Euro-Zone, US News Set to Impact Markets Today

The US dollar was able to recoup some of its recent losses during European trading yesterday, as better than expected US data helped boost confidence in the American economic recovery. Today, potentially significant news out of both the euro-zone and US is set to create market volatility. Traders will want to pay attention to the Italian ten-year bond auction, followed by the US Unemployment Claims figure. Solid demand for Italian bonds could send the euro higher against its main currency rivals, including the dollar, while a better than expected unemployment figure could boost the USD/JPY.

Forex Market Trends

Daily Trend up up down down up up
Weekly Trend up up down down down up
Resistance 1.2651 1.5925 79.46 0.9653 1.0441 0.8034
1.2599 1.5876 79.09 0.9611 1.0390 0.7982
1.2566 1.5848 78.87 0.9586 1.0356 0.7950
Support 1.2514 1.5799 78.49 0.9544 1.0313 0.7897
1.2482 1.5770 78.27 0.9519 1.0276 0.7865
1.2430 1.5722 77.90 0.9477 1.0229 0.7812

Economic News

USD – US Housing Data Boosts Greenback

The US dollar was able to see moderate gains against several of its main currency rivals yesterday, as positive American economic data caused investors to shift their funds to the greenback. In particular, the Pending Home Sales figure, which came in significantly higher than expected, boosted faith in the US economic recovery. The USD/JPY advanced more than 30 pips for the day, reaching as high as 78.78 by the end of the European session. Against the Swiss franc, the dollar traded as high as 0.9592, up more than 40 pips for the day.

Today, the main piece of US news is likely to be weekly Unemployment Claims figure, set to be released at 12:30 GMT. Analysts are forecasting the unemployment figure to come in at 370K, slightly better than last week’s 372K. If the figure comes in below the forecasted level, it may be taken as a sign by investors that the US economy is improving, and that the Fed may put off initiating a new round of quantitative easing. In such a case, the greenback could extend yesterday’s gains.

EUR – Italian Bond Auction May Impact EUR

The euro took losses vs. several of its main currency rivals yesterday, as investors anxiously await a decision from the ECB regarding potential new monetary easing steps to boost the euro-zone economic recovery. Against the USD, positive US economic indicators caused the euro to slide close to 50 pips to trade as low as 1.2518. The EUR/GBP fell more than 40 pips to reach as low as 0.7904. A slight upward correction later in the day brought the pair to the 0.7915 level.

Today, a ten-year Italian bond auction is expected to generate market volatility. One of the main reasons behind the euro’s bearish trend last month was high Italian borrowing costs. If there is high demand for Italian bonds today, it may signal to investors that the euro-zone economic recovery is picking up, which could help the common-currency recover yesterday’s losses. At the same time, if today’s auction signals that borrowing costs remain high, the euro could extend yesterday’s bearish movement.

Gold – Gold Prices Fall amid Positive US News

The price of gold slid during mid-day trading yesterday, following positive US news which boosted the value of the USD. Typically, a strong dollar results in gold turning bearish, as the precious metal becomes more expensive for international buyers. After dropping close to $16 an ounce to reach as low as $1652.06, gold was able to bounce back to the $1656 level.

Today, gold traders will want to pay attention to European and US news, and what impact it has on the US dollar. If the dollar extends yesterday’s bullish momentum, gold may continue moving downward. That being said, positive euro-zone data could result in the EUR/USD moving upward, which could help gold recoup some of its recent losses.

Crude Oil – Crude Oil Tumbles Following US Inventories Figure

The price of crude oil tumbled during afternoon trading yesterday, following a significantly higher than expected US inventories indicator. The indicator signaled to investors that demand for oil in the US could fall and resulted in prices dropping close to $1 a barrel. After reaching as low as $94.87, crude was able to bounce back to the $95.15 level.

Today, oil traders will want to pay attention to the US Unemployment Claims figure, set to be released at 12:30 GMT. If the indicator comes in better than expected, investors may take the news as a sign that demand for oil could increase, which may help the commodity recover some of yesterday’s losses during the mid-day session.

Technical News

The Williams Percent Range on the weekly chart is approaching the overbought zone, signaling that a downward correction could occur in the coming days. 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.
While the Williams Percent Range on the weekly chart has crossed into the overbought zone, most other long term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the weekly chart are beginning to narrow, signaling that a price shift could occur in the near future. In addition, the daily chart’s Williams Percent Range is approaching the oversold zone, indicating that the price shift could be upward. Opening long positions may be the best choice for this pair.
The Relative Strength Index on the daily chart is approaching oversold territory, signaling that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross. Going long may be wise strategy for this pair.

The Wild Card

A bearish cross on the daily chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. Furthermore, the Williams Percent Range on the same chart has moved into overbought territory. This may be a good time for forex traders to open short positions before a downward breach takes place.

Written by