The euro extended its bullish momentum during the first part of the European session yesterday, after positive Italian news and better than expected US Unemployment Claims figure led to an increase in risk taking among investors. Meanwhile, the Japanese yen continued its downward trend amid signs that the new Japanese Prime Minister will move to initiate fresh monetary easing policies. Today, traders will want to continue monitoring developments in the ongoing US “fiscal cliff” negotiations. In addition, the US Pending Home Sales and Crude Oil Inventories figures can potentially create market volatility.
Forex Market Trends
USD – US News Once Again Set to Create Market Volatility Today
The safe-haven US dollar continued to fall against its higher-yielding currency rivals during the first part of the day yesterday, as positive economic news out of both the euro-zone and US led to an increase in investor risk taking. That being said, disappointing US consumer confidence and homes sale data limited losses. Against the Swiss franc, the greenback fell close to 40 pips during the first part of the day, eventually reaching as low as 0.9095, before bouncing back to 0.9120. The GBP/USD gained more than 60 pips to peak at 1.6202 before dropping back to the 1.6170 level.
Today, traders will want to pay attention to the US Pending Home Sales report, scheduled to be released at 15:00 GMT. The figure is forecasted to come in at -0.3%, a significant decrease from last month that may result in risk aversion in the marketplace, which could help the USD recover some of its recent losses. That being said, any positive developments in the “fiscal cliff” negotiations will likely boost riskier currencies like the euro and AUD against the greenback before markets close for the weekend.
EUR – Euro Sees Gains ahead of Italian Bond Auction
The euro was able to extend its upward momentum against both the US dollar and Japanese yen yesterday as expectations for a positive Italian bond auction today generated risk taking in the marketplace. The EUR/USD gained more than 50 pips during the European session to eventually trade as high as 1.3280. Against the JPY, the common-currency took advantage of speculations that the Bank of Japan will soon initiate new monetary easing policies. The EUR/JPY was able to climb to a fresh 16-month high at 114.30.
The main piece of euro-zone news today is likely to be the Italian 10-year bond auction. Analysts widely expect the auction to show growth in the Italian economy, which if true, is likely to generate investor risk taking, which could boost the euro before markets close for the weekend. In addition, any indication that US lawmakers are closer to reaching a budget deal is likely to lead to euro gains against the dollar.
Gold – Gold Takes Minor Losses amid Ongoing US Budget Negotiations
The price of gold fell close to $5 an ounce yesterday, as investors cautiously monitored developments in the ongoing US budget negotiations. While no announcements or developments in the negotiations were announced, analysts widely view the prospect of a deal as bearish for gold, as it would lessen the appeal for the safe-haven precious metal. By the end of European trading, gold was trading at $1655.
Today, traders will want to continue paying attention to the “fiscal cliff” negotiations, as they are likely to have the biggest influence on what direction gold takes. If the talks remain deadlocked, risk aversion may boost prices before markets close for the weekend.
Crude Oil – US Inventories Data Set to Impact Oil Today
Crude oil turned bearish during afternoon trading yesterday following worse than expected US consumer confidence and homes sales indicators. The news led to speculations that American demand for oil could drop, and resulted in prices dropping close to $0.70 a barrel to reach as low as $90.65.
Today, the main piece of news for oil traders is likely to be the US Crude Oil Inventories figure at 16:00 GMT. The indicator, which was rescheduled from Wednesday due to the Christmas holiday, is forecasted to come in at -1.6M, which would signal an increase in American demand. A lower than expected figure could help the commodity turn bullish during afternoon trading.
The Bollinger Bands on the weekly chart are beginning to narrow, indicating that a price shift could occur in the near future. Furthermore, the Williams Percent Range on the same chart has crossed over into overbought territory, signaling that the price shift could be bearish. Opening short positions may be the wise choice for this pair.
Most long-term technical indicators place this pair in neutral territory, which makes a definitive trend difficult to predict at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
The Slow Stochastic on the weekly chart has formed a bearish cross, indicating that this pair could see downward movement in the coming days. Furthermore, the Relative Strength Index on the same chart has crossed over into overbought territory. Going short may be the wise choice for this pair.
The weekly chart’s Williams Percent Range has dropped into oversold territory, signaling a possible upward correction for this pair in the coming days. This theory is supported by the MACD/OsMA on the daily chart, which appears close to forming a bullish cross. Opening long positions may be the wise choice for this pair.
The Wild Card
The Slow Stochastic on the daily chart has formed a bullish cross, indicating that an upward correction could occur in the near future. This theory is supported by the Williams Percent Range on the same chart which has dropped into oversold territory. Opening long positions may be the wise choice for forex traders today.
Written by Forexyard.com