The US dollar largely maintained its recent gains against the euro throughout yesterday’s trading session, as a batch of positive US data continued to boost confidence in the American economic recovery. The EUR/USD spent much of the day trading around the 1.3050 level, after dropping as low as 1.3002 during Asian trading. As we begin to close out the week, traders will want to pay attention to two US indicators set to be released today. The Core CPI, set to be released at 12:30 GMT, and the Prelim UoM Consumer Sentiment figure, scheduled for 13:55 GMT, are both considered valid indicators of economic health and could help the dollar extend its gains.
Forex Market Trends
USD – USD Retreats Slightly vs. Yen
After breaking the psychologically significant 84.00 level during Asian trading yesterday, the USD/JPY retreated during much of the European session. The pair fell some 80 pips before stabilizing around the 83.30 level. The EUR/USD spent most of the day trading around the 1.3050 level, after dropping as low as 1.3002 during early morning trading. Despite the relatively small losses taken by the greenback yesterday, market sentiment is still overwhelmingly bullish for the dollar. Positive US indicators, including yesterday’s weekly Unemployment Claims figure, continue to boost confidence in the American economic recovery.
As we close out the week, traders will want to pay attention to several US economic indicators. The Core CPI figure, set to be released at 12:30 GMT, is considered a valid indicator of inflation and has the potential to create dollar volatility. Later in the day, dollar pairs could also see some movement following the release of the Prelim UoM Consumer Sentiment. Analysts are forecasting the indicator rose to 75.8, following last month’s figure of 75.3. If true, the dollar could see additional gains before markets close for the weekend.
EUR – Euro Falls vs. CHF Following SNB Statement
The euro tumbled vs. the CHF during European trading yesterday, following the Swiss National Bank’s (SNB) Monetary Policy Assessment. The assessment stated that the SNB would actively work to make sure the EUR/CHF does not trade below the 1.20 level. As a result, the EUR/CHF dropped some 65 pips, reaching as low as 1.2073 during European trading. The euro also had a bearish day vs. the Japanese yen. The EUR/JPY was down over 100 pips, reaching as low as 108.56, before bouncing back to the 109.00 level.
Turning to today, euro traders will want to keep an eye on several US indicators which have the potential to bring the EUR/USD down. The pair came dangerously close to dropping below the psychologically significant 1.3000 level yesterday, before bouncing back to the 1.3500 level. Should any of the US news today come in above expectations, investor confidence in the US economic recovery may continue to go up, which could turn the EUR/USD bearish once again.
JPY – JPY Sees Gains against EUR and USD
After several days of continuous bearishness, the Japanese yen was able to recoup some of its losses during yesterday’s trading session. The USD/JPY, which had recently gone as high as 84.15, tumbled close to 85 pips throughout the European session yesterday, before stabilizing at the 83.30 level. The EUR/JPY fell over 100 pips yesterday, reaching as low 108.57, before staging a mild recovery and stabilizing around 108.85.
Turning to today, yen traders will want to keep an eye on several US indicators scheduled to be released over the course of the day. The recent monetary easing policy from the Bank of Japan continues to weigh down on the yen. Analysts are predicting that, given the poor state of the Japanese economy and recent strong US economic indicators, the USD/JPY has the potential to reach 85.00 in the near future. Should any of the US news come in better than expected today, the yen could reverse yesterday’s gains before markets close for the week.
Gold – Gold Sees Mild Gains in Trading Yesterday
After spending much of the week stuck in a bearish trend, gold saw mild gains during yesterday’s trading session. The price of gold had dropped as low as $1634.09 an ounce on Wednesday, largely due to the strengthening US dollar. A strong USD typically limits the appeal for high yielding commodities, like gold. The trend briefly changed yesterday, and the precious metal was able to reach as high as $1650.91 during the evening session.
Despite yesterday’s slight upward movement, analysts warn that gold’s bearish trend may continue for the foreseeable future. US indicators continue to show that the American economy is growing. It would appear that for the time being, a bullish dollar means that any upward movement by gold may be limited.
The Slow Stochastic on the 8-hour chart has formed a bullish cross, indicating that upward movement could occur in the near future. This theory is supported by the Relative Strength Index on the daily chart, which has crossed into oversold territory. Going long may be the wise choice for this pair.
Most long-term technical indicators show the GBP/USD trading in neutral territory at this time. The daily chart’s Williams Percent Range and Relative Strength Index are both range trading. As there is no defined trend, traders may want to take a wait and see approach for this pair ahead of any major movements.
Technical indicators on the daily chart continue to show that this pair is overbought and could see downward movement in the near future. These include the Slow Stochastic, which has formed a bearish cross, and the Relative Strength Index which is currently at 80. Going short may be the wise choice for this pair.
The daily chart’s Williams Percent Range is currently well into the overbought zone, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently around 75. Going short may be the wise choice for this pair.
The Wild Card
Following the upward movement this pair has seen in recent days, technical indicators now show downward movement may occur in the coming days. A bearish cross on the daily chart’s Slow Stochastic signals a possible reversal. Additionally, the Williams Percent Range is trading at the -20 level, indicating that a bearish correction could occur. Forex traders may want to go short in their positions.
Written by Forexyard.com