After seeing significant gains across the board last week, the euro reversed some of its recent bullish movement yesterday during a slow news day. That being said, investors were hesitant about going overly bearish on the currency ahead of potentially significant news later this week. Today, traders will want to pay attention to the US Trade Balance figure, set to be released at 12:30 GMT. If the indicator signals a further slowing down in the US economic recovery, speculations that the Fed may soon take steps to stimulate growth may go up, in which case the euro could extend its gains from last week.
Forex Market Trends
USD – Potential Fed Action Keeps USD Bearish
The US dollar spent much of the day range trading yesterday, as a lack of significant news combined with the possibility that the Fed may soon act to boost the US economy, kept the currency near its recent lows. Against the Swiss franc, the dollar gained 35 pips during the first half of the day to trade as high as 0.9483. That being said, the dollar was once again bearish by the end of European trading, and eventually fell to the 0.9460 level. Similarly, after gaining 12 pips during morning trading, the USD/JPY erased most of its gains and by the end of the day was trading at 78.25.
Today, the dollar has the potential to recoup some of its recent losses following the release of the US Trade Balance figure at 12:30 GMT. Any better than expected news could weaken expectations that the Fed is getting ready to initiate a new round of quantitative easing, which may lead to higher demand for the greenback. On Thursday, the FOMC Statement may tell us what, if any, plans the Fed has to stimulate growth in the US economy.
EUR – Despite Slight Losses, EUR Remains Bullish
After reaching its highest level in close to four months against the US dollar and a two-month high vs. the JPY on Friday, the euro took modest losses during trading yesterday, ahead of potentially significant news later this week. The EUR/USD dropped close to 50 pips during overnight trading yesterday to reach as low as 1.2769, still well within reach of its recent high of 1.2815. Against the JPY, the common currency fell just over 30 pips to reach as low as 99.95. A slight upward correction later in the day brought the euro to the 100.05 level.
Today, the euro may see another slow trading day as investors anxiously await a German court ruling on Wednesday regarding the legality of euro-zone bailouts to indebted countries in the region. That being said, the EUR/USD could turn bullish again if the US Trade Balance signals a further slowdown in the US economic recovery. At the same time, if Wednesday’s court decision in any way limits the ECB’s ability to combat the euro-zone debt crisis, the common-currency may reverse some of its recent gains.
Gold – Gold Comes Off 6-Month High
Gold reversed some of its recent gains throughout European trading yesterday, but largely remained within reach of its recent six-month high as investors remained convinced that the Fed is getting ready to take steps to boost the US economy. The precious metal fell close to $9 an ounce during the first part of the day to reach as low as $1727.15 before bouncing back to the $1730 level by the end of the day.
Today, gold traders will want to pay attention to the US Trade Balance figure, set to be released at 12:30 GMT. Any better than expected news could result in gains for the USD, which may reduce demand for gold and lead to additional losses for the precious metal during mid-day trading.
Crude Oil – Oil Range Trades Ahead of Fed Decision
Crude oil spent most of yesterday’s session range trading, as investors remained anxious about possible action by the Fed later this week to boost the US economic recovery. Crude dropped just over $1 a barrel during morning trading to reach as low as 95.34. An upward correction later in the day brought the commodity back above the $96 level.
Today, traders will want to pay close attention to the US Trade Balance figure and its impact on the dollar. Any better than expected news may boost the greenback and signal to investors that demand for oil in the US will go up, which may then lead to gains for crude during afternoon trading.
The Bollinger Bands on the weekly chart are narrowing, signaling that this pair could see a shift in price in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed over into the overbought zone, indicating that the change in price could be downward. Opening short positions may be the wise choice for this pair.
The daily chart’s Relative Strength Index is approaching overbought territory, signaling that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Going short may be the wise choice for this pair.
While the weekly chart’s Williams Percent Range has dropped into oversold territory, 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 near future.
The daily chart’s Relative Strength Index is currently in oversold territory, which indicates that this pair could see a bullish correction in the near future. Additionally, the Williams Percent Range on the weekly chart has fallen to the -90 level, giving further support to the theory of impending upward movement. Going long may be the smart choice for this pair.
The Wild Card
A bearish cross on the daily chart’s MACD/OsMA indicates that an upward correction could occur in the near future. Furthermore, the Williams Percent Range on the same chart has dropped into oversold territory. This may be a good time for forex traders to open long positions ahead of a possible upward breach.
Written by Forexyard.com