Greenback Slips After Posting Its Largest 1 Day Gain

The currency market is focusing on U.S. short-term Interest Rates as talk of a rate increase by the Federal Reserve has emerged. Dealers said that market participants will focus on a slew of Treasuries auctions this week. If longer-term Treasury yields rise on supply worries, this could weigh on the U.S dollar. and that might be difficult for the USD to climb further only on U.S. positive jobs data.

Economic News

USD – USD Reversal in the Works – Will it Hold?

Last Friday’s surprising Non-Farm Employment Change report helped to generate a fantastic reversal for USD pairs and crosses. Regaining much of what it had lost in the previous 2 weeks, the greenback rallied Friday and breached a number of significant support and resistance levels. The EUR/USD traded over 1.4200 by mid-day Friday, yet currently trades under 1.4000. The GBP/USD temporarily spiked above 1.6200 only to fall back towards 1.5950 by today’s early trading session. These currency pairs only demonstrate a small sampling of the movement which the Dollar witnessed in late-afternoon trading on Friday.

Perusing through today’s market movements it seems as though last Friday’s employment reports will continue to drive market optimism in the US economy. Therefore, traders can expect USD pairs and crosses to continue their reversal, or level-off at the very least. So far, in today’s early trading hours, the greenback has appeared to stabilize and float in neutral territory against most of its currency counterparts. With hardly any news coming from the United States, this isn’t likely to change today.

Looking ahead this week, there isn’t much economic news expected which will impact the Dollar like last week’s data releases. Traders will likely see a continuation of recent trends primarily due to the lack of economically impacting data from world markets. Significant to bear in mind, however, is the upcoming G8 summit this coming weekend. While it is not an official regulating body, it is an official meeting between finance chiefs and central bankers at the highest levels who will meet to discuss recent issues facing the global economic community. As a result, it may carry an impact on the future movement of the major world currencies; like the USD.

EUR – EUR Strength a Myth?

After climbing to its highest level in 2009 against the USD, the EUR now appears to be losing steam. Last week’s jobs data from the US has put a damper on EUR gains. Climbing as high as 1.4330 against the Dollar, and 0.8867 against the GBP last week, the EUR is now trading at 1.3985 and 0.8773, respectively, marking a considerable loss in value in just a short time period.

As many analysts are anticipating traders to jump on the band-wagon of USD-buying this week, the EUR will likely continue to see bearish results against many of its rivals. Once it had reached the key resistance level of 1.4300 against the Dollar, economists began to state that the EUR will now face a sell-off period from the failure increased risk appetite to generate the demand for the EUR needed to sustain its recent bullish movement. They now claim that the EUR is going to witness a bearish run against most currency counterparts before continuing its climb.

Looking at today we can clearly see that the EUR has very little economic news which will impact the market. Generally speaking, this means that the EUR’s downtrends will likely continue throughout the day. This is also true of the remainder of the week as well. With few pieces of meaningful economic data expected to be released, the EUR will not likely regain the strength seen last week for some time.

JPY – Yen a Primary Currency to Watch this Week

Last week’s jobs data from the United States has helped generate a confident push in the value of the USD and the JPY felt the sting of this rush just as every other currency. Trading as high as 96.50 against the greenback during early trading sessions last Friday, the USD/JPY currently stands near 98.50 in today’s early morning hours. The strength in the US market has helped rally the appeal of the American safe-haven and taken more funds away from the carry-trade safe haven of the Japanese Yen.

With an inordinate amount of economic news expected from Japan this week, we could see a sharp increase in trading volatility for this specific currency. As figures such as the M2 money supply, Japanese Final GDP, and core machinery orders are published this week, traders will get a healthy look at the state of the island economy. No doubt the Japanese Yen will be one of the currencies to watch this week!

Crude Oil – Crude Oil Prices Falling back towards $65 a Barrel

Last week’s spike towards $70 a barrel for the price of Crude Oil may have indeed been a fluke. As the USD strengthens on positive economic data, the value of Crude Oil has begun to decline as a result. A number of analysts have cautioned that this recent spike in price may be similar to the spike in mid-2008 which played a role in the economic crash which ensued. If oil prices are not brought under control, the impact on the global energy market could severely impede the progress of economic recovery.

Driving the price of Crude Oil this week is the value of the US Dollar. Most signals indicate that the greenback is forecast to continue its bullish trends this week which indicates that Crude Oil will likely continue its decline in the days ahead. Short of any significant breaking news which revalues the USD, it is safe to say that these trends are relatively more predictable and stable this week as compared to other weeks. We may have a healthy price target of $65 a barrel in the short-term.

Technical News

The bearish trend continues with plenty of steam. On the daily chart the bearish momentum is still intact as the pair now floats in the middle of it. The hourly chart also support that notion; however the RSI implies that in the near future the ongoing bearish correction might run out of steam. Traders are advised to take advantage of the pair’s bears.
The pair is in the midst of a very strong bearish move, as it dropped almost 200 pips for the past couple of days. As of now, the Bollinger Bands on the 1 hour chart are tightening, indicating that a violent move is quite impending, and a bearish cross on the 4-hour chart’s Slow Stochastic is taking place, suggesting that bearish move might extend further.
The pair is still range-trading without making a significant breach, and was last traded around the 98.30 level. However, a bearish cross on the 4 hour chart’s Slow Stochastic suggests that a bearish momentum is building up. Going short with tight stops seems to be the right strategy today.
This pair is in the midst of a downtrend; however, it appears that it is slowly leveling out. The hourlies are showing mixed signals. The 4-hour chart’s RSI is showing that bullish correction is imminent. Traders are advised to wait for a clearer signal on the hourlies before entering the market.

The Wild Card

Crude Oil prices rose significantly in the last week and peaked at $69.19 a barrel. However, 4 hour chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

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