The euro saw slight gains against several of its main currency rivals yesterday, despite a worse than expected German Ifo Business Climate figure that signaled a possible slowdown in the euro-zone’s strongest economy. Analysts attributed the euro’s uptrend to hopes that the ECB will soon take steps to lower borrowing costs in Spain and Italy. Today, the US CB Consumer Confidence figure is forecasted generate the most market activity when it is released at 14:00 GMT. If the figure comes in above the expected 65.8, the US dollar could reverse some of its recent losses against the EUR and JPY.
Forex Market Trends
USD – US Consumer Confidence Set to Impact Markets
The US dollar saw relatively little movement against its main currency rivals yesterday, as the combination of a bank holiday in England and a lack of US news resulted in a low liquidity environment in the marketplace. The USD/CHF fell more than 30 pips during the first half of the day to trade as low as 0.9579 before staging a slight upward correction. The pair was trading at the 0.9590 level by the afternoon session. Against the Canadian dollar, the greenback was down close to 20 pips to reach as low as 0.9893 during mid-day trading. By the end of European trading, the USD bounced back to the 0.9900 level.
Today, the main piece of news in the marketplace is likely to be the US CB Consumer Confidence figure, set to be released at 14:00 GMT. Analysts are predicting the indicator to come in at 65.8, slightly below last month’s 65.9. If the news comes in below the forecasted level, risk aversion may send higher-yielding currencies, like the euro, lower during afternoon trading. Later in the week, traders should not forget to pay attention to a speech from Fed Chairman Bernanke. Investors are eagerly awaiting Friday’s speech for clues as to a possible new round of quantitative easing in the US, and major market volatility is expected.
EUR – Euro Remains Bullish in Slow News Day
The euro was able to advance against several of its main currency rivals during European trading yesterday, despite a worse than expected German business climate indicator and a lack of other significant news. The EUR/USD traded as high as 1.2534 during mid-day trading, up close to 45 pips, before dropping to the 1.2515 level. Against the British pound, the common currency gained close to 30 pips to reach 0.7927. A downward correction during the second half of the day brought the EUR/GBP to the 0.7920 level.
Turning to today, while the main piece of news is likely to be the US CB Consumer Confidence figure, traders will also want to note the results of the euro-zone M3 Money Supply at 8:00 GMT. The indicator is forecasted to come in slightly above last month’s, which if true, could help the euro advance further against its safe-haven currency rivals, including the US dollar and Japanese yen. Later in the week, traders will want to make sure to pay attention to the results of a ten-year Italian bond auction, scheduled to take place on Thursday. High demand for Italian bonds could lead to risk taking in the marketplace.
Gold – Gold Hits 4 ½ Month High
Gold hit a new four and a half month high during Asian trading yesterday, as speculations that the Fed may soon initiate a new round of quantitative easing in the US led to investor risk taking. After reaching as high as $1676.66 an ounce, the precious metal saw a minor downward correction before stabilizing around the $1670 level.
Today, gold traders will want to pay attention to a US consumer confidence figure, set to be released at 14:00 GMT. If the indicator comes in below its expected level, speculations that the Fed may soon act to boost the US economic recovery could increase, which may lead to additional risk taking in the marketplace. In such a case, gold could extend its bullish trend.
Crude Oil – Crude Tumbles amid Rumors Regarding US Oil Reserves
The price of crude oil tumbled more than $3 a barrel during afternoon trading yesterday, as rumors that the US may release its strategic oil reserves if an impending hurricane threatens production in the Gulf of Mexico. Crude reached as low as $94.38 before staging a slight upward correction. The commodity was trading above the $95 level by the end of European trading.
Today, oil traders will want to monitor developments regarding Hurricane Issac and its potential to impact US production. Crude could recoup yesterday’s losses if the news results in supply side fears among investors. At the same time, if the hurricane fails to materialize and oil refineries are not threatened, oil could extend yesterday’s losses.
The weekly chart’s Bollinger Bands are beginning to narrow, signaling that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross, indicating that the price shift could be upward. Opening long positions may be the wise choice.
While the Williams Percent Range on the weekly chart has crossed over into overbought territory, most other long-term technical indicators are currently in neutral territory. Taking a wait and see approach for this pair may be the best choice, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the weekly chart are narrowing, signaling a possible price shift could occur in the coming days. In addition, the MACD/OsMA on the same chart appears close to forming a bullish cross. Traders will want to keep an eye on this indicator. If a bullish cross does indeed form, it may time to open long positions.
Most technical indicators on the daily and weekly charts show this pair range-trading, making it difficult to predict long-term price trends. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself later in the week.
The Wild Card
The Slow Stochastic on the daily chart is appears close to forming a bearish cross, signaling that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which has crossed into overbought territory. Forex traders may want to go short in their positions today.
Written by Forexyard.com