Dollar Hits 5-Week High vs. Yen

The US dollar hit a five week high against the Japanese yen on Friday, amid an increase in optimism in the US economic recovery highlighted by a better than expected US consumer confidence figure. Meanwhile, the euro took moderate losses against the greenback before markets closed for the weekend, as investors continue to wait for any news regarding plans to lower Spanish and Italian borrowing costs. This week, traders will want to pay attention to a number of potentially significant news events, including the FOMC Meeting Minutes on Wednesday and euro-zone manufacturing and services data on Thursday.

Forex Market Trends

Daily Trend up up down down up down
Weekly Trend up up down down up no
Resistance 1.2440 1.5796 80.44 0.9834 1.0561 0.7961
1.2395 1.5747 79.96 0.9790 1.0509 0.7915
1.2363 1.5716 79.65 0.9763 1.0476 0.7883
Support 1.2315 1.5665 79.18 0.9719 1.0426 0.7835
1.2285 1.5634 78.88 0.9692 1.0393 0.7804
1.2238 1.5585 78.39 0.9648 1.0341 0.7756

Economic News

USD – US Indicators Set to Drive Market Volatility This Week

The US dollar was able to finish out last week on a bullish note, following the release of a better than forecasted Prelim UoM Consumer Sentiment figure. The indicator, combined with positive retail sales data from earlier in the week, lifted the dollar to a five-week high against the Japanese yen. The USD/JPY advanced more than 30 pips for the day to reach as high as 79.54. The greenback also advanced more than 70 pips against the Swiss franc to peak at 0.9772 during the European session. A downward correction resulted in the pair finishing the week at 0.9739.

Turning to this week, dollar traders will want to pay attention to a number of economic indicators out of the US that could potentially generate market volatility. Home sales data on Wednesday and Thursday is forecasted to show growth in the US real-estate sector. If true, the dollar may be able to extend its upward trend against the yen in the coming days. Additionally, investors are eagerly anticipating Wednesday’s FOMC Meeting Minutes to see if the Fed will hint at a new round of quantitative easing to boost the US economy.

EUR – Investors Eagerly Await ECB Action to Boost EU Recovery

The euro had a mixed trading session on Friday, as positive US news led to losses against the greenback, while risk taking in the marketplace resulted in the EUR/JPY hitting a six-week high. The EUR/USD fell close to 90 pips during European trading, eventually hitting 1.2288, before staging an upward correction to close out the week at 1.2330. Against the JPY, the common-currency advanced close to 50 pips during early morning trading to reach 98.38, its highest level since early July. Downward movement later in the day resulted in the pair finishing out the day at 98.09.

This week, in addition to any announcements from EU leaders regarding the current state of the euro-zone, traders will want to note the results of several indicators out of the region. Thursday in particular is likely to be a volatile day, as manufacturing and services data is set to be released out of Germany, France and the EU as a whole. Should any of the data come in higher than forecasted, the euro may be able to recover some of its recent losses against the US dollar.

Platinum – Violence at South Africa Mine Sends Platinum Higher

Violence between miners and police at a South African platinum mine sent the price of platinum to its highest level since the beginning of July on Friday. Overall, the precious metal advanced more than $39 for the day before finishing out the week at $1474.10.

This week, traders will want to continue monitoring the ongoing situation in South Africa, the world’s leading source of platinum. Recent violence between striking workers and police has led to supply side fears that have driven prices higher. Unless the situation in the country is resolved peacefully in the near future, the price of platinum may continue spiking.

Crude Oil – Middle East Turmoil Sends Oil to 3-Month High

Crude oil hit its highest point since the middle of May on Friday, as tensions in the Middle East continue to drive supply side fears among investors. The price of crude was up by more than $1 a barrel to reach as high as $96.24 during mid-day trading. A slight downward correction later in the day resulted in the commodity finishing out the week at $96.14.

This week, developments in the Middle East are likely to be the driving force behind any movements in the price of oil. Any escalation in the conflict in Syria or in the current tensions between Iran and Western powers could drive oil higher. In addition, traders will also want to pay attention to Wednesday’s US Crude Oil Inventories figure. If the indicator signals that demand in the US has gone up once again, crude could see gains during mid-week trading.

Technical News

The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. A bullish cross on the same chart’s MACD/OsMA indicates that the price shift could be upward. Going long may be the wise strategy for this pair.
The Williams Percent Range on the weekly chart is approaching the overbought zone, indicating that this pair could see downward movement in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bearish cross. Opening short positions may be the wise choice.
The weekly chart’s Bollinger Bands have begun to narrow, indicating that this pair could see a price shift this week. Furthermore, the Slow Stochastic on the daily chart has formed a bearish cross while the Williams Percent Range on the same chart is in overbought territory. Going short may be a wise choice for this pair.
While the weekly chart’s MACD/OsMA has formed a bearish cross, most other long-term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.

The Wild Card

DAX 30
The Relative Strength Index on the daily chart is approaching the overbought zone, indicating that downward movement could occur 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 downward breach.

Written by