While the US dollar was able to move up against many of its main rivals during morning trading yesterday, the currency was not able to maintain its bullish trend during the evening session. US fundamental data, which showed a decrease in US housing starts in February, caused the greenback to turn bearish against both the yen and euro. Today, traders will want to pay attention to another US indicator for clues regarding market sentiment. The Existing Home Sales figure, scheduled to be released at 14:00 GMT, is considered an accurate sign of health in the housing sector, and could lead to market volatility.
Forex Market Trends
USD – USD Reverses Bullish Trend
Risk aversion led to significant dollar gains during morning trading yesterday, as the combination of poor Chinese and euro-zone news boosted safe-haven currencies. The greenback was not able to maintain these gains, and by the afternoon session had once again turned bearish against its main currency rivals.
Analysts attributed the dollar’s reversal to the news that housing starts in the US decreased last month, in a sign that the US economic recovery still has a long way to go. The EUR/USD spiked over 50 pips during the afternoon session, reaching as high as 1.3243. The USD/JPY dropped over 40 pips in the same amount of time, reaching as low as 83.31.
Turning to today, US news is once again forecasted to influence market sentiment. A testimony from Fed Chairman Bernanke is likely to give clues as to any plans to increase US interest rates in the near future. While no major announcements are expected, Bernanke’s speeches tend to generate speculation among investors, which can lead to dollar volatility. Following the speech, the Existing Home Sales figure is scheduled to be released. Analysts are predicting a slight increase in today’s figure, which if true, could help the USD offset yesterday’s losses.
EUR – Euro Recovers vs. USD, Extends Gains against AUD
The EUR/USD tumbled during the morning session yesterday, falling as low as 1.3170. That being said, fears that the US economic recovery is not proceeding as quickly as originally thought eventually caused the common currency to correct its earlier losses. As a result, the EUR/USD rose as high as 1.3243 during the afternoon session. Against the Australian dollar, the euro extended its recent bullish trend. The EUR/AUD was up well over 150 pips yesterday, reaching as high as 1.2629 before staging a mild downward reversal.
Turning to today, euro traders will want to pay attention to a batch of US news. Specifically, the Existing Home Sales figure may generate volatility for the EUR/USD pair. The euro’s gains yesterday were primarily due to a decrease in US housing starts from last month. With analysts predicting today’s figure to show an increase in US home sales, the euro may once again turn bearish during the afternoon session today. In addition, fears that Portugal will have to eventually restructure its debt have recently come about. Any additional signs of future euro-zone debt issues may weigh down on the common currency.
JPY – JPY Turns Bullish vs. USD
The Japanese yen saw bullish movement vs. the US dollar during the afternoon session yesterday, following disappointing US housing data. The USD/JPY dropped over 40 pips, reaching as low as 83.31 before staging a mild upward correction. The yen also saw mild gains against the euro during yesterday’s session. At one point, the EUR/JPY was down 55 pips for the day, reaching as low as 110.27. The pair eventually corrected itself, and by the evening session was trading at 110.60.
Turning to today’s session, the yen may reverse yesterday’s gains if the US Existing Home Sales figure comes in as predicted. That being said, some analysts are predicting an increase in investments in the Japanese economy towards the end of the month, the conclusion of the Japanese business year. Traditionally the end of the business year in Japan sees renewed investor confidence which could ultimately support the Japanese currency.
Crude Oil – Crude Oil Tumbles
Crude oil declined steeply on Tuesday, as weakened demand weighed down on the price of the commodity. The price of oil steadily decreased yesterday, falling as low as $106.13 a barrel before staging a correction during the evening session. Analysts attributed oil’s bearish trend to decreased demand in the EU and China, as well as an increase in US inventories.
Today, traders will want to pay attention to any announcements out of the EU. Negative rumors regarding the current state of several euro-zone countries have led to risk aversion among traders. Any pessimistic announcements regarding the current debt situation in Portugal or Italy could cause investors to revert back to safe-haven assets. In such a case, oil could drop further.
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
NSE Nifty Index
A bullish cross on the daily chart indicates that the Nifty could see upward movement in the near future. The 8-hour chart’s Williams Percent Range, which is currently below -80, lends additional support to the theory that upward movement could occur. Forex traders may want to go long in their positions ahead of a bullish correction.
Written by Forexyard.com