatility. In addition, should US news during afternoon trading lead to an increase in risk taking, gold could see additional gains.
Crude Oil – US Inventories Lead to Major Gains for Oil
The price of oil shot up following a significantly lower than expected US crude oil inventories figure yesterday. US stockpiles dropped by 5.4 million barrels last week, signaling to investors that demand in the world’s largest oil consuming country has increased. As a result, oil increased by just under $1 a barrel to trade as high as $97.13.
Today, oil traders will want to pay attention to a batch of euro-zone and US indicators scheduled to be released throughout the day. Any positive news may lead to additional risk taking in the marketplace, which could help the price of oil increase further before markets getting ready to close for the weekend.
Technical News
EUR/USD
Long-term technical indicators are providing mixed signals for this pair. On the one hand, the daily chart’s Williams Percent Range has crossed into overbought territory, signaling possible downward movement in the near future. On the other hand, the MACD/OsMA on the weekly chart has formed a bullish cross. Traders may want to take a wait and see approach for this pair.
GBP/USD
The Slow Stochastic on the daily chart appears close to forming a bearish cross. Furthermore, the Williams Percent Range on the same chart has crossed into the overbought zone. This may be a good time to open short positions ahead of a downward correction.
USD/JPY
Most long term technical indicators are trading in neutral territory, meaning that a defined price trend for this pair is difficult to predict 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/CHF
The Williams Percent Range on the daily chart has crossed into oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the MACD/OsMA on the same chart appears close to forming a bullish cross. Traders will want to keep an eye on this indicator. If the cross forms, it may a good time to open long positions.
The Wild Card
GBP/SGD
A bearish cross on the daily chart’s Slow Stochastic indicates 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. Opening short positions may be a smart choice for forex traders.
Forex Market Analysis provided by ForexYard.
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