Riskier currencies like the euro and Australian dollar saw moderate gains during European trading yesterday, despite negative economic data out of Germany which increased fears among investors that the euro-zone debt crisis could continue to spread. Today, traders will want to carefully pay attention to what is said at the FOMC Press Conference, scheduled to take place at 18:15 GMT. Analysts are predicting the Fed will extend its current bond-buying program to help the US economic recovery gain traction. If true, the euro could see additional gains during the evening session.
Forex Market Trends
USD – Possible Action by Fed May Impact USD
The US dollar took losses against its main currency rivals yesterday, despite the release of a better than expected US Building Permits figure. Analysts attributed the dollar’s bearish trend to expectations that the Fed will ease monetary policy to stimulate growth in the US economic recovery. Against the Canadian dollar, the greenback fell more than 50 pips during the European session, eventually reaching as low as 1.0180. Furthermore, the USD/CHF fell over 40 pips, reaching as low as 0.9491 before staging a very minor upward correction during afternoon trading.
Today, dollar traders will want to get ready for volatility in the marketplace as a batch of US news is scheduled to be released during afternoon trading. The FOMC Statement, Federal Funds Rage, FOMC Economic Projections and FOMC Press Conference could lead to dollar losses if the Fed decides to extend its current bond-buying program. Additionally, any mention of a new round of quantitative easing today may weigh down on the greenback for the rest of the week.
EUR – Spanish Banking Worries Threaten to Keep Euro Bearish
The euro was able to recoup some of its recent losses in trading yesterday, as expectations that the US Federal Reserve will extend its bond-buying program gave a boost to riskier currencies. The EUR/USD advanced close to 60 pips over the course of the day, eventually reaching as high as 1.2650. Furthermore, the EUR/JPY gained over 60 pips for the day to peak at 99.99 while the EUR/GBP moved up approximately 35 pips to trade as high as 0.8060.
Turning to today, analysts continue to warn that any gains the euro makes could turn out to be short-lived, especially if the economic situation in Spain and Italy deteriorates further. Furthermore, the euro still has the potential to fall due to the political situation in Greece, which has yet to finalize the makeup of its new government. That being said, the common-currency could see gains this afternoon, as it is widely expected that the Fed will announce steps today to help stimulate growth in the US economy. Any move by the Fed could lead to gains for riskier currencies like the euro.
AUD – Aussie Hits 6-Week High vs. USD
Risk taking in the marketplace gave the Australian dollar a boost over the course of the day yesterday. The AUD/USD extended its recent bullish trend to gain over 80 pips for the day. The pair eventually peaked at 1.0183, a six-week high. Against the JPY, the aussie was able to gain over 50 pips during the European session, reaching as high as 80.48.
Turning to today, the aussie may be able to see additional gains if the Fed announces plans to extend its bond-buying program during the FOMC Press Conference, scheduled to take place at 18:15 GMT. That being said, should any news news out of the euro-zone, in particular with regards to Spain and Italy, be announced, riskier currencies like the AUD may quickly turn bearish.
Crude Oil – Crude Oil Sees Gains amid Risk Taking
After dropping as low as $82.58 a barrel during overnight trading yesterday, crude oil was able to stage a moderate recovery during the European session. Expectations among investors that the US Federal Reserve will soon take additional steps to boost the US economic recovery caused oil to increase as high as $84.69 during mid-day trading.
Today, in addition to any announcements by the Fed which could lead to heavy volatility for oil, traders will also want to pay attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Analysts are predicting that US inventories fell by around 1 million barrels last week, which if true, may signal increased demand in the US which could help crude extend yesterday’s bullish trend.
Long term technical indicators are providing mixed signals for this pair. On the one hand, the weekly chart’s MACD/OsMA seems like it is about to form a bullish cross. On the other hand, the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur. Taking a wait and see approach for this pair may be the best choice.
The Williams Percent Range on the daily chart is currently in the overbought zone, indicating that downward movement could occur in the near future. In addition, the Slow Stochastic on the same chart seems like it is about to form a bearish cross. Traders will want to pay attention to this indicator. If it forms the cross, it may be a good time to open short positions.
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is hovering close to the oversold zone. Traders may want to go long in their positions for this pair.
A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see an upward correction in the near future. This theory is supported by the Williams Percent Range on the same chart. Going long may be the best choice for this pair.
The Wild Card
Both the Relative Strength Index and Williams Percent Range on the daily chart have drifted 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 a possible downward breach.
Written by Forexyard.com