U.S. News Likely to Dictate Direction of Marketplace Today

Following the Dollar’s rather steep losses yesterday, traders can expect the greenback to either correct itself or extend its bearish streak today, depending on the outcome of several news events. The weekly U.S. Unemployment Claims figure and the TIC Long-Term Purchases report are both set to create market volatility.

Economic News

USD – Dollar Looks to Correct Losses Against Euro

Following yesterday’s testimony by Fed Chairman Bernanke, the Dollar tumbled against several of its main currency rivals, most notably the Euro and British Pound. In the testimony, Bernanke explicitly stated that U.S. interest rates would remain at their record lows for quite some time.

Investors responded to Bernanke’s statement by abandoning the safe-haven Dollar in favor of riskier currency pairs including Sterling, the Euro and the Australian Dollar. The Aussie in particular has seen a steady increase in value as of late against the greenback.

Despite the Dollar’s recent losses, analysts are predicting solid gains for the greenback today. Forecasts for both the U.S. Unemployment Claims Report, as well as the TIC Long-Term Purchase figure, are somewhat optimistic. Providing these forecasts are indeed true, the Dollar should be able to correct the downward trend experienced yesterday. That being said, traders will want to watch out for any surprise results from either of these reports. Any figure that comes in below expectations may end up hurting USD in afternoon trading.

EUR – Risk Taking Leads to Euro Gains

The Euro, still riding out a bullish trend following unveiling of a bailout plan for Greece, was able to extend its gains against the USD in trading yesterday. Following a downbeat assessment by the Fed Chairman regarding the prospect of a U.S. interest rate hike, the Euro shot up against the Dollar some 80 pips. Currently, EUR/USD is trading around the 1.3650 level, relatively unchanged from yesterday afternoon. With risk taking still the prevailing sentiment among investors, the Euro will likely maintain its gains for the time being.

With no significant European news events scheduled for the rest of the week, any significant movement by the Euro will likely be dependant on how well the U.S. economy performs. Traders should be warned that any better then expected news from the U.S. will likely mean the Euro could drop against the Dollar. The Euro-zone is still in very fragile territory. It would not take much to send the single currency back into turmoil.

JPY – Yen Records Losses Against Major Counterparts

Renewed confidence in the pace of the global economic recovery has caused investors to shy away from the safe-haven Japanese currency, in favor of riskier assets like the Kiwi and British Pound. Against the New Zealand Dollar, the Yen has lost almost 50 pips in the last 24 hours. Currently the pair is trading around 0.7145. Versus Sterling the Yen has faired worse, loosing over 100 pips since yesterday morning. GBP/JPY is currently trading around the 144.60 level.

Whether or not the Yen continues with its bearish trend is largely dependant on the U.S. news scheduled for today. Providing investor confidence is built up around the U.S. economy, the Yen could see some gains in evening trading. That being said, most analysts are not predicting very positive American data today, so JPY traders may want to consider that the currency could be in a prolonged downward cycle.

Crude Oil – Risk Taking Helps Brink Oil Above $86.00

An unexpected drop in U.S. crude oil inventories helped elevate the commodity past the $86.00 level in early morning trading today. In addition, with the Dollar currently trading quite bearishly, commodities in general have been able to take advantage of the return to risk taking.

Today, traders will want to note the results of the different U.S. economic reports. Any positive news for the American economy would likely lead to a drop in crude oil prices. That being said, with investors scrambling for higher yielding currencies over the last few days, the price of crude could continue to increase as a result.

Technical News

The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. When the downward breach occurs, going short with tight stops appears to be preferable strategy.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart’s Slow Stochastic. Going short with tight stops may turn out to pay off today.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The price of this pair appears to be floating in the over-sold territory on the 4-hour chart’s RSI indicating a downward correction may be imminent. The upward direction on the daily chart Slow Stochastic also supports this notion. Going long might be a wise choice.

The Wild Card

Nasdaq 100
This stock index sustained upward movement has finally pushed its price into the over-bought territory on the daily chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Written by Forexyard.com