Oil prices dropped sharply yesterday with the New York Mercantile Exchange session closing just below the $98 price mark. US oil stockpiles rose over 3 million barrels for the second week in a row, marking a significant uptick in American hoarding behavior. The possibility exists that this is a tactic to release excess stockpiles at the start of the American summer in order to push down on gas prices ahead of the driving season.
Forex Market Trends
USD – USD Rebounds as Euro Zone Struggles with Greek Debt
The US dollar rebounded strongly versus the euro yesterday as traders began to bail out of the region out of fear that euro zone policymakers would fail to meet the Greek debt crisis rapidly enough. The result has been for the EUR/USD to move strongly bearish, with 1.4200 well in reach. Against the pound, the greenback held close to 1.6340, though bullishness in Britain has generated pressure beneath the Cable in anticipation of an uptick.
Yesterday’s widening trade deficit in the United States initially appeared to support the US dollar by assisting in a shift to safe havens. But yesterday evening’s publication of the federal budget balance, which revealed a somewhat diminished deficit, had the effect of leveling the dollar off and caused many investors to evaluate the EUR instead. Such attention brought to light the weakness of Greece and the stark debt conditions which persist throughout the region and this has largely caused a flight to the safety of the greenback.
For today, US retail sales are on tap with an expectation to hold last month’s growth figures steady. The producer price index (PPI) and its complimentary core data are also scheduled for today, with inflation also forecast to hold its current rate of growth. The US dollar has gained from risk aversion, with its own economic fundamentals appearing soft, but today’s stable data may also support further bullishness on the USD.
EUR – EUR Takes Hit from Speculation on Greece Debt Woes
The euro was holding near a three-week low versus its primary currency counterpart (i.e. USD) yesterday morning, but as the day wore on the 17-nation common currency could bear the weight no longer. As speculators tore into the euro zone with a harsh reaction to the sluggish speed of officials’ handling of the debt woes, the EUR felt the sting and dropped to as low as $1.4210 in later trading hours.
The EUR was not able to hold its recently stable price against the US dollar as regional investors battled over the direction of the 17-nation common currency. Regional bears won the day as the rumor mill chewed on the speculative reports that Greece had already secured a new financial aid package, or that it was planning to exit the euro zone. With both staunchly refuted, traders rapidly moved to safety as the speed of assistance appears to be slow in coming.
As for today, the euro zone will be largely absent from the economic calendar aside from several smaller reports, predominant among them is the ECB’s Monthly Bulletin regarding interest rates. The industrial production figure scheduled for 10:00 GMT also carries the potential to reveal further stagnation in the industrial sector of the region’s collective economy. Such news will likely not be beneficial for the EUR, but any movement back into higher yielding assets could help the common currency find a modicum of support.
JPY – JPY Continues to See Mixed Results
The Japanese yen (JPY) has been trading with somewhat mixed results since Friday, with gains made against several currencies and losses elsewhere. After a week of ups and downs, the Japanese yen appears set to take losses today as investors appear to be seeking higher yields. The dominant stance of risk aversion overarching yesterday’s environment of optimism has many traders moving towards the yen against the higher yielding currencies like the euro, which dropped to a six-week low during yesterday’s afternoon sessions.
However, the yen was slightly lower versus the US dollar as the pair moved up from previous intervention levels near 80.00. The USD/JPY held steady at yesterday’s low, finding support near 80.30 and moving up towards 80.90 by today’s opening Asian sessions. Japan’s Current Account was published this morning and revealed a sharp downturn in data which may put some pressure on the island currency. Market news released out of the US and Europe today will likely be the driving force behind JPY values, though.
Crude Oil – Crude Oil Prices Drop as US Inventories Pile Up
Oil prices dropped sharply yesterday with the New York Mercantile Exchange session closing just below the $98 price mark. US oil stockpiles rose over 3 million barrels for the second week in a row, marking a significant uptick in American hoarding behavior. The possibility exists that this is a tactic to release excess stockpiles at the start of the American summer in order to push down on gas prices ahead of the driving season. Whether it will pay off is yet to be seen.
The value of the US dollar versus the euro in recent trading has pushed towards a three-week high near 1.4200, but oil prices continued to rebound until yesterday afternoon as traders price in an expected boost in consumption as the driving season kicks into high gear in the Northern Hemisphere. With yesterday’s sharp downtick during the later sessions, and this morning’s continuation of that movement, traders appear likely to see oil reaching a bit lower as this week comes to an end – though a return to riskier assets could lift oil prices one more time if the market deems it worthy.
The pair has recorded much bearish behavior over the past several days. However, the technical data indicates that this trend may reverse soon. For example, the 8-hour chart’s RSI signals that a bullish reversal is imminent. Going long with tight stops 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. Oscillators on the 4 hour chart are not providing a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The USD/JPY has gone bullish in the past 2 days, and currently stands at the 81.15 level. The daily chart’s Slow Stochastic indicates that the currency cross will rise further today. However, the 8-hour chart’s Stochastic Slow signals that a bearish reversal will take place. Entering the pair when the signs are clearer seems to be the wise choice.
The USD/CHF cross has seen bullish movement over the past 2 days. However, it seems that this trend may be coming to an end. The RSI on the daily chart shows the pair floating in the overbought region, indicating that a downward correction could happen in the near future. Going short with tight stops might be a wise choice.
The Wild Card
The Williams Percent Range on the 8-hour chart is in oversold territory. In addition, the daily chart’s Stochastic Slow has formed a bullish cross, indicating upward movement is likely to occur. Now may be a great time for forex traders to open up long positions before the upward breach occurs.
Written by Forexyard.com