The euro received a boost following the most recent German Ifo Business Climate figure to close out last week’s trading session. The better than expected news resulted in the EUR/USD shooting up close to 100 pips to finish out the day at 1.3219. Turning to this week, traders can expect market volatility as the US is scheduled to release a batch of potentially significant indicators, including Tuesday’s CB Consumer Confidence figure and Wednesday’s FOMC Economic Projections. Today, traders will want to pay attention to the German Flash Services and Flash Manufacturing PMI’s. Better than expected results could help the euro extend its current trend.
Forex Market Trends
USD – Dollar Drops vs. Main Currency Rivals
The dollar reported losses against virtually all of its main currency rivals on Friday, including the euro and British pound. Positive news out of Germany, the biggest economy in the euro-zone, led to a 95 pip spike for the EUR/USD. The pair eventually closed out the week at 1.3219. Meanwhile, a significantly better than expected UK Retail Sales figure resulted in major gains for the GBP/USD. The pair moved up over 100 pips on Friday to close out the day at 1.6130. Against the Japanese yen, the greenback reversed gains made during overnight trading and eventually finished the week at 81.53, the same level as its low for the day.
This week, traders will want to pay attention to several potentially important US indicators. Housing data on both Tuesday and Thursday, FOMC Economic Projections on Wednesday and the Advanced GDP figure on Friday are all expected to generate significant market volatility when they are announced. Turning to today, euro-zone news is likely to dictate the direction the markets take. Analysts are warning that given the current state of the economy in Spain and political uncertainty in France, the euro may not be able to hold onto its recent gains. Any negative euro-zone news today could result in the dollar recouping some of its recent losses vs. the common-currency.
EUR – Euro Turns Bullish, But For How Long?
The euro saw gains against both the US dollar and Japanese yen on Friday, following a better than expected German Ifo Business Climate figure which led to some risk taking in the marketplace. The 95 pip boost the EUR/USD received on Friday resulted in the best weekly performance for the pair since February. Against the JPY, the euro shot up around 80 pips during the morning session before leveling off during mid-day trading. The EUR/JPY closed out the week at 107.78. That being said, the news was not all positive for the euro. The EUR/CHF finished out the week at 1.2012, dangerously close to the psychologically significant 1.2000 level.
This week, analysts are warning that the euro may have a hard time holding onto its recent gains against the dollar and yen. While a successful Spanish bond auction did help calm fears regarding the euro-zone debt crisis, investors are still concerned regarding the prospects of economic recovery in the region. Furthermore political uncertainty in France may lead to some risk aversion in the marketplace. Today, traders will want to pay attention to Flash Services and Flash Manufacturing PMI’s out of both France and Germany. Should the indicators come in above expected levels, the euro could extend its current trend.
AUD – Risk Taking Gives Aussie a Boost
Positive news out of the euro-zone and England led to some risk taking in the marketplace on Friday, resulting in gains for the Australian dollar. The AUD/USD was up 70 pips for the day to close out the week at 1.0378. Against the Japanese yen, the aussie gained more than 60 pips before staging a slight downward reversal. The AUD/JPY eventually finished the day at 84.62.
This week, AUD traders will want to pay attention to news out of both the euro-zone and US. Any positive announcements out of the euro-zone could lead to additional risk taking in the marketplace, which may lead to additional gains for the aussie. That being said, several potentially significant economic indicators are scheduled to be released out of the US in the coming days. Should they come in above their forecasted levels, the AUD may reverse some of its recent gains vs. the greenback.
Crude Oil – Euro-Zone Data Boosts Oil Prices
Investor risk taking resulted in the price of oil going up on Friday. The better than expected German Ifo Business Climate figure helped calm some fears regarding the euro-zone economic recovery and signaled an increase in demand for oil in the region. The price of crude was up close to $2 a barrel before a slight downward correction took place. The commodity eventually closed out the week at $104.04.
Turning to this week, oil traders will want to monitor the news out of the US. Any positive developments may lead to gains for the USD, which could end up bringing the price of oil down. Typically, a bullish dollar means that oil becomes more expensive for international buyers, leading to a drop in price. Furthermore, with euro-zone worries still on the minds of investors, the markets could see some risk aversion in the coming days, which could cause oil to turn downward.
The daily chart’s Slow Stochastic appears to be forming a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart which has crossed into overbought territory. Traders may want to go short in their positions.
The weekly chart’s Williams Percent Range has crossed into overbought territory in a sign that this pair could see a bearish correction in the coming days. In another sign that downward movement may occur, the daily chart’s Relative Strength Index is moving up and may cross into the overbought region shortly. Traders may want to go short in their positions.
Most long term technical indicators show this pair trading in neutral territory, meaning that no definitive trend is known at this time. That being said, the daily chart’s MACD/OsMA has formed a bullish cross. Traders will want to keep an eye on other indicators on this chart, as they may provide further clues as to a possible impending upward correction.
A bullish cross on the daily chart’s Slow Stochastic appears to be forming, in a sign that upward movement could occur in the near future. In addition, the Williams Percent Range on the same chart is currently at -80, right on the border of being in oversold territory. Going long may be the preferred strategy for this pair.
The Wild Card
Both the daily chart’s Slow Stochastic and MACD/OsMA have formed bearish crosses, in a sign that this pair could see downward movement in the near future. Furthermore, the Williams Percent Range on the same chart is currently in overbought territory. This may be a good time for forex traders to open short positions ahead of a possible bearish correction.
Written by Forexyard.com