The USD tumbled vs. its main currency rivals on Friday, following the release of a worse than expected Non-Farm Payrolls figure which showed that the US only added 69K jobs in May. Analysts had been forecasting the figure to come in around 150K. Turning to this week, traders will want to monitor any US news, including Tuesday’s ISM Non-Manufacturing PMI and Friday’s Trade Balance figure. Any worse than expected data may lead to fears that the Fed will initiate a new round of quantitative easing, which could result in the dollar extending its recent losses.
Forex Market Trends
USD – Dollar May Extend Losses This Week
The US dollar fell against virtually all of its currency rivals during evening trading on Friday, following a significantly worse than expected Non-Farm Payrolls figure. In addition, the US unemployment rate increased from 8.1% to 8.2%. The USD/JPY fell close to 50 pips, reaching as low as 77.65 after the news was released. The pair was able to stage a mild upward correction before finishing out the week at 77.97. After weeks of bearish movement, the EUR/USD was able to capitalize on the US news. The pair went up over 100 pips by the end of the day and closed out the week at 1.2427.
Turning to this week, the dollar could see further losses if investors determine that the Fed is getting ready to initiate another round of quantitative easing to stimulate growth in the US economy. Traders will want to pay attention to potentially significant US indicators, including Tuesday’s ISM Non-Manufacturing PMI. Additionally, a speech from Fed Chairman Bernanke on Thursday may contain information regarding any new policies the Fed plans on using to grow the economy.
EUR – Euro Sees Gains Following US News
After several weeks of downward movement, the euro was able to capitalize on disappointing US news Friday to finish the week on a positive note. Against the JPY, the common currency was up well over 100 pips during mid-day trading. The pair peaked at 97.49 before staging a downward correction to close out the week at 96.90. Against the British pound, the euro moved up more than 70 pips over the course of the day. The pair eventually closed out the week at 0.8091, just below its high of 0.8095.
This week, analysts are warning that the euro’s bullish trend may be short lived, as investors are still preoccupied with Spain’s debt crisis and the upcoming Greek elections. In addition, the euro could come under renewed pressure following Wednesday’s Minimum Bid Rate and subsequent ECB Press Conference. While no changes to euro-zone interest rates are forecasted to occur, investors will be paying close attention to the press conference for clues as to any future plans to stimulate growth in the region.
AUD – Aussie Gains on USD, JPY to Finish Week
The Australian dollar saw gains against its safe-haven rivals following disappointing economic data out of the US on Friday. The AUD/USD moved up around 110 pips during mid-day trading, eventually reaching as high as 0.9722 before staging a correction to close out the week at 0.9698. Against the JPY, the aussie traded as high as 76.09 before moving downward to finish the week at 75.61.
Turning to this week, the aussie not be able to maintain its recent gains if global economic data continues to come in below expectations. Traders will want to monitor developments out of the euro-zone, specifically with regards to the current economic and political problems in Spain and Greece. Should any negative news be released, investors may shift their funds back to safe-havens, which could result in the AUD returning to a bearish trend.
Crude Oil – Crude Oil Falls to 8-Month Low amid Poor Global Data
Fears of a slowdown in the global economy sent the price of crude oil tumbling to an eight-month low on Friday. A worse than expected Chinese Manufacturing PMI combined with a disappointing US employment statistic led to fears that global demand for oil will continue to drop. As a result, the price of crude fell over $3 a barrel to close out the week at $83.23.
Turning to this week, traders will want to pay attention to news out of both the euro-zone and US for clues as to where the price of oil will go. Any additional disappointing data could result in oil extending its bearish trend. Furthermore, any signs that the Fed is getting ready for a new round of quantitative easing in the US could weigh down on oil.
The Williams Percent Range on the weekly chart is in the oversold zone, indicating that this pair could see upward movement in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bullish cross. Going long may be the wise choice for this pair.
In a sign that this pair could see an upward correction in the near future, the Relative Strength Index on the daily chart has dropped into oversold territory. Furthermore, the Williams Percent Range on the weekly chart is currently at the -90 level. Opening long positions may be a good idea for this pair.
While the Williams Percent Range on the weekly chart is pointing to a possible upward correction in the coming days, most other long term technical indicators are in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself shortly.
The Relative Strength Index on the weekly chart is approaching the overbought zone, indicating that this pair could see a downward correction in the near future. Additionally, the Slow Stochastic on the same chart appears to be forming a bearish cross. Traders will want to monitor these two indicators, as they may point to an impending downward correction.
The Wild Card
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. Furthermore, in a sign that the shift could be upward, the Slow Stochastic on the same chart has formed a bullish cross. This may be a good time for forex traders to open long positions ahead of a possible upward correction.
Written by Forexyard.com