The US dollar reversed some of its recent gains to close out the week on Friday, following the release of a disappointing US Core CPI figure. The figure, which came in at 0.1%, led to investor doubts that US interest rates would go up earlier than planned. As a result, the EUR/USD shot up well over 100 pips on Friday to close out the week at 1.3174. Turning to next week, a relative lack of news events means that the dollar could remain bearish for the near future. Still, US housing data, scheduled to be released on Wednesday and Friday, may give the greenback an opportunity to recoup its recent losses.
Forex Market Trends
USD – USD Takes Losses vs. Main Rivals to Close out Week
Worse than expected fundamental indicators out of the US led to significant dollar losses to close out last week’s trading session. Both the Core CPI and Prelim UoM Consumer Sentiment figures came in below analyst forecasts. The Core CPI figure in particular dampened hopes that the Federal Reserve would increase US interest rates earlier than expected.
In addition to losses against the euro, the dollar also fell vs. the Japanese yen and Swiss franc. The USD/JPY fell as low as 83.18 on Friday before staging a mild recovery to close out the week at 83.44. The USD/CHF, which peaked at 0.9254 during the morning session, tumbled 100 pips to close out the week at 0.9154.
Turning to this week, a lack of significant news events means that the dollar may not have many opportunities to reverse its current bearish trend. Still, there are several indicators that may turn out to generate market volatility. US housing data, scheduled to be released on Wednesday and Friday, may signal further gains in the American economic recovery. In addition, Thursday’s weekly Unemployment Claims figure is forecasted to show ongoing improvements in the labor sector. If true, the dollar could see gains as a result.
EUR – EUR Has Mixed Session to Close out Week
The euro saw significant gains against its safe-haven currency rivals to close out last week’s session. The EUR/USD reversed its downward trend on Friday, and gained well over 100 pips to close out the day at 1.3174. Against the Japanese yen, the euro was up close to 100 pips to close out the week at 109.92. Analysts attributed the common-currency’s reversal to disappointing news out of the US which caused investors to shift their funds away from the dollar and yen. That being said, the day was not all positive for the euro. The EUR/CHF maintained its bearish trend from Thursday to close out the week at 1.2060. Beginning on Thursday morning, the pair has dropped close to 100 pips.
Turning to this week, traders will want to note several potentially significant economic indicators out of the euro-zone. Thursday in particular could see heavy volatility, as manufacturing data out of Germany and France, the euro-zone’s two biggest economies, are scheduled to be released. In addition, a speech from the ECB President may provide investors with additional insight into the current state of the euro-zone economic recovery. In the meantime, the euro may see additional gains in the coming days if news out of the US once again comes in below analyst predictions.
Crude Oil – Crude Oil Sees Gains to Close out Week
Crude oil reversed losses taken earlier in the week to close out Friday’s session at $107.18 a barrel, up almost $2 a barrel for the day. Analysts attributed the increase in the price of oil to worse than expected US fundamental indicators which caused the dollar to slip on Friday. Typically, a bearish dollar causes commodities like oil to go up, as they become more attractive to international buyers. In addition, supply side fears caused by the upcoming EU ban on Iranian oil drove the price of oil higher.
Turning to this week, oil may continue to see gains, providing the dollar extends its bearish trend. Traders will want to note the results of several US indicators, including Tuesday’s Building Permits and Wednesday’s Existing Home Sales figures. Should either of them come in below expectations, the USD may drop further which could help support a higher price for oil.
Dow Jones – Dow Jones Takes Mild Losses during Friday’s Session
The Dow Jones capped its gains on Friday, following seven consecutive sessions of upward momentum. The Dow closed out the week at 13158.25, down from Friday’s high of 13222.25. While the downward reversal was attributed to worse than expected US fundamentals, analysts were quick to note that the gains for the week were the biggest so far this year.
This week, traders will want to note the results of several US indicators, particularly the Existing and New Home Sales figures scheduled for Wednesday and Friday. Any signs that the American economic recovery is gaining momentum are likely to help the US stocks see gains. Should either of the housing indicators come in above forecasts, the Dow Jones may resume its upward movement.
Most long-term technical indicators show this pair range-trading, meaning that no significant movements are forecasted at this time. That being said, traders may want to take a wait and see approach, as a clearer picture may present itself in the near future. The daily chart’s Williams Percent Range, which is trending upward at the moment, may eventually reach overbought territory. In such a case, a bearish correction could occur.
The weekly chart’s Williams Percent Range is currently hovering in the overbought zone, indicating that a bearish correction could occur in the coming days. A bearish cross on the daily chart’s MACD/OsMA lends further support to this theory. Traders may want to go short in their positions.
A bearish cross on the weekly chart’s Slow Stochastic indicates that a downward correction could occur in the near future. Furthermore, in another sign that the pair could move down, the daily chart’s Williams Percent Range is currently at -20. Going short may be the wise choice for this pair.
A narrowing of the Bollinger Bands on the weekly chart indicates that a price shift could occur in the coming days. That being said, most other technical indicators are not showing a clear picture as to which direction the shift could be. Traders may want to take a wait and see approach for this pair.
The Wild Card
A bearish cross on the 8-hour chart’s Slow Stochastic indicates that this pair could see a downward correction. This theory is supported by the Relative Strength Index on the same chart, which is right around the 75 level. Forex traders may want to go short in their positions ahead of a possible downward correction.
Written by Forexyard.com