The euro fell against most of its main currency rivals yesterday, as expectations that the European Central Bank will cut euro-zone interest rates today weighed down on the currency. The price of crude oil also fell yesterday, as tensions between Iran and Western countries decreased. Turning to today, in addition to the euro-zone Minimum Bid Rate, traders will also want to pay attention to the US ADP Non-Farm Employment Change figure, scheduled to be released at 12:15 GMT. The ADP figure is considered an accurate predictor for Friday’s all important Non-Farm Payrolls figure, and consistently leads to market volatility.
Forex Market Trends
USD – ADP Non-Farm Employment Change Could Generate Dollar Volatility
The US dollar saw gains against several of its main currency rivals yesterday, as risk aversion due to poor euro-zone and British news boosted safe-haven assets. The GBP/USD fell close to 100 pips during the European session, following the release of a worse than forecasted British Services PMI. The pair eventually reached as low as 1.5580. The EUR/USD also dropped some 90 pips yesterday, eventually reaching the 1.2507 level.
Today, dollar traders can anticipate heavy market volatility, as a batch of significant euro-zone and US news is set to be released. Analysts are forecasting that the European Central Bank is getting ready to cut euro-zone interest rates when they meet today at 11:45 GMT. If true, the dollar could extend its recent gains against the euro. At 12:15 GMT, the ADP Non-Farm Employment Change figure is set to be released. With analysts forecasting the figure to come in below last month’s result, the greenback could see some losses against its safe-haven rival, the Japanese yen, during afternoon trading.
EUR – EUR Could Extend Bearish Trend Today
The euro fell against several of its rivals yesterday, including the Australian dollar and Japanese yen, as expectations that the ECB will cut euro-zone interest rates weighed down on the common-currency. The EUR/AUD fell some 85 pips during the European session, eventually hitting the 1.2165 level by the afternoon session. Against the JPY, the euro dropped some 70 pips over the course of the day, eventually reaching 99.78 before staging a very slight upward correction.
Today, the euro-zone Minimum Bid Rate at 11:45 GMT, followed by the ECB Press Conference at 12:30, is likely to be the most significant news events. Given the impact the euro-zone debt crisis has had throughout the region, analysts are forecasting that the ECB will cut interest rates today from 1.00% to 0.75%. If true, the euro may extend its bearish trend going into the rest of the week. That being said, depending on the outcome of Friday’s all important US Non-Farm Payrolls figure, the euro could recoup some of its recent losses before markets close for the weekend.
Gold – Gold Resumes Bearish Trend as USD Strengthens
A strengthening US dollar caused the price of gold to fall during trading yesterday. A bullish USD means that gold becomes more expensive for international buyers, and typically causes prices to drop. Gold fell close to $8 an ounce over the course of the day, eventually reaching as low as $1611.29 before staging a moderate upward correction and stabilizing around the $1615 level.
Today, gold traders will want to pay attention to the US ADP Non-Farm Employment Change figure. The figure is considered an accurate predictor of Friday’s Non-Farm Payrolls indicator. Should today’s news come in below analyst expectations, the USD could turn bearish which may help gold recoup yesterday’s losses.
Crude Oil – Oil Takes Moderate Losses as Iran Tensions Calm
The price of oil fell just over $1 a barrel yesterday, as tensions between Iran and the West calmed down and supply side fears among investors eased. Crude fell as low as $86.46 before staging a slight upward correction during the afternoon session, to reach as high as $87.37.
Turning to today, crude oil could resume its downward trend if the European Central Bank decides to cut euro-zone rates and investors shift their funds to safe-haven assets. That being said, any escalation in the conflict over Iran’s disputed nuclear program could lead to significant gains for crude.
The Williams Percent Range on the weekly chart is approaching oversold zone. If it continues moving down, it may signal a possible upward correction in the coming days. This theory is supported by the MACD/OsMA on the same chart, which has formed a bullish cross. Going long may be the wise choice for this pair.
Most long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be predicted at this time. Taking a wait and see approach may be a wise choice, is a clearer picture is likely to present itself in the near future.
The MACD/OsMA on the daily chart appears close to forming a bearish cross, signaling a possible downward correction in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the best option at this time.
The Williams Percent Range on the weekly chart has almost crossed into overbought territory. Furthermore, a bearish cross has formed on the daily chart’s MACD/OsMA. Traders may want to go short in their positions ahead of a possible downward correction.
The Wild Card
The Slow Stochastic on the daily chart appears close to forming a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Forex traders may want to open short positions ahead of a possible downward breach.
Written by Forexyard.com