US News Forecasted to Generate Volatility Today

Following a hectic trading day yesterday, which eventually saw the euro tumble against its main currency rivals, traders can once again expect market volatility today. Significant news out of the US, including a speech from the Fed Chairman and the weekly Unemployment Claims figure are both expected to show growth in the US economy. If true, the USD may be able to extend its recent bullish trend as we begin to close out the week.

Forex Market Trends

Daily Trend down down up up down down
Weekly Trend down up down up up down
Resistance 1.3882 1.5982 81.66 0.9134 1.0826 0.8485
1.3417 1.5913 81.20 0.9087 1.0781 0.8443
1.3377 1.5866 80.91 0.9058 1.0753 0.8416
Support 1.3313 1.5789 80.45 0.9011 1.0707 0.8374
1.3273 1.5743 80.17 0.8982 1.0679 0.8348
1.3208 1.5667 79.70 0.8935 1.0634 0.8306

Economic News

USD – Positive US Indicators Boost Greenback

A better than expected Prelim GDP figure led to major gains for the dollar during the evening session yesterday. The news brought the EUR/USD to the 1.3400 level, while the USD/JPY shot up to 80.70. Additionally, positive comments from Fed Chairman Bernanke regarding the pace of the US economic recovery helped boost investor confidence and led to USD gains. At the same time, in a sign that the US economy is still in a fragile position, Bernanke has maintained his pledge to keep interest rates at their current levels through 2014.

Turning to today, traders will want to pay attention to another batch of US news that is forecasted to generate significant volatility. The weekly Unemployment Claims has the potential to lead to further dollar gains if the figure shows additional improvements in the US labor sector. Additionally, the ISM Manufacturing PMI, scheduled to be released at 15:00, is expected to show gains over last month. If true, the dollar could extend its bullish trend.

EUR – Euro Dips Following ECB Refinancing

The EUR fell against many of its main currency rivals yesterday, following the European Central Bank’s latest refinancing operation which injected 530 billion euro’s in low cost loans to euro-zone banks. While the move did generate some risk-taking, the common-currency failed to make any gains, as investors remain worried about the euro-zone debt crisis. The EUR/USD dropped to the 1.3400 level during the European session, before staging a mild upward correction. Against the Japanese yen, the euro fell close to 90 pips, hitting 107.85 before staging a reversal.

As we begin to close out the week, analysts are warning that while the ECB’s recent actions may boost euro-zone economies in the short term, the potential for further issues related to the debt crisis still exist. Countries in the region with weaker economies, such as Portugal and Spain, still risk credit downgrades or even default.

Turning to today, euro traders will want to pay attention to a batch of US data that has the potential to inject additional volatility into the marketplace. The weekly Unemployment Claims figure, along with a speech from the Fed Chairman and the ISM Manufacturing PMI are all forecasted to generate significant market activity. Should any of the news boost confidence in the US economic recovery, the euro may take further losses against the greenback.

AUD – Risk Taking Leads to Aussie Gains

The Australian dollar saw gains across the board yesterday, following euro-zone news that generated risk taking in the marketplace. The AUD/USD shot up to 1.0854, a 7-month high, while the EUR/AUD dropped as low as 1.2386 before staging a mild upward correction during the afternoon session. Against the safe-haven JPY, the aussie continued its upward momentum yesterday, reaching as high as 87.34.

Turning to today, traders will want to pay attention to a batch of US news, as it is likely to dictate the level of risk appetite in the marketplace. Traders will want to pay particular attention to the US Unemployment Claims figure. The employment situation in the US has improved steadily in recent weeks. Any additional drop in the number of people who filed for unemployment insurance last week could lead to additional risk taking in the market, which could benefit the AUD.

Crude Oil – Crude Oil Maintains Bearish Movement

Despite the gains crude oil saw yesterday following positive euro-zone news, the commodity turned bearish once again during the afternoon session. Signs of decreased demand in the US, along with fears that the high price of oil has negatively impacted the global economy, have caused the price of crude to drop for several days.

Turning to today, traders will want to monitor US news for clues as to the level of risk appetite in the marketplace. Positive news could lead to additional risk taking and boost the price of oil. Additionally, any escalation in the ongoing conflict over Iran’s nuclear program could lead to a spike in prices.

Technical News

The daily chart’s Slow Stochastic has formed a bearish cross, indicating that downward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has moved into overbought territory. Going short may be the wise choice.
The Williams Percent Rang on the daily chart is currently at -10 and angling downward, indicating that bearish movement could occur in the near future. The Slow Stochastic on the same chart appears to be forming a bearish cross. Traders will want to keep an eye on this indicator. If a cross forms, downward movement may occur.
Most long term technical indicators are showing this pair trading in neutral territory, meaning that no significant movements are forecasted at this time. Traders will want to keep an eye on the weekly chart’s Relative Strength Index, as it is currently close to the overbought zone. If it crosses into overbought territory, it may be a sign of impending downward movement.
The weekly chart’s Slow Stochastic has formed a bullish cross, indicating that upward movement could occur in the coming days. Furthermore, the Relative Strength Index on the daily chart has crossed into oversold territory. Going long may be a wise choice for this pair.

The Wild Card

The daily chart’s Relative Strength Index has crossed into overbought territory, indicating that downward movement could occur in the near future. The 8-hour chart’s Williams Percent Range is currently at -20, further supporting the theory that a bearish correction could occur. Forex traders may want to go short in their positions today.

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