The euro saw moderate losses in mid-day trading yesterday, as investors remain concerned about Spanish debt and its possible effect on other countries in the region. Following the ECB’s decision to leave euro-zone interest rates at 1.00%, the common-currency fell against both the US dollar and Japanese yen. That being said, the losses were not significant and the euro was able to later recover. Today, traders will want to pay attention to the results of a Spanish debt auction. Analysts are warning that if demand for Spanish debt is not strong, the euro could tumble during the afternoon session.
Forex Market Trends
USD – Bernanke Speech Could Lead to Dollar Losses
Fears that the Bank of Japan would intervene to weaken the yen caused the USD/JPY to move up over the course of the day yesterday. The dollar gained over 60 pips during the overnight session, eventually reaching as high as 79.26. Following a slight downward correction later in the day, the USD was able to recover and stabilize at 79.15. Against the Australian dollar, the greenback extended its losses from earlier in the week. The AUD/USD moved up over 100 pips after a better than expected Australian GDP figure led to some risk taking in the marketplace.
Turning to today, dollar traders will want to pay attention to several US indicators that have the potential to create market volatility, including the weekly Unemployment Claims and a speech from Fed Chairman Bernanke. Following last week’s disappointing Non-Farm Payrolls figure, today’s Unemployment Claims figure could provide additional clues as to the current state of the US employment sector. With regards to the speech from the Fed Chairman, investors will be watching for any signs of a possible new round of quantitative easing (QE) in the US. If the speech contains any mention of QE, the dollar may see heavy losses to close the week.
EUR – Euro Volatility Expected Following Spanish Auction
While the euro was able to largely maintain gains from earlier in the week against the USD and JPY during trading yesterday, the common-currency took losses against both the AUD and GBP. The EUR/AUD began falling during the overnight session, after positive news boosted investor confidence in the Australian economy. The pair eventually dropped over 120 pips, reaching as low as 1.2613 before staging a slight upward correction. Against the GBP, the euro fell close to 60 pips, reaching as low as 0.8049, before staging an upward correction and stabilizing at 0.8077.
Today, all eyes are likely to be on the Spanish 10-y bond auction. The euro’s recent bearish trend was largely due to fears among investors that Spain will need a bailout in the near future. Should today’s bond auction show poor demand for Spanish debt, the euro could begin falling against its main currency rivals as a result. That being said, a positive bond auction could generate risk taking among investors. In such a case, the euro could extend yesterday’s gains vs. the dollar and yen.
Gold – Gold Continues Upward Trend
Gold extended its upward momentum during yesterday’s trading session, as investors continued to shift their funds to the precious metal amid economic uncertainty in the euro-zone and US. Gold traded as high as $1640.70 an ounce during mid-day trading, up over $17 for the day.
Today, traders will want to pay attention to the results of the Spanish 10-y Bond Auction as well as to a speech from US Fed Chairman Bernanke. Should the auction indicate poor demand for Spanish bonds, risk aversion could return to the marketplace, in which case gold may see additional gains. Furthermore, any mention by the Fed Chairman of a new round of quantitative easing in the US could lead to dollar losses, which may also help gold extend its recent gains.
Crude Oil – Oil Turns Bullish Following US Inventories Figure
The price of oil turned bullish during afternoon trading yesterday, following the weekly US Crude Oil Inventories report which showed a decline in stockpiles. The news was taken as a sign that demand has increased in the US, which led to oil’s upward movement. The price of oil increased by close to $2 a barrel following the news, eventually reaching as high as $86.24.
Turning to today, oil traders will want to pay attention to euro-zone news, specifically the Spanish bond auction. If demand for Spanish bonds comes in below expectations, investors may once again shift their funds to safer assets, which could cause oil to give up yesterday’s gains.
The weekly chart’s Slow Stochastic has formed a bullish cross, indicating that this pair may extend its recent upward movement. In addition, the Williams Percent Range on the same chart has crossed into oversold territory. Going long may be the wise choice for this pair.
Long-term technical indicators are currently placing this pair in neutral territory, meaning that no defined trend can be determined at this time. Traders may want to take a wait-and-see approach, as a clearer picture may present itself in the near future.
A bullish cross on the daily chart’s MACD/OsMA points to a possible upward correction in the near future. Furthermore, the Slow Stochastic on the weekly chart appears to be forming a bullish cross as well. Traders will want to keep an eye on this indicator. If the cross does form, it may be a good time to open long positions.
The Slow Stochastic on the weekly chart has formed a bearish cross, indicating that this pair could see a downward correction in the coming days. Additionally, the Williams Percent Range on the same chart is hovering around the overbought zone. Opening short positions may be a wise choice for this pair.
The Wild Card
The Williams Percent Range on the daily chart as moved into the overbought zone, indicating that this pair could see a downward correction in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of possible bearish movement.
Written by FX Empire