The euro erased most of its recent gains in trading yesterday, as investors once again shifted their attention to Spain’s debt issues, which in turn led to risk aversion in the marketplace. Additionally, investors had little hope that a meeting among G7 ministers would lead to any breakthroughs in new way to stimulate growth in the euro-zone. Turning to today, traders will want to pay attention to the European Minimum Bid Rate and the subsequent ECB Press Conference. While no changes to euro-zone interest rates are expected to occur, the press conference may provide clues as to what the ECB plans to do to combat the region’s debt crisis.
Forex Market Trends
USD – USD Resumes Bearish Movement against JPY
After steadily increasing during the beginning of the week, the USD/JPY once again turned bearish during trading yesterday. Analysts attributed the dollar’s downward reversal to the perception among many investors that the US economic recovery has stalled following last week’s disappointing Non-Farm Payrolls figure. The USD/JPY dropped as low as 78.09 in the early morning session before staging a slight upward recovery to stabilize at 78.24. The news was not all bad for the dollar though. The EUR/USD once again turned downward yesterday, dropping over 100 pips to reach as low as 1.2409.
Taking a look at the rest of the week, dollar traders will want to pay close attention to a speech from Fed Chairman Bernanke on Thursday. Any signs that the Fed is planning on a new round of quantitative easing to help grow the US economy could weigh down on the dollar. That being said, Friday’s US Trade Balance is forecasted to have improved over last month’s figure. If true, the dollar may be able to recoup some of its recent losses against the yen.
EUR – Minimum Bid Rate Could Impact EUR
Fears’ regarding Spain’s banking sector as well as the possible impact of Greece’s upcoming election caused investors to revert back to safe-haven assets during trading yesterday. As a result, the euro fell against several of its main currency rivals, including the British pound and Japanese yen. The EUR/GBP dropped more than 50 pips over the course of the day, eventually reaching as low as 0.8087. Against the Japanese yen, the euro was down over 100 pips during early morning trading, eventually hitting 97.03 before staging an upward correction later in the day.
Turning to today, traders will want to pay attention to the European Minimum Bid Rate and ECB Press Conference, scheduled for 11:45 and 12:30 GMT, respectively. While most analysts are fairly certain that euro-zone interest rates will stay at 1.00%, the possibility exists that the ECB will lower rates as a way to stimulate growth in the region. Should this occur, the euro may drop against its safe-haven currency rivals during the afternoon session.
AUD – Aussie Sees Mixed Trading Day
The Australian dollar saw a mixed session yesterday against the USD and JPY. The AUD/USD fell from a high of 0.9801 during early morning trading, eventually reaching as low as 0.9708 before staging a slight upward correction. The pair was able to then stabilize at 0.9750. Against the yen, the AUD had more luck. After falling over 90 pips during the first part of the day, the AUD/JPY rebounded and eventually reversed all of its earlier losses by the end of European trading.
Turning to today, aussie traders will want to pay attention to news out of the euro-zone, as it is likely to dictate the level of risk appetite in the marketplace. If the ECB unveils any new strategies to stimulate economic growth in the euro-zone, the AUD may be able to rebound during afternoon trading. That being said, any additional negative European news could cause the AUD to turn bearish.
Crude Oil – Crude Oil Gives Back Some of its Earlier Gains
Crude oil gave back some of its gains from earlier in the week yesterday, as risk aversion in the marketplace due to worries that the global economic recovery is stalling drove the price of commodities downward. The price of crude fell from a high of $84.89 a barrel as low as $83.31 during mid-day trading.
Turning to today, traders will want to note this week’s US Crude Oil Inventories figure, set to be released as 14:30 GMT. Part of the reason the price of oil has fallen so much in recent weeks is because of record high crude stockpiles in the US, which investors take as a sign of decreased demand in the world’s largest oil consuming country. Should today’s figure again show US crude inventories increased, the price of oil could fall further.
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
Dow Jones Industrials
The daily chart’s Slow Stochastic has formed a bullish cross, meaning that upward movement could be seen in the near future. This theory is supported by the same chart’s Williams Percent Range and Relative Strength Index, both of which are in oversold territory. Forex traders may want to go long in their positions ahead of a possible upward breach.
Written by Forexyard.com