Source: ForexYard
Higher-yielding assets took losses throughout the European session yesterday, following a disappointing German Industrial Production figure that led to fresh concerns regarding the pace of the euro-zone economic recovery. Meanwhile, speculations about future monetary easing in Japan weighed down on the JPY. Today, the main piece of economic news is likely to be the EU Minimum Bid Rate and ECB Press Conference, scheduled to respectively take place at 12:45 and 13:30 GMT. If euro-zone interest rates are lowered from their current 0.75%, risk aversion may result in significant euro losses.
Economic News
USD – Dollar Capitalizes on Global Economic Data
The US dollar saw upward movement against both its riskier and safe-haven currency rivals yesterday, as the combination of disappointing German economic data, and speculations regarding future monetary easing in Japan boosted demand for the greenback. The GBP/USD fell more than 70 pips during European trading, eventually reaching as low as 1.5995. Against the Japanese yen, the greenback gained close to 90 pips during the first part of the day to trade as high as 87.73, not far from a recent 2 ½ year high.
Today, in addition to euro-zone news which is forecasted to generate heavy market volatility, dollar traders will also want to pay attention to the US Unemployment Claims figure, set to be released at 13:30 GMT. The figure is expected to come in at 361K, slightly below last week’s 372K. A lower than expected result today, would signal improvements in the US labor market and may result in dollar gains during afternoon trading.
EUR – Euro Bearish Ahead of EU Interest Rate Decision
The euro took losses against most of its main currency rivals yesterday following the release of a disappointing German Industrial Production figure which generated fears that the EU is slipping deeper into recession. The EUR/USD lost more than 50 pips during the mid-day session to trade as low as 1.3037. Against the Japanese yen, the common-currency fell more than 70 pips, eventually reaching as low as 114.03 before bouncing back to the 114.40 level during afternoon trading.
Turning to today, euro traders will want to pay close attention to the EU Minimum Bid Rate at 12:45 GMT, followed by the ECB Press Conference at 13:30. While most analysts predict that euro-zone interest rates will be kept at 0.75%, traders will want to note that if a surprise cut takes place, the euro could take heavy losses. Furthermore, if the ECB signals during the press conference that interest rates may be reduced in the near future, risk aversion is likely to weigh down on the common-currency.
Gold – Gold Takes Minor Losses as Dollar Strengthens
Gold took minor losses during European trading yesterday, as a bullish US dollar made the precious metal more expensive for international buyers. Gold prices fell close to $10 an ounce during mid-day trading to eventually reach as low as $1656.00.
Turning to today, gold traders will want to pay attention to a potentially significant euro-zone interest rate decision, set to take place at 12:45 GMT. If interest rates are kept at their current level of 0.75%, the euro could recoup some of its recent losses against the greenback, which could boost the price of gold during afternoon trading.
Crude Oil – Euro-Zone Data Likely to Generate Volatility for Oil
Despite speculations that demand for oil has fallen in the US, the world’s leading consuming country, crude prices saw upward movement yesterday. The commodity advanced more than $0.70 a barrel during mid-day trading, eventually reaching as high as $93.62 by the end of the European session.
Today, euro-zone data is likely to be the deciding factor in the direction oil prices take. If interest-rates in the EU are cut from their current level of 0.75%, or the ECB signals that the region has slipped deeper into recession, risk aversion is likely to cause oil to reverse yesterday’s gains.
Technical News
EUR/USD
The Bollinger Bands on the weekly chart are beginning to narrow, indicating that a price shift could occur in the coming days. That being said, most other technical indicators place this pair in neutral territory, meaning a definitive trend is difficult to predict at this time. Taking a wait and see approach may be the best strategy for this pair.
GBP/USD
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross, indicating that the shift could be downward. Opening short positions may be the best option for this pair.
USD/JPY
The Relative Strength Index on the weekly chart is currently in overbought territory, indicating that a downward correction could occur in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Opening short positions may be the smart move for this pair.
USD/CHF
While the Williams Percent Range on the daily chart has crossed over into overbought territory, most other long-term 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.
The Wild Card
NZD/CHF
The daily chart’s Slow Stochastic has formed a bearish cross, signaling that this pair may see a downward correction in the near future. Furthermore, the Williams Percent Range on the same chart is currently in overbought territory. Forex traders may want to open short positions for this pair, ahead of possible downward movement.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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