Amid the central bank movements from the United States and Japan, the euro zone has been eerily silent regarding its currency valuation and interest rates. This week’s news events should help shed more light on what’s happening in the region, but the scale of reports may not be on par with what is taking place elsewhere. Today’s leading events will be from Britain, although the euro zone will be publishing a few reports on French consumer spending, prelim CPI, and the German consumer climate report from GfK.
Economic News
USD – USD Under Pressure from Quantitative Easing Speculation
A modest portion of the US dollar’s losses yesterday were offset this morning after the greenback rose slightly against most of its currency rivals. After declining against the euro to as low as 1.3425 in yesterday’s afternoon trading, the EUR/USD has risen back to 1.3465 in today’s Asian session. Against the British pound a similar gain has been seen; after the pair fell to 1.5800, it steadily climbed back to 1.5830 as of this morning.
The downturn in the US dollar appears to be considered part of a larger strategy by the Federal Reserve to weaken the currency through speculation incentive prior to undertaking another round of quantitative easing. The Fed has been talking of adjusting its monetary policies to combat an unstable currency.
So far the effect has been to weaken the USD against all of its currency counterparts. Should the Fed step in at this point, the impact may be milder than previously thought due to the recent pricing in of a downturn prior to any action being taken. There is a possibility that this wave of speculation may help stave off the adjustment for a few weeks longer.
Today’s news may be of a little help for the buck. The Conference Board (CB) is set to release its recent household survey of consumer confidence. This report has been floating between a reading of 50 and 60 for the past few months. Should today’s report remain within this range, we should see some mild upward movement for the dollar heading into late-day trading sessions.
EUR – EUR Dips on Profit-Taking; Long-Term Trend Remains Bullish
The euro remains bullish against most of its currency counterparts this week, despite a recent setback due to profit taking. The EUR/USD has been rising over the previous three weeks, setting a recent high just over 1.3500. However, the pair recently fell back to 1.3425 before resuming its upward movement. The EUR/GBP remains steady with only minor price fluctuations; it currently trades at 0.8505.
Amid the central bank movements from the United States and Japan, the euro zone has been eerily silent regarding its currency valuation and interest rates. This week’s news events should help shed more light on what’s happening in the region, but the scale of reports may not be on par with what is taking place elsewhere.
Today’s leading events will be from Britain, although the euro zone will be publishing a few reports on French consumer spending, prelim CPI, and the German consumer climate report from GfK. Should these reports come in line, or above expectations, the EUR could see additional bullishness, correcting its most recent downturn.
JPY – USD/JPY Continues Bearish Despite Talk of BOJ Intervention
The Japanese yen appears to be devaluing as planned against most of its currency rivals, except the US dollar. The EUR has advanced on the Japanese currency to currently trade at 113.40, while the British pound climbed to 133.36, up from 132.92. Somehow the greenback, on the other hand, has persisted in rising against the island currency. The USD/JPY fell from a recent high of 85.92 to currently trade at 84.18 over the past several days.
Two forces seem to be pulling both the USD and JPY into a bearish trading pattern. The Bank of Japan (BOJ) and Federal Reserve are both attempting to devalue their respective currencies through monetary intervention and quantitative easing, respectively. The push and pull between these two giants appears to be in favor of the dollar falling more than the yen. If tonight’s Tankan Manufacturing Index from Japan provides additional positive data for the Japanese economy, the yen may continue to outpace the greenback with a potential target price below 84.00.
Crude Oil – Crude Oil Targeting $80 a Barrel?
The price of Crude Oil continues to fluctuate between $71 and $78 a barrel, with a current price settling yesterday just under $77. Speculative reports about a decline in inventories have fueled a number of analyses to predict an impending rise in oil prices from a boost in consumption among the larger economies. The United States, Canada, and Japan all appear to be showing positive signs of industrial and manufacturing growth, adding support to oil demand.
On the other hand, a large number of economists seem to share the view that the fundamentals are still lacking for a boost in oil and gas prices. Regardless of a number of positive manufacturing reports, demand continues to appear stagnant. The range-trading price is a testimony to the fact that oil prices don’t seem to have much pressure in either direction, but the general trend is a gradually sloping bullish channel, with a near-term target around $80 a barrel.
Technical News
EUR/USD
The price has broken past the significant barrier around 1.3340 and appears to be targeting 1.3665, according to the Fibonacci retracement levels on the daily chart. However, the daily Stochastic (slow) appears to have a fresh bearish cross and the daily RSI shows the price as heavily over-bought. Both suggest strong downward pressure. Going short could be the wiser move today.
GBP/USD
The price of this pair appears to have recently entered the over-bought region on the daily chart’s RSI, suggesting an impending downward correction. The breach of the upper border on the daily chart’s Bollinger Bands, followed by a price flattening, also suggests that a downward correction may be imminent. Today’s preferred tactic may be to go short on this pair, but with tight stops.
USD/JPY
The RSI on the daily and weekly chart shows the price of this pair moving in an upward direction, counter to the actual movement of the pair. This suggests that a divergence is underway and the pair should correct into a bullish pattern in the near future. The impending bullish crosses on the daily Stochastic (slow) and MACD, as well as the weekly MACD, all support this notion. Going long may turn out to be a smart move today.
USD/CHF
There appears to be a fresh bullish cross on the daily and weekly chart’s Stochastic (slow) for this pair. This seems to suggest that a hefty amount of upward pressure is building under this pair. The price also appears to be floating in the over-sold region on the daily and weekly RSIs, which support the notion of a buildup in bullish pressure. Going long with tight stops appears to be preferable.
The Wild Card
Gold
The price of Gold has been climbing rapidly these past few weeks, but technical indicators unanimously agree that this precious metal is highly over-bought and over-prices at the moment. Recent bearish crosses on the daily and weekly Stochastic (slow) and MACD all suggest that there is downward pressure building atop this commodity. The price has also entered the over-bought region of the weekly chart’s RSI. Forex traders have a chance to enter a downward correction to a highly over-bought commodity by going short on this metal now, and at a great entry price.
Written by Forexyard.com