The euro rallied against most of its main currency rivals throughout the day yesterday, after an increase in investor risk taking due to better than forecasted news out of Spain and a positive Italian bond auction. The JPY also had a bullish day, following the Bank of Japan’s announcement of a smaller than expected monetary easing package. Today, traders will want to pay attention to updates regarding the aftermath of Hurricane Sandy. The full impact the hurricane has had on the US economy is still unknown. Should the damage the storm created be worse than expected, investors could shift their funds to safe-haven assets.
Forex Market Trends
USD – USD Tumbles amid Risk Taking
The US dollar took losses against most of its main currency rivals throughout the day yesterday, as the announcement of a smaller than expected round of monetary easing in Japan boosted the JPY, while positive euro-zone news helped riskier currencies. The USD/JPY tumbled more than 80 pips during the early morning session to trade as low as 79.26 before an upward correction brought the pair to the 79.55 level later in the day. Against the Swiss franc, the dollar fell over 70 throughout the European session, eventually reaching the 0.9300 level.
Today, dollar traders will want to pay attention to news out of the US, particularly with regards to the aftermath of Hurricane Sandy and its impact on the US economy. The hurricane brought widespread destruction to the eastern United States. Any signs that the damage will be long-lasting may result in investors shifting their funds to safe-haven assets. Additionally, a batch of euro-zone news, specifically the CPI Flash Estimate and Unemployment Rate, could influence risk sentiment among investors. Worse than expected data may give safe-haven currencies like the dollar a boost.
EUR – Euro Benefits from Spanish, Italian News
The euro rallied against several of its main currency rivals during European trading yesterday, after a better than expected Spanish Flash GDP figure, combined with high demand at an Italian bond auction boosted risk taking among investors. The EUR/USD advanced more than 90 pips over the course of the day, eventually trading as high as 1.2982. Against the JPY, the euro was able to reverse losses it took during Asian trading and move up some 89 pips throughout the mid-day session. The EUR/JPY eventually traded as high as 103.30.
Today, euro traders will want to pay attention to several potentially significant economic indicators out of the EU. Specifically, the CPI Flash Estimate and Unemployment Rate, both scheduled to be announced at 10:00 GMT, are likely to give investors a good idea about the current state of the euro-zone economic recovery. Any better than expected data could result in additional risk taking, which may help the euro extend yesterday’s gains.
Gold – Gold Sees Gains Following Euro-Zone News
Gold was able to benefit from positive euro-zone news during the first part of the day yesterday, but eventually staged a minor downward correction due to Hurricane Sandy and the closure of US markets. The precious metal traded as high as $1714.97 during morning trading, up close to $7 an ounce, before dropping down to the $1710 level later in the day.
Turning to today, gold traders will want to pay attention to the results of several economic indicators out of the euro-zone and their impact on risk taking in the marketplace. Better than expected data could turn gold bullish. In addition, any developments with regards to Hurricane Sandy’s impact on the US economy could also influence whether investors place their funds with safe-haven or riskier assets.
Crude Oil – Oil Gains Limited Due to Hurricane Sandy
The price of crude oil saw moderate gains during morning trading after better than expected euro-zone news caused investors to shift their funds to riskier assets. That being said, the commodity’s bullish movement was limited due to Hurricane Sandy’s impact on US refining capabilities. After advancing close to $1 a barrel during mid-day trading, gold began moving downward, eventually stabilizing at the $85.90 level.
Today, in addition to any developments regarding Hurricane Sandy’s impact on the US’s refining capabilities, oil trades will also want to pay attention to the US Crude Oil Inventories figure at 14:30 GMT. A higher than forecasted inventories figure could result in the price of oil turning bearish during afternoon trading.
The Williams Percent Range on the weekly chart has crossed into overbought territory, indicating that a downward correction could take place in the coming days. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Traders may want to open short positions for this pair.
Most long-term technical indicators place this pair in neutral territory, making a definitive trend difficult to predict at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The Relative Strength Index on the daily chart is approaching the overbought zone, meaning that this pair could see a downward correction in the near future. Furthermore, the MACD/OsMA on the same chart appears close to forming a bearish cross. Traders will want to keep an eye on these indicators, as they may signal an impending downward correction.
The Slow Stochastic on the weekly chart has formed a bullish cross, signaling that this pair could see an upward correction in the coming days. Additionally, the Williams Percent Range on the same chart is currently in oversold territory. Opening long positions may be the smart choice for this pair.
The Wild Card
The daily chart’s Bollinger Bands are narrowing, indicating that this pair could see a price shift in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross, signaling that the price shift could be upward. This may be a good time for forex traders to open long positions ahead of a possible upward correction.
Written by Forexyard.com