Positive Chinese manufacturing data, along with signs that Greece was closer to receiving a new round of bailout funds, encouraged investors to shift their funds to higher-yielding assets yesterday which boosted the euro against several of its main currency rivals. Today, traders will want to pay attention to the Spanish Unemployment Change figure as well as any developments in the ongoing budget negotiations between US Congressional leaders. Progress in the negotiations is likely to lead to additional risk taking, which could help the euro extend its recent gains.
Forex Market Trends
USD – Dollar Falls vs. Riskier Currency Rivals
The US dollar started the week off on a bearish note against its riskier currency rivals yesterday, as several positive global economic indicators led to risk taking in the marketplace. The Australian dollar gained close to 50 pips against the greenback, eventually reaching as high as 1.0445, before a minor downward correction brought the Aussie to the 1.0430 level toward the end of European trading. The USD had slightly better luck vs. the Japanese yen. The USD/JPY was able to advance close to 40 pips during the mid-day session to trade as high as 82.36.
Turning to today, the ongoing “”fiscal cliff” talks between US Congressional leaders may lead to volatility for the dollar. The talks are meant to resolve a budget dispute in order to avoid a set of automatic tax increases and budget cuts that threaten to send the US back into recession. Any progress in the talks may encourage investor risk taking, which could result in the safe-haven dollar taking additional losses against currencies like the euro and AUD.
EUR – Euro Bullish to Start Week
Positive Chinese data combined with signs that Greece is closer to receiving a new round of bailout funds helped the euro against several of its main currency rivals yesterday. Against the Australian dollar, the common-currency advanced close to 70 pips during overnight trading to reach as high as 1.2527. A slight downward correction during the European session brought the EUR to the 1.2500 level. The EUR/USD hit a six-week high at 1.3073 during mid-day trading before staging a bearish reversal and falling to the 1.3040 level.
Today, the Spanish Unemployment Change figure, set to be released at 8:00 GMT, may lead to volatility in the marketplace. Any signs of improvements in the Spanish economy could lead to additional euro gains. In addition, traders will not want to forget to monitor a Spanish bond auction tomorrow and the euro-zone Minimum Bid Rate and ECB Press Conference on Thursday. The indicators will likely illustrate the current state of the euro-zone economic recovery, with positive news set to benefit the euro.
Gold – Gold Trades Flat as Investors Wait for “Fiscal Cliff” News
The price of gold saw minor fluctuations throughout the European session yesterday, as investors remained hesitant to open significant positions before more information is known about negotiations to avoid the upcoming US “fiscal cliff”. After falling slightly more than $6 an ounce during the mid-day session, the precious metal was able to largely recover its losses and spent most of the day trading around the $1719 level.
Today, traders will want to note that any progress in the budget talks between US Congressional leaders may encourage risk taking, which could result in gold turning bullish. Later in the week, the US Non-Farm Employment Change figure is virtually guaranteed to generate volatility for gold, with a better than expected result likely to boost prices.
Crude Oil – Crude Oil Benefits from Chinese Data
A better than expected Chinese manufacturing PMI yesterday led to speculations that the global demand for oil will increase and resulted in the price of crude shooting up close to $1.65 a barrel during European trading. After peaking at $90.30 during mid-day trading, the commodity began falling again to reach as low as $89.55 during the afternoon session.
Today, oil traders will want to pay attention to news out of the US regarding the ongoing “fiscal cliff” negotiations. Any indication that the budget talks between Congressional leaders are closer to being resolved may result in investor risk taking, which could help oil see additional gains.
The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that downward movement could occur in the near future. Additionally, a bearish cross has formed on the daily chart’s Slow Stochastic. Going short may be the wise choice for this pair.
The Bollinger Bands on the weekly chart are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart is close to forming a bearish cross. Opening short positions may be the wise choice for this pair.
The Slow Stochastic on the weekly chart appears to be 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 over into overbought territory. Opening short positions may be the wise choice for this pair.
While the Williams Percent Range on the weekly chart is in oversold territory, most other long-term technical indicators show this pair range trading. Taking a wait and see approach may be the best option here as a clearer trend is likely to present itself in the near future.
The Wild Card
The daily chart’s Relative Strength Index is approaching the oversold zone, indicating that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart is forming a bullish cross. This may be a great time for forex traders to open long positions ahead of possible upward movement.
Written by Forexyard.com