The US dollar was able to mostly maintain its recent gains during a slow trading day yesterday. Investor confidence in the US economic recovery remained high following a series of positive American economic indicators released last week. Today, the dollar may be able to continue its upward trend, as analysts are predicting little movements in the marketplace due to another slow news day. That being said, traders will want to monitor developments in the euro-zone, particularly with regards to Germany and its opposition to plans to lower borrowing costs in Spain and Italy. Any indication that plans to boost the euro-zone economic recovery is in danger can send the euro tumbling today.
Forex Market Trends
USD – Confidence in the US Economy Keeps USD Bullish
The US dollar remained bullish vs. its main currency rivals yesterday, as a lack of global economic news resulted in very little movement in the marketplace. After hitting a fresh five-week high at 79.65, the USD/JPY saw a minor downward correction and spent most of the rest of the day at the 79.40 level. The USD/CHF advanced close to 60 pips during European trading, reaching as high as 0.9766 before reversing slightly toward the end of the day and stabilizing at 0.9740.
Today, analysts are forecasting another slow day in the marketplace due to a lack of significant news events. That being said, any announcements out of the euro-zone regarding plans to combat the debt crisis in the region could result in significant fluctuations for the dollar. Later in the week, traders will want to remember to pay attention to the US Existing Home Sales and FOMC Meeting Minutes, both scheduled to be released on Wednesday. In particular, market volatility is expected following the meeting minutes, as there is speculation that the Fed could hint at a new round of quantitative easing in the near future.
EUR – Concerns Regarding ECB Action Cause Euro to Turn Bearish
Reports that Germany may oppose plans to lower borrowing costs in Spain and Italy caused the euro to turn bearish against several of its main currency rivals during mid-day trading. The EUR/USD fell more than 70 pips, eventually reaching as low as 1.2294 before bouncing back to the 1.2330 level. The EUR/GBP dropped close to 40 pips to trade as low as 0.7832, before an upward correction brought the pair to the 0.7845 level toward the end of the day.
Turning to today, the direction the euro takes is likely to be determined by announcements out of the euro-zone regarding plans to combat the debt crisis in the region. While no formal announcements are scheduled to take place, the markets have seen significant volatility in recent days as a result of comments from euro-zone officials. Any signs that a planned ECB bond buying program designed to lower borrowing costs in the region could be held up by German opposition may result in losses for the common-currency.
Gold – Despite Mild Losses, Gold Remains Bullish
Gold started off the week on a moderately bearish note, as fears regarding the debt crisis in the euro-zone resulted in risk aversion in the marketplace. That being said, losses were mild and the precious metal remained bullish overall. Gold fell as low as $1609.43 an ounce yesterday, down just over $9 from when markets opened for the week. An upward correction brought prices above the $1615 level by the end of the day.
Today, any movement gold sees is likely to be a result from announcements out of the euro-zone. Any signs of German opposition to plans to lower borrowing costs in Spain and Italy could result in risk aversion, which may cause gold to turn bearish during mid-day trading.
Crude Oil – Risk Aversion Leads to Modest Losses for Oil
The price of crude oil took modest losses during European trading yesterday, as concerns about the ECB’s ability to combat the euro-zone debt crisis led to some risk aversion in the marketplace. Still, supply side fears due to tensions in the Middle East limited any losses the commodity took. Crude fell by just over $1 a barrel to reach as low $95.28 by the beginning of the afternoon session.
Today, the price of oil could see volatility depending on developments in the ongoing conflict in Syria and tensions between Iran and Western powers. Should any developments result in additional supply side fears, oil could see significant upward movement as a result.
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
The Williams Percent Range on the daily chart has crossed over into overbought territory, indicating that downward movement could occur in the near future. Furthermore, the Slow Stochastic on the same chart is forming a bearish cross. Going short may be the wise choice for forex traders today.
Written by Forexyard.com