Riskier assets, like the euro and AUD, tumbled on Thursday following the release of a string of negative global data. Worse than expected German news confirmed fears that the euro-zone has gone back into recession.
Meanwhile, a decline in Chinese manufacturing caused the aussie to slip against its main currency rivals. Turning to today, traders will want to pay attention to the US New Home Sales figure, scheduled to be released at 14:00 GMT. Analysts are forecasting the figure to increase slightly over last month. If true, the US dollar may see gains against the JPY to close out the week.
Forex Market Trends
USD – Risk Aversion Leads to Major USD Gains
The safe-haven US dollar saw significant gains on Thursday, as negative Chinese and euro-zone data led to fears regarding the pace of the global economic recovery. Meanwhile, a better than expected US Unemployment Claims figure yesterday, boosted confidence in the US economy which gave the dollar additional momentum. The EUR/USD tumbled around 120 pips throughout European trading before staging a mild recovery during the afternoon session. The AUD/USD fell close to 150 pips, reaching as low as 1.0334, before stabilizing around 1.0365.
As we close out the week, traders will want to pay attention to the US New Home Sales figure, set to be released at 14:00 GMT. As seen earlier this week, the US housing market has been slow to recover from the global economic crisis. That being said, analysts are forecasting today’s news to show improvement over last month’s. If true, the US dollar may see gains against other safe haven currencies, like the JPY. Additionally, traders will want to pay attention to any announcements out of the euro-zone. Additional negative news may cause the dollar to extend its bullish run against riskier currencies.
EUR – Euro-Zone Recession Fears Cause EUR to Slide
A batch of negative euro-zone manufacturing data released yesterday caused the common currency to tumble throughout the day. Analysts had been forecasting an increase in the German Flash Manufacturing PMI. After it came in well below expectations, fears that the euro-zone has slipped back into recession were confirmed. As a result, the EUR/USD fell over 100 pips, reaching as low as 1.3133. Against the Japanese yen, the euro fell around 180 pips, reaching as low as 108.63.
Turning to today, euro traders will want to pay attention to any announcements out of the euro-zone regarding yesterday’s news. Any additional negative data may weigh down on the common currency. Additionally, US housing news is forecasted to show positive growth in the American economy. If true, the euro could see further losses against the greenback to close out the week. Taking a brief look at next week, traders will want to remember that on Monday, Germany will release its Ifo Buisness Climate figure. Should it come in below expectations, the euro could continue its bearish trend.
JPY – JPY Moves Up vs. USD
Thursday saw the Japanese yen benefitting from safe- haven trading against the USD. Negative global data caused the JPY to make gains virtually across the board. Euro-zone manufacturing data confirmed fears that the region has slipped back into recession, while a decrease in Chinese manufacturing caused investors to flock to safer assets, like the yen. The USD/JPY fell over 100 pips yesterday, before stabilizing around the 82.50 level.
Turning to today, yen traders will want to pay attention to the US New Home Sales figure. The JPY may be slowly inching towards the psychologically significant mark of 80.00. That being said, investors will have to see how news from the US plays out in the coming days before deciding if they want to continue going short on the USD/JPY.
Crude Oil – Crude Oil Drops on Thursday
Crude oil made a sharp downward movement on Thursday as an array of news affected currencies and commodities across the board. The biggest factor in crude oil’s drop on Thursday was the poor PMI numbers from China. This follows weeks of indications that China’s manufacturing sector had been shrinking in recent months. Additionally, overall demand from Europe continues to drop, further influencing Thursday’s drop for crude oil.
While the US released numbers on its crude oil inventories that were far below market predictions, the price of oil still dropped considerably and hovered close to 104.64 for most of Thursday afternoon. Heading into Friday, investors will want to keep an eye on whether or not domestic data from the U.S., including the recent drop in unemployment claims, has any influence on prices.
In a sign that this pair could see a price shift in the near future, the Bollinger Bands on the daily chart are beginning to narrow. A bearish cross on the same chart’s Stochastic Slow indicates that downward movement could occur. Traders may want to short their positions ahead of a possible downward breach.
The Williams Percent Range on the weekly chart is currently at -20, indicating that downward movement could occur in the coming days. A bearish cross on the daily chart’s Slow Stochastic supports this theory. Going short may be a wise choice for traders ahead of a possible downward breach.
A bearish cross on the weekly chart’s Slow Stochastic indicates that the pair could see downward movement in the coming days. That being said, most other technical indicators are showing that the current bullish trend may continue. Traders may want to take a wait and see approach for this pair.
The Williams Percent Range on the daily chart is currently right around the -80 level, indicating that this pair could see an upward correction. At the same time, most other technical indicators are not showing a clear direction at this time. Taking a wait and see approach may be the wise choice for this pair.
The Wild Card
The Williams Percent Range on the daily chart is currently at -90, indicating that this pair is oversold and may see an upward correction in the near future. This theory is supported by the Relative Strength Index on the same chart, which has crossed below the 30 level. Forex traders may want to go long in their positions ahead of an upward breach.
Written by Forexyard.com