Source: ForexYard
The USD saw gains across the board on Friday, following a significantly better than expected US Non-Farm Payrolls figure that helped boost confidence in the US economic recovery. Perhaps most significantly, the USD/JPY came off its recent three-month low. The news calmed fears that the Bank of Japan would soon intervene to limit yen growth. This week, Greece is likely to be back in the headlines as investors eagerly await news of a possible debt-swap deal. Any positive developments are likely to help riskier currencies like the euro and Australian dollar.
Economic News
USD – USD/JPY Comes off Three-Month Low Following Jobs Report
The better than expected US Non-Farm Payrolls last Friday, resulted in positive gains for the USD to close out the week. 243K jobs were added to US payrolls in January, in yet another sign that the American economic recovery is progressing. The unemployment rate dropped to 8.3% percent as a result, its lowest level in almost three years. The USD/JPY closed out the week on a bullish note at 76.58 after hitting a three-month low on Thursday. As a result, fears of a Bank of Japan market intervention were temporarily calmed.
Turning to this week, both European and US news will likely determine whether the dollar can extend its bullish trend. On the European front, Greece’s inability to reach a deal with its creditors has raised concerns that the country could default on its debt. Traders will want to continue paying attention to any announcements out of the euro-zone. If a Greek deal is not finalized in the coming days, the USD could see further gains as a result.
With regards to US news, the most significant event at the moment will likely be a speech from Fed Chairman Bernanke on Tuesday. Should Bernanke indicate that the Fed may raise interest rates earlier than previously thought, the dollar could see gains during mid-week trading. At the same time, if Bernanke voices any pessimism regarding the US economic recovery, the greenback could come under renewed pressure.
EUR – Euro Trend Uncertain amid Greek Debt Negotiations
The euro tumbled against the US dollar following the release of Friday’s Non-Farm Payrolls figure. The better than expected payrolls data renewed faith in the US economic recovery and boosted the dollar. The EUR/USD dropped as low as 1.3065 before staging an upward correction to close out the week at 1.3159. Against the yen, the euro saw fairly significant gains as investors reverted to riskier assets following the positive news. The EUR/JPY closed out the week 100.78, after dropping as low as 100.15 earlier in the day.
Turning to this week, news out of Greece is once again forecasted to impact the markets. Greece has yet to reach a debt-swap deal with its creditors, and is now facing the possibility of default. Unless positive developments occur this week, the euro may come under renewed pressure as investors are likely to revert back to safe-havens like the USD and JPY.
JPY – Fears of BOJ Intervention Temporarily Calmed
Following the bearish turn the JPY took to close out last week, concerns that the Bank of Japan would soon intervene to limit yen growth have subsided. Both the USD/JPY and EUR/JPY crosses saw gains after a better than forecasted US jobs report boosted risk taking. That being said, the dollar is still relatively close to its recent three-month low. Should the pair turn bearish once again, rumors of a BOJ intervention are likely to come about again.
Whether or not the dollar continues to gain against its Japanese counterpart will likely depend on US news scheduled for this week. Traders will want to pay particular attention to a speech from the Fed Chairman on Tuesday. Should he indicate that the US may increase interest rates ahead of schedule, the USD/JPY will likely extend its current trend.
Crude Oil – Oil Prices Spike to Close out Week
The price of crude oil spiked after a positive US jobs report convinced investors that American demand would also increase. Additionally, fresh threats from Iran to limit exports led to supply side fears which also boosted prices. The price of crude increased almost $2 on Friday to close out the week at $97.81 a barrel. Whether or not the commodity can maintain its current trend largely depends on market events this week.
Any further escalation in tensions between Iran and the West is likely to result in another spike in the price of oil. Furthermore, additional signs that the US economic recovery is advancing may also lead to an increase in prices. At the same time, should Greece once again fail to reach a debt-swap deal with its creditors, the euro could tumble which would likely bring oil down as a result.
Technical News
EUR/USD
Technical indicators are currently mixed for this pair. While the weekly chart’s Relative Strength Index is right around the 30 level and oversold, a bearish cross has formed on the daily chart’s Stochastic Slow, meaning that downward movement could occur in the near future. Traders may want to take a wait and see approach for this pair until a clearer picture presents itself.
GBP/USD
Most technical indicators show that this pair is currently overbought and may see a downward correction in the near future. The daily chart’s Stochastic Slow has formed a bearish cross, while the Williams Percent Range on the same chart is above the -20 level. Going short may be a wise choice for the near future.
USD/JPY
Technical indicators on the daily chart show this pair in the oversold zone, meaning that upward movement is possible in the near future. A bullish cross is forming on the MACD/OsMA, while the Williams Percent Range is hovering close to the -80 level. Going long may be a wise choice for the pair.
USD/CHF
The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift is likely to occur in the near future. The Relative Strength Index (RSI) on the same chart is hovering close to the 70 level, which typically means that a downward correction is going to take place. Traders will want to pay attention to the RSI. If it crosses the 70 line, a bearish correction may take place.
The Wild Card
AUD/USD
Most technical indicators show this pair in overbought territory, meaning that a downward correction could take place in the near future. The daily chart’s Relative Strength Index is above the 70 line, while the Stochastic Slow on the same chart has formed a bearish cross. Forex traders may want to go short in their positions ahead of any downward breach.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
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