The euro turned bearish against several of its main currency rivals yesterday, despite the announcement that an agreement between euro-zone finance ministers to provide Greece with a new round of bailout funds had been reached. Crude oil also took losses during mid-day trading, amid fears that demand in the US is falling. Today, the main piece of economic news is likely to be the US New Home Sales figure, set to be released at 15:00. In addition, traders will want to pay attention to any developments regarding the ongoing US “fiscal cliff” negotiations.
Forex Market Trends
USD – Durable Goods Orders Data Leads to Dollar Gains
The US dollar turned moderately bullish against several of its main currency rivals during afternoon trading yesterday, following the release of a better than expected Core Durable Goods Orders figure. Against the Japanese yen, the greenback, which had fallen close to 30 pips during early morning trading, was able to gain close to 20 pips following the news to trade as high as 82.20. The USD/CHF advanced close to 40 pips during the European session, eventually trading as high as 0.9309 before a slight correction brought the pair to 0.9300.
Today, the US New Home Sales figure could generate some activity in the marketplace when it is released at 15:00 GMT. If the figure comes in above the forecasted 387K, the dollar may see additional gains against the yen and franc. Additionally, dollar traders will want to pay attention to any developments in the ongoing budget negotiations between US Congressional leaders. A final deal needs to be reached in the very near future before massive tax increases and spending cuts threaten to plunge the US back into recession. Progress in negotiations may result in dollar gains.
EUR – Greek Bailout Deal Does Little to Help Euro
The euro took losses against its safe-haven currency rivals during the European session yesterday, despite the approval of a deal to provide Greece with a new round of bailout funds. Analysts warned that while the news was positive overall for the euro-zone, disappointing economic indicators from throughout the region continued to weigh down on the common currency. The EUR/JPY fell more than 60 pips during the first part of the day, eventually trading as low as 106.11. The EUR/USD dropped some 65 pips to trade as low as 1.2920.
Today, traders should be warned that while yesterday’s bailout agreement provided a temporary solution to Greece’s debt problems, ongoing fears that the euro-zone could still slip deeper into recession may lead to additional losses for the EUR. Any signs that the economic situation in the EU is worsening are likely to weigh down on the currency. Furthermore, if US home sales data today comes in above expectations, the dollar may continue gaining on the euro.
Gold – Gold Takes Slight Losses amid EU Worries
The price of gold took slight losses throughout European trading yesterday, as concerns regarding the EU economic recovery caused investors to shift their funds to safe-haven assets. The precious metal fell as low as $1742 during afternoon trading, down more than $5 an ounce.
Today, gold traders will want to pay attention to news out of the US. Specifically, negotiations between Congressional leaders regarding the upcoming “fiscal cliff” could lead to volatility in the marketplace. Any indication that a deal is closer to being reached to avoid automatic spending cuts and tax increases could help gold recoup some of yesterday’s losses.
Crude Oil – Signs of Weakened US Demand Causes Oil Prices to Drop
The price of crude oil fell more than $0.70 a barrel during the European session yesterday, amid signs that demand in the US is weakening. As the world’s leading consuming country, demand for oil in the US tends to have a significant overall impact on prices. By the beginning of evening trading yesterday, the commodity had dropped as low as $87.10.
Today, oil traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 15:30 GMT. Analysts are forecasting that US inventories increased by around 400,000 barrels last week, which if true, would be a sign that demand has gone down and could result in additional bearish movement for crude.
The Stochastic Slow on the daily chart is forming a bearish cross, indicating that a downward correction could occur in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory. Opening short positions may be a wise choice for this pair.
The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross, indicating that the price shift could be bearish. Opening short positions may be the smart choice for this pair.
The Relative Strength Index on the weekly chart is approaching the overbought zone, signaling that this pair could see a downward correction in the coming days. This theory is supported by the same chart’s Williams Percent Range, which has crossed above the -20 line. Going short may be the wise choice for this pair.
While the weekly chart’s Williams Percent Range has crossed into the oversold 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 Wild Card
The daily chart’s Bollinger Bands are narrowing, indicating that a price shift could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross, indicating that the price shift could be downward. This may be a good time for forex traders to open short positions ahead of possible downward movement.
Written by Forexyard.com