The EUR/USD fell to an almost two-year low on Friday, as concerns regarding Spanish debt sent investors to safe-haven assets. The currency pair dropped to 1.2495 during mid-day trading before staging a slight recovery to close out the week at 1.2514. This week, traders can anticipate volatility in the marketplace, as a batch of significant US data is set to be released. In addition to the all-important Non Farm Payrolls figure on Friday, attention should also be given to Tuesday’s CB Consumer Confidence and Thursday’s Prelim GDP figures. Any better than expected news could help the dollar extend its recent bullish run.
Forex Market Trends
USD – Risk Aversion Helps USD Extend Gains
The US dollar was able to extend its bullish momentum on Friday, as concerns regarding Spain’s debt situation caused investors to continue selling off riskier assets. In addition, investors are still concerned about the affects of a possible Greek exit from the euro-zone. As a result, the EUR/USD dropped over 100 pips during the European session, eventually reaching an almost two-year low at 1.2495. The GBP/USD fell close to 70 pips over the course of the day, reaching as low as 1.5629 before staging a slight upward correction to finish the week at 1.5659.
Turning to today, dollar traders will want to note that US markets are closed due to the Memorial Day holiday. That being said, significant US news scheduled to be released throughout the week is almost guaranteed to generate activity in the markets. The CB Consumer Confidence figure on Tuesday, followed by Wednesday’s Pending Home Sales and Thursday’s Prelim GDP indicators could all help the dollar should they come in above expectations. Finally, Friday’s Non-Farm Employment Change figure is considered the most important economic indicator on the forex calendar, and has the potential to create volatility throughout the marketplace.
EUR – Euro-Zone Instability Leads to Heavy EUR Losses
The euro continued to fall against several of its main currency rivals on Friday, as fresh concerns regarding Spain’s ability to manage its debt caused investors to abandon riskier assets. In addition to the almost two-year low hit against the US dollar, the common currency also took heavy losses against the British pound and Japanese yen. The EUR/GBP fell 65 pips during mid-day trading before closing out the week at 0.7989. The EUR/JPY fell 85 pips over the course of the day, reaching as low as 99.46 before correcting itself to finish the week at 99.70.
This week, euro traders will want to pay attention to any announcements out of the euro-zone regarding the upcoming Greek elections. Any signs that anti-austerity political parties could win in the elections may drive the euro lower. In addition, an Italian bond auction on Wednesday could be an important indicator of whether the crisis in Greece is spreading to other euro-zone countries. Finally, the US Non-Farm Payrolls figure on Friday typically leads to volatility throughout the marketplace. Should the figure show improvements in the US labor sector, the euro may take additional losses as a result.
Gold – Gold Closes the Week on a High Note
The price of gold increased significantly on Friday, eventually finishing out the week at $1572.94 an ounce, up over $20 for the day. Analysts attributed the gains to investor reluctance to open too many short positions for the precious metal ahead of the holiday weekend in the US. Despite Friday’s gains, the precious metal was still down overall for the week due to euro-zone debt worries.
This week, gold traders will want to pay attention to any news out of the euro-zone. Wednesday’s Italian bond auction will provide investors with important clues as to whether the debt crisis in Greece is spreading to other countries in the region. Poor results for the debt auction could lead to an increase in risk aversion which may weigh down on the price of gold.
Crude Oil – Oil Sees Modest Gains to Finish Week
Inconclusive talks regarding Iran’s disputed nuclear program generated some supply side fears which led to a modest increase in the price of crude oil on Friday. Any sign that Iran could scale back its oil exports generally cause the price of crude to turn bullish. Oil increased by over $1 a barrel during morning trading, eventually peaking at $91.29, before moving downward to close out the week at $90.68.
This week, the price of oil may be influenced by a batch of highly significant US news. As the world’s biggest oil consuming country, high demand in the US typically leads to gains for oil. Traders will want to pay attention to Tuesday’s CB Consumer Confidence figure, Thursday’s Prelim GDP and Friday’s Non-Farm Employment Change. Any better than expected news could help oil extend Friday’s bullish movement.
A bullish cross on the weekly chart’s Slow Stochastic indicates that this pair could see upward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into oversold territory. Going long may be the preferred strategy for this pair.
Technical indicators on the daily chart, including the Relative Strength Index and the Slow Stochastic, indicate that this pair could see an upward correction in the near future. In addition, the weekly chart’s Williams Percent Range has crossed into oversold territory. Opening long positions may be the wise choice for this pair.
While the Williams Percent Range on the weekly chart is in oversold territory, most other long term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s MACD/OsMA has formed a bearish cross, indicating that downward movement could occur in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Going short may be the wise choice for this pair.
The Wild Card
The daily chart’s Slow Stochastic has formed a bearish cross, indicating that this pair could see downward movement in the near future. In addition, the Williams Percent Range on the same chart has crossed over into the overbought zone. This may be a good time for forex traders to open short positions ahead of a possible downward correction.
Written by Forexyard.com