A meeting of euro-zone finance ministers failed to boost investor confidence regarding the economic recovery in the region, and resulted in the EUR resuming its downward trend. The news also weighed down on commodities and precious metals, which both turned bearish during the afternoon session. Turning to today, traders will want to pay attention to the US Trade Balance figure and FOMC Meeting Minutes, scheduled to be released at 12:30 and 18:00GMT. Should any of the news signal a further slowdown in the US economy, investors may continue shifting their funds to safe-haven assets which could result in further losses for the euro.
Forex Market Trends
USD – USD Gains amid Risk Aversion
The US dollar came within reach of a two-year high against the euro yesterday, as investor concerns regarding a euro-zone plan to bring down Spanish and Italian borrowing costs resulted in risk aversion in the marketplace. The EUR/USD fell close to 80 pips during the afternoon session, eventually reaching as low as 1.2244. The greenback was also able to extend its bullish run against the Swiss franc during European trading. The USD/CHF gained close to 60 pips, and eventually peaked at 0.9805 late in afternoon trading.
Turning to today, dollar traders will want to monitor the US Trade Balance figure and FOMC Meeting Minutes, scheduled to be released at 12:30 and 18:00 GMT, respectively. Investor confidence in theUS economic recovery remains low, especially following last week’s worse than expected US Non-Farm Payrolls figure. Should today’s news indicate that the US economy is stagnating further, investors may continue shifting their funds to safe-haven currencies which could help both the USD and JPY during afternoon trading.
EUR – Euro-Zone Fears Turn EUR Bearish
A meeting of euro-zone finance ministers did little to convince investors that the EU was on its way to economic recovery yesterday. It is still unclear how the EU plans to implement its plan to lower borrowing costs in Italy and Spain, and there are signs that the region’s debt crisis is spreading to other countries in the region. As a result, the euro tumbled against several of its main currency rivals. The EUR/AUD fell close to 100 pips over the course of the day, eventually reaching as low as 1.1983 before staging a slight upward correction. Against the JPY, the euro fell to a five-week low at 97.29.
Today, analysts are warning that with little significant euro-zone news set to be released, the euro may not have very many opportunities to correct its recent losses. Still, traders will want to pay attention to the German 10-year bond auction. As the biggest economy in the euro-zone, German indicators tend to have a significant impact on the euro. Should demand for German bonds come in high today, the EUR may see some short-term gains.
Gold – Gold Resumes Bearish Trend
After advancing close to $17 an ounce during early morning trading yesterday, gold proceeded to resume its bearish trend after disappointing euro-zone news led to risk aversion in the market place. The precious metal fell from a high of $1601.26 to the $1585 level during the afternoon session.
Today, gold traders will want to monitor US indicators, specifically the Trade Balance and FOMC Meeting Minutes. Should the news result in the USD turning bearish against its riskier currency rivals, gold may have an opportunity to recoup its recent losses.
Crude Oil – End of Norway Strike Turns Oil Bearish
The price of crude oil fell yesterday after a strike in Norway, which had generated supply side fears among investors, came to an end. Crude fell approximately $1.25 a barrel during mid-day trading, eventually reaching as low as $84.60 before staging a minor upward correction.
Turning to today, oil traders will want to pay attention to any announcements out of the euro-zone. Should additional signs emerge that the euro-zone debt crisis is spreading to other countries in the region, including Germany which is holding a 10-year bond auction today, crude could extend its bearish trend.
The Williams Percent Range on the weekly chart has fallen into oversold territory, signaling that an upward correction could take place in the coming days. Additionally, the Slow Stochastic on the daily chart appears to be forming a bullish cross. Traders may want to open long positions ahead of possible upward movement.
While the Williams Percent Range on both the daily and weekly chart is currently in oversold territory, most other technical indicators show this pair trading in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
Most long term technical indicators are currently showing this pair range-trading, meaning that no defined trend can be predicted at this time. Taking a wait and see approach may be a wise choice, as a clearer picture is likely to present itself in the coming days.
The Relative Strength Index on the weekly chart is hovering close to the overbought zone, indicating that downward movement could occur in the near future. This theory is supported by the daily chart’s Slow Stochastic, which has formed a bearish cross. Going short may be the wise choice for this pair.
The Wild Card
The Slow Stochastic on the daily chart has formed a bullish cross, indicating that upward movement could occur in the near future. Furthermore, the Relative Strength Index on the same chart has crossed over into oversold territory. Going long may be the wise choice for forex traders today.
Written by Forexyard.com