A speech by Fed Chairman Ben Bernanke yesterday resulted in the US dollar tumbling throughout the European trading session. The speech, which hinted that the Fed may initiate another round of quantitative easing in the near future, turned the USD bearish against both the euro and Swiss franc. Turning to today, traders will want to pay attention to the US CB Consumer Confidence report, scheduled to be released at 14:00 GMT. A positive figure may help the dollar recoup some of yesterday’s losses.
Forex Market Trends
USD – US Consumer Confidence Set to Impact Dollar
Signs that the Fed may initiate a new round of quantitative easing sent the dollar tumbling against some of its main currency rivals during yesterday’s trading session. Following a speech from Fed Chairman Bernanke, in which he said that the US economy is not growing fast enough, the EUR/USD spiked, eventually reaching a fresh three-week high. The pair eventually stabilized at around the 1.3325 level during afternoon trading. Against the Swiss franc, the dollar fell close to 100 pips during the European session. The USD/CHF eventually stabilized around 0.9045.
Turning to today, USD traders will want to note the results of the CB Consumer Confidence figure, set to be released at 14:00 GMT. Consumer confidence is widely considered an accurate indicator of overall economic health. At the moment, analysts are expecting a slight drop in the figure over last month. If true, the dollar could extend yesterday’s losses against the euro. That being said, should the Consumer Confidence number come in above the forecasted level of 70.3, the dollar could reverse its recent bearish trend.
EUR – Analysts Warn That EUR Gains Could be Temporary
The euro saw significant gains against the USD yesterday, as signs began to emerge that the US economy may not be growing fast enough to sustain an economic recovery. The EUR/USD spiked well over 100 pips as a result, eventually reaching as high as 1.3337 during mid-day trading. The euro also received a significant boost against the Japanese yen yesterday. The EUR/JPY was up approximately 130 pips, eventually reaching as high as 110.54 before staging a slight downward reversal. The pair eventually stabilized at 110.30.
As we take an extended look at the rest of the week, analysts are warning that the euro’s recent bullish trend could be temporary. Signs of economic turmoil in several euro-zone countries, including Portugal, Italy and Spain, may soon dominate the news and could lead to significant euro losses. Traders will want to note the results of bond auctions from both Italy and Spain, scheduled for later in the week. In addition, a meeting of euro-zone finance ministers could offer additional clues as to the current state of the euro-zone economic recovery.
JPY – Safe Haven JPY Falls vs. Riskier Assets
The Japanese yen tumbled vs. some of its more volatile currency rivals throughout yesterday’s trading session. The CHF/JPY was up over 100 pips during the European session before hitting resistance around the 91.60 level. The AUD/JPY was up close to 130 pips, reaching as high as 87.36 before staging a slight downward correction. The pair found support at 87.15. Analysts attributed the yen’s losses to the poor economic situation in Japan, combined with a positive German Ifo Business Climate figure which led to an increase in risk taking.
Turning to today, traders will want to pay attention to any announcements out of the euro-zone, particularly with regards to the current state of the Italian, Spanish and Portuguese economies. Any negative news could lead to risk aversion in the marketplace, which could help the yen reverse its current bearish trend.
Crude Oil – Crude Oil Moves Up amid Risk Taking
The price of crude oil saw significant gains throughout yesterday’s trading session, eventually reaching as high as $107.30 a barrel before staging a downward reversal. Positive news out of Germany led to an increase in risk taking, which helped support the commodity throughout the day. The gains proved to be temporary though, and by the end of the European session oil was once again trading below $107.00.
Turning to today, crude oil traders will want to pay close attention to any announcements out of the euro-zone. Analysts are warning that debt worries in several European countries could lead to risk aversion in the market place. In such a case, riskier commodities like oil could see downward movement.
The Bollinger Bands on the weekly chart appear to be narrowing, indicating that a price shift could occur in the coming days. The Williams Percent Range on the daily chart is in overbought territory, signaling that the shift could be downwards. Traders may want to go short in their positions ahead of a possible bearish correction.
Most long term technical indicators show this pair in neutral territory, meaning that no major shift in price is expected at this time. That being said, traders will want to keep an eye on the MACD/OsMA on the daily chart. It looks like a bearish cross may be forming. If so, it may be a sign of a possible impending downward correction.
The weekly chart’s Relative Strength Index is hovering right around the overbought zone, indicating that this pair could see downward movement. This theory is supported by the Williams Percent Range on the same chart, which is currently at -20. Traders may want to go short in their positions ahead of a possible downward correction.
While the Williams Percent Range on the daily chart is currently in the oversold region, which is typically a sign of impending upward movement, most other technical indicators are in neutral territory at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself later on.
The Wild Card
The 8-hour chart’s MACD/OsMA has formed a bullish cross, indicating that upward movement could occur in the near future. This theory is supported by the daily chart’s Williams Percent Range, which is currently in oversold territory. Forex traders may want to go long in their positions ahead of a possible upward correction.
Written by Forexyard.com