EUR/USD Hits 10-Day High

The euro hit a ten-day high against the US dollar during trading yesterday, following a positive Spanish bond auction which led to an increase in risk taking. By the end of European trading, the EUR/USD rose as high as 1.2609, an increase of close to 70 pips for the day. As markets get ready to close for the week, traders will want to pay attention to several indicators that could lead to volatility. The British PPI Input figure, set to be released at 8:30 GMT, could help the pound extend its recent bullish movement against the USD if it comes in above the forecasted -1.2%. Later in the day, the US Trade Balance figure could potentially lead to additional losses for the greenback if it comes in below expectations.

Forex Market Trends

Daily Trend no down down up up up
Weekly Trend up up up down up down
Resistance 1.2624 1.5591 80.13 0.9693 0.9964 0.8184
1.2572 1.5537 79.70 0.9642 0.9915 0.8139
1.2540 1.5504 79.44 0.9611 0.9884 0.8111
Support 1.2490 1.5452 79.01 0.9561 0.9834 0.8066
1.2459 1.5419 78.75 0.9528 0.9803 0.8038
1.2407 1.5365 78.32 0.9479 0.9754 0.7993

Economic News

USD – Dollar Takes Losses against Riskier Currencies

The US dollar extended its recent bearish trend against its higher-yielding currency rivals yesterday, as several global indicators generated risk taking in the marketplace. A significantly better than expected Australian Employment Change figure resulted in the AUD/USD moving up some 120 pips over the course of the day, eventually reaching just below the psychologically significant 1.000 level. Later in the day, the EUR/USD was able to hit a ten-day high after solid demand at a Spanish bond auction helped ease fears regarding the health of Spain’s banking sector.

Turning to today, dollar traders will want to pay attention to the US Trade Balance figure, set to be released at 12:30 GMT. Analysts are forecasting that the figure will come in around -49.3B, which if true, would represent a slight improvement over last month. Should the figure come in at or above expectations, the dollar could recoup some of its recent losses before markets close for the week. At the same time, analysts are warning that any gains could be temporary, as investors are still concerned with the possibility that the US economic recovery has stalled.

EUR – Euro Sees Mixed Trading Day

While the euro saw significant gains against its safe-haven rivals yesterday, including the USD and JPY, it dropped against other riskier currencies including the AUD. In addition to the 70 pip gain against the USD, the euro was able to advance close to 120 pips against the JPY. By the end of the European session, the EUR/JPY was trading around the 100.50 level. At the same time, better than expected Australian employment data resulted in the EUR/AUD falling more than 100 pips over the course of the day. The pair reached as low as 1.2592 before staging a slight upward correction to stabilize at 1.2629.

Turning to today, traders will want to pay attention to any announcements out of the euro-zone, particularly with regards to Spain and Greece. While the euro has seen a fairly significant recovery against the dollar and yen this week, analysts are warning that the economic and political problems that have plagued the euro-zone still have the potential to weigh down on the common-currency. Any negative indicators out of the region may cause the euro to quickly reverse its earlier gains.

Gold – Gold Reverses Gains amid Investor Risk Taking

An increase in investor risk taking yesterday, following positive news events out of Australia and the euro-zone, caused gold to reverse some of its earlier gains. Gold has recently been treated as a safe-haven asset due to economic turmoil in the US and euro-zone. The precious metal fell close to $30 an ounce during European trading, eventually hitting $1599.94.

Today, gold traders will want to pay attention to news out of the euro-zone. If riskier currencies like the euro and Australian dollar continue their current upward trend, gold may take additional losses to close out the week. At the same time, if any developments out of the euro-zone lead to risk aversion in the marketplace, gold could recoup some of yesterday’s losses.

Crude Oil – Crude Oil Moves Up Following Chinese Interest Rate Cut

Crude oil saw gains throughout European trading yesterday, after a surprise Chinese interest rate cut was taken as a sign that global demand could go up in the near future. The price of crude oil was up by over $2 a barrel, eventually reaching as high as $86.98 during mid-day trading before staging a mild downward correction. The commodity eventually stabilized around $85.85.

As we close out the week, oil traders will want to pay attention to the US Trade Balance figure at 12:30 GMT. With analysts predicting that the figure will show some improvement over last month, the news could result in modest dollar gains during afternoon trading. If true, investors may take the news as a sign that oil demand will go up in the US, which could help the price of crude move up further.

Technical News

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 daily chart’s Williams Percent Range has fallen into the oversold zone, indicating that this pair could see an upward correction before markets close for the week. 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 forex traders.

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