Gold Continues to Rise on Concerns over Euro-Zone Instability and Chinese Growth

Continuing market uncertainty and Euro declines helped support Gold prices as investors turn to the metal as an alternative safe haven investment. Gold levels were further supported by positive economic data from the U.S on the one hand and manufacturing concerns from China on the other. Chinese growth concerns are adding to the uncertainty regarding the global economic recovery, pushing investors to the metal as an alternative investment.

Economic News

USD – USD Remains Strong as Euro-Zone Uncertainty Persists

The Dollar advanced slightly against most of its rivals Tuesday, supported by solid U.S. economic data and while concerns over the Euro-zone sovereign debt crisis persist. The Institute for Supply Management report Tuesday came in at 59.7, from 60.4 in April. The result was better than the 58.7 expected by economists. A reading over 50 indicates growth.
The Dollar is currently at 91.63 Yen from 91.18 last night. The EUR/USD pair is currently trading around $1.2250, after dropping to a 4 year low of $1.2110 in European trading Tuesday.
The Bank of Canada raised its key interest rate from a record low yesterday, the first Group of Seven central bank to do so since July 2008. However, the Canadian Dollar fell following the news, as the bank indicated in the accompanying statement that caution is needed with any future rate increases. Late Tuesday, the U.S. Dollar was stronger, at C$1.0541 from C$1.0433 late Monday.

EUR – EUR Recovers from a 4 year Low

The EUR dropped to a 4 year low Tuesday on concerns that the Euro-Zone debt crisis could affect the global economic recovery. The EUR later recovered after the release of better than expected U.S economic data though the common currency still ended lower against the Dollar.
Late Tuesday, the EUR was at $1.2236 from $1.2304 late Monday; it dropped overnight as low as $1.2110, its lowest level since April 2006. The EUR is at 112.33 Yen. The U.K. Pound rose to $1.4730. The U.K Pound rose against the Dollar on development reports from Prudential PLC’s planned $35.5 billion takeover of AIG’s largest Asian life-insurance.

JPY – JPY Declines as Prime Minister Resigns

The Yen fell against all of its major counterparts in Asian trading today after Prime Minister Yukio Hatoyama announced his resignation. The political uncertainty reduced the Yen’s safe heaven appeal. Meanwhile, The New Zealand Dollar gained on expectations its central bank will increase the benchmark rate from a record low this month.
The Yen slid to 91.60 per Dollar from 90.94 yesterday in New York. The Japanese currency fell to 112.25 per EUR from 111.22 yesterday. The kiwi rose 0.4 % to 67.94 U.S. cents. The Australian Dollar rose to 83.73 U.S. cents after falling in early trading Tuesday as the central bank kept interest rates unchanged.

Crude Oil – Crude Falls on Concerns Regarding Global Economic Recovery

Crude Oil Dropped after a volatile session Tuesday on concerns that the global economic recovery may be stalling. Oil declined as China’s purchasing manager’s index, a leading indicator for the country’s manufacturing sector, fell to 53.9 in May from 55.7 in April. China’s factories account for a large portion of world-wide demand for energy and other commodities.
Light, sweet crude for July delivery on the New York Mercantile Exchange fell $1.39, or 1.9%, to settle at $72.58 a barrel.

Technical News

The EUR/USD has gone increasingly bearish in the past month, and currently stands at the 1.2210 level. The 4-hour chart’s Slow Stochastic indicates this currency cross may fall further today. However, the weekly chart’s RSI signals that a bullish reversal may take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
The GBP/USD cross experienced a bullish trend yesterday. However, it seems that this trend may be coming to an end. The RSI on the 4-hour chart shows the pair floating in the overbought territory, indicating that a downward correction could happen soon. Going short with tight stops might be a wise choice.
The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a bullish cross forming on the daily chart’s Slow Stochastic, indicating a bearish correction might take place in the nearest future. Going short might be a wise choice.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic is providing us with mixed signals. All oscillators on the 4- hour chart are also not giving us a clear indication. Waiting for a clearer sign on the hourly charts might be a good strategy today.

The Wild Card

This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the daily chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex Forex traders have the opportunity to wait for the downward breach on the hourly chart and go short in order to ride out the impending wave.

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