U.S. Consumer Confidence to Set the Level for the USD Today

Today, traders should pay close attention to the release of the U.S. Consumer Confidence report. This indicator always leads to extreme market volatility for the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 14:00 GMT.

Economic News

USD – USD Rises against EUR on Sign of Strengthening Economic Recovery

The dollar rose broadly against the EUR but remained steady against its other rivals Monday morning, as news out of the Group of 20 gave investors little incentive to stake bold positions. By yesterday’s close, the USD rose against the EUR, pushing the oft- traded currency pair to 1.2280. The dollar experienced similar behavior against the AUD, with the pair closing at 0.8715. The USD did see bearishness as well, as it lost over 150 pips against the CHF and closed at 133.45.

Over the weekend, officials at the summit of G-20 nations in Toronto said they would jointly commit to at least halving fiscal deficits by 2013 and to stabilizing ratios of debt to gross domestic product by 2016.

A leading indicator released yesterday was the U.S. Personal Spending report. Consumer spending in the U.S. rose in May at a higher then forecasted rate, a sign households are gaining confidence in the recovery and the job market. Purchases rose 0.2% after little change last month. Incomes climbed 0.4% and the savings rate increased to its highest level in eight months.

Looking ahead to today, the news event that will likely have the biggest impact on the Dollar and its main currency pairs is the Consumer Confidence report, set to be released at 14:00 GMT. This report is considered very significant, and is likely to create dollar volatility. Traders should pay close attention to the market as there will likely be an opportunity to capitalize on the fluctuations which are likely to follow this release.

EUR – EUR Weakens to a 1 1/2-Year against the Pound

The EUR fell against most of its major currencies yesterday, pressured by bank funding concerns and caution ahead of more European debt sales this week. The Swiss franc rallied after a monetary official said the currency’s strength was not harming the Swiss economy. As a result, the EUR fell more than 1% to a record low of 1.3323 against CHF. Against sterling, the EUR hit a 1 1/2-year low and last traded down 1.1% at 81.30 pence.

The Swiss franc was the biggest mover amongst the majors yesterday, propelled higher by comments from a Swiss central bank member. The Swiss currency has been soaring of late, particularly since late June when the Swiss National Bank terminated its program of euro buying to limit the franc’s appreciation. Unless the central bank sees fresh signs that the franc’s ascent is generating deflation by making imports cheaper, it appears set to stand back and leave the currency to the whim of market forces.

JPY – Yen Sees Mix Results against the Majors

The Yen completed yesterday’s trading session with mixed results versus the other major currencies. The JPY was virtually unchanged versus the USD yesterday, and closed its trading session at around the 89.40 level. The JPY also saw bullishness against the EUR as it jumped around 100 points to close at 109.70.

As for today, Japan will be absent from the economic calendar. The JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and CHF are expected to continue a volatile trading session today, and their crosses with the JPY will likely be as well. Traders should pay attention to the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today. Focus should be especially given to the U.S. Consumer Confidence report at 14:00 GMT.

Crude Oil – Oil Falls below $78.50

The price of crude oil fell on Monday on forecasts that tropical storm Alex will bypass the Gulf of Mexico’s main oil producing region and BP’s oil spill. The oil price had reached a seven-week high of $79.40 on earlier reports that Alex will become a hurricane in the next 48 hours.

The price was also dampened down by expectations that data due this week will show US consumer confidence waned and manufacturing growth slowed this month.

Moreover, a drop in the EUR against the dollar also has made oil a less appealing investment overseas. Crude is priced in dollars, so oil becomes more expensive for holders of other currencies when the dollar goes up. Analysts are concerned that the European debt crisis could slow down euro-zone economies and drag down demand for oil.

Technical News

A cross on the 4-hour chart’s Stochastic Slow indicates that an upward correction may occur for the pair later today. This theory is supported by the Relative Strength Index on the hourly chart. Traders are advised to go long today, as upward movement is likely.
The daily chart’s Slow Stochastic shows a cross forming above the upper resistance line, indicating downward movement could occur. We can also see that the Relative Strength Index on the 8-hour chart is giving signs that a bullish correction will likely occur today. Traders are advised to go short with tight stops today.
There are numerous signs that this pair is well into oversold territory at the moment. These include the Bollinger Bands and Relative Strength Index on the daily chart, as well as the Relative Strength Index on the 8-hour chart, which are all showing signs that upward movement is imminent. Traders are advised to go long with tight stops today.
The Slow Stochastic on the daily chart shows a cross forming below the lower support line, indicating a bullish correction will likely occur today. This theory is supported by the Relative Strength Index on the 8-hour chart, which shows the pair in oversold territory. Traders are advised to go long today.

The Wild Card

Nasdaq 100
The Relative Strength Index on the 8-hour chart indicates that the Nasdaq is trading well in oversold territory. This is typically a sign that an upward correction will occur during the course of the day. This theory is supported by the Stochastic Slow on the daily chart. CFD traders are advised to long with tight stops today.

Written by Forexyard.com