EUR Corrects Itself Following German Debt Auction

The euro staged a downward reversal yesterday, following a German debt auction that caused investors to once again place their funds in safe-haven assets. Today, traders will want to pay attention as major market volatility is expected following news events from the UK, US and Canada.

Forex Market Trends

Daily Trend down down up up down up
Weekly Trend down up down up up down
Resistance 1.3074 1.5669 77.97 0.9470 1.0381 0.8419
1.3023 1.5590 77.65 0.9428 1.0267 0.8382
1.2966 1.5555 77.45 0.9384 1.0195 0.8359
Support 1.2911 1.5484 77.13 0.9333 1.0137 0.8323
1.2859 1.5440 76.73 0.9300 1.0079 0.8282
1.2840 1.5370 76.61 0.9248 1.0007 0.8264

Economic News

USD – USD Rebounds Following Return to Safe-Haven Assets

The US dollar had a very bullish day yesterday, following a less than enthusiastic German debt auction which sent investors back toward safe-haven assets like the USD and CHF. The dollar saw upward movement against many of its main currency rivals, particularly the euro and UK pound. The EUR/USD tumbled well below the psychologically significant 1.3000 level, while the GBP/USD fell under 1.5600 before staging a slight correction.

Turning to today, US and euro-zone news are forecasted to generate major volatility, so traders should be prepared for heavy market movement. Most notably, the ADP Non-Farm Employment Change is likely to influence USD pairs. The ADP report is a precursor to Friday’s Non-Farm Employment Change figure. While it is not considered as serious as Friday’s report, it has been known to generate major price shifts.

Analysts are forecasting the ADP figure to come in at around 176K, which if true, would signal significant job growth for the month of December in the US. Should the ADP figure come in at 176K, it may boost investor confidence in the US economic recovery and signal a return to riskier assets. The USD would likely fall as a result. On the other hand, if tomorrow’s news comes in under analyst predictions, investors may decide that the economic recovery is not happening as quickly as possible, and revert back to the safe-haven dollar.

EUR – German Debt Auction Leads to Bearish Euro

Yesterday’s German debt auction caused the euro to slide throughout the day, particularly against the USD. The EUR/USD once again fell below the 1.3000 level, in a clear sign that investor’s lack confidence in the euro-zone economic recovery. The euro also recorded a bearish day against the UK pound. The EUR/GBP fell throughout the day following a better than expected British construction PMI.

Turning to today, in addition to the ADP Non-Farm Employment Change, euro traders will want to keep their eyes on the UK Services PMI. Analysts are predicting a solid PMI figure, which if true, may cause the euro to slide even further against the pound. Also, traders should pay attention to any news coming out of the euro-zone relating to the current debt crisis. Any further negative news will likely lead to further bearish movement for the single currency.

JPY – Safe-Haven JPY Records Gains Wednesday

The Japanese yen saw a very bullish day Wednesday, especially against riskier currencies like the euro. At the same time, confidence in the US economic recovery led to slight increases for the USD/JPY.

The yen is likely to maintain its bullish trend against the euro as long as negative news regarding the euro-zone debt crisis stays in the headlines. That being said, traders should note that a positive ADP Non-Farm Payroll figure today may help boost riskier currencies like the euro against the JPY.

Additionally, Friday’s US Non-Farm Payrolls report is likely to create a lot of volatility for yen pairs. A positive figure may boost risk taking which could cause the JPY to close the week in a downward trend.

Crude Oil – Crude Maintains Upward Momentum

Crude oil maintained its upward momentum yesterday, despite some slight downward movement during mid-day trading. Oil was able to stay above the $102 a barrel level as tensions between Iran and the US stayed high. Investors are worried about crude oil supplies out the Middle East should the current situation between the US and Iran maintain.

Today, oil could see further price shifts depending on how the ADP Non-Farm Payrolls figure comes in. A positive number may increase risk appetite, which typically causes commodities like oil to rise. At the same time, a less positive number may cause investors to revert back to safe-havens which could cause oil to fall.

Technical News

Technical indicators are showing that the pair may see an upward correction this week. The Relative Strength Index on the weekly chart has entered the oversold region, while the Stochastic Slow on the same chart has formed a bullish trend. Taking a bullish long term trend may be a wise choice.
Most long term indicators show this pair trading in neutral territory, meaning that major market movements are not expected this week. That being said, the Williams Percent Range on the weekly chart is creeping toward the oversold region. Should the indicator fall below the -90 level, it may be a sign for traders to go long in their positions.
Following the bearish trend late last week, technical indicators are showing that the USD/JPY may be due for an upward correction this week. Daily chart indicators, like the Relative Strength Index and Stochastic Slow, are showing the pair in the oversold region. Going long this week may be a wise strategy for the pair.
Following the slight upward movement the USD/CHF experienced last week, technical indicators are showing that the pair may turn bearish in the coming days. The Williams Percent Range on the daily chart is creeping toward the -20 level. Should it go above this level, it may be a sign that the pair will stage a downward correction. Traders will want to keep an eye on the daily and weekly chart for further signs of bearish movement.

The Wild Card

Technical indicators are showing that silver may fall during the trading day today. The Stochastic Slow on the 8-hour chart has formed a cross above the upper resistance line, meaning that bearish movement could occur. Furthermore, the Williams Percent Range on the daily chart has entered overbought territory. Forex traders may want to go short in their positions today.

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