Euro Hits 1-Week High vs. USD

The euro rose to a one-week high against the US dollar during yesterday’s trading session, as positive international fundamental data led to an increase in risk taking. Analysts are warning that overall market sentiment is still bearish toward the euro, and any gains made by the currency may be short lived. Today, traders will want to pay attention to data out of the US, including the Core CPI and Prelim UoM Consumer Sentiment figures. With both indicators forecasted to come in above last month’s, the greenback could see gains to close out the week.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend up up down no up down
Resistance 1.3250 1.6025 81.85 0.9205 1.0470 0.8340
1.3230 1.6005 81.65 0.9185 1.0450 0.8320
1.3200 1.5975 81.35 0.9155 1.0420 0.8290
Support 1.3140 1.5915 80.75 0.9095 1.0360 0.8230
1.3110 1.5885 80.45 0.9065 1.0330 0.8200
1.3090 1.5865 80.25 0.9045 1.0310 0.8180

Economic News

USD – Dollar Continues to Fall vs. Riskier Currencies

The US dollar extended its recent bearish trend during yesterday’s trading session, as positive data out of Australia and China led to an increase in risk taking. The EUR/USD hit a one-week high at 1.3175 during the afternoon session, while the AUD/USD moved up well over 100 pips over the course of the day. Against the Japanese yen, the dollar erased gains made during overnight trading. By the end of the European session, the USD/JPY had once again dropped below the 81.00 level.

Turning to today, a batch of US data is forecasted to generate market volatility before markets close for the week. The Core CPI figure, scheduled to be released at 12:30 GMT, is forecasted to come in at 0.2%. If true, it would represent a slight increase over last month and may result in dollar gains. The same can be said of the Prelim UoM Consumer Sentiment figure, which is forecasted to come in at 76.5 when it is released at 13:55 GMT. Traders will also want to pay attention to a speech from Fed Chairman Bernanke. Any mention of additional quantitative easing by the Fed Chairman may result in dollar losses.

EUR – Risk Taking Gives EUR Slight Boost

The euro saw modest gains vs. several of its main currency rivals during trading yesterday, following positive Chinese news which led to investors shifting their funds to higher yielding assets. The EUR/GBP shot up close to 40 pips over the course of the day, reaching as high as 0.8264 by the end of European trading. The EUR/JPY was up over 60 pips for the day, reaching as high as 106.68 by the afternoon session.

Turning to today, analysts are warning that the euro may have a hard time sustaining its recent bullish momentum. Spanish and Portuguese debt worries continue to weigh down on investor confidence in the euro-zone economic recovery. Furthermore, with US news forecasted to show growth in the US economy today, investors may shift their funds back to the dollar, which could result in the EUR/USD turning bearish.

AUD – Australian Employment Data Boosts AUD

The aussie received a boost in trading yesterday, as a better than expected Employment Change figure led to risk taking in the market place. The Australian economy added 44K jobs last month, well above the 6.4K analysts had been predicting. By the end of the European session, the AUD/USD was trading around the 1.0430 level, up 130 pips for the day. The AUD/JPY saw gains of close to 100 pips, reaching as high as 84.36 during afternoon trading.

As we close out the week, AUD traders will want to focus on a batch of Chinese data that may lead to additional risk taking in the marketplace. Additionally, several US indicators are set to be released over the course of the day and could lead to significant volatility. Should any of the news come in above analyst expectations, higher yielding currencies, like the AUD, could see additional gains.

Crude Oil – Crude Oil Turns Bullish

The price of crude oil saw a healthy boost during the afternoon session yesterday, following a drop in US crude oil inventories and natural gas, which was taken as a sign of increased demand in the world’s biggest energy consuming country. Crude was up well over $1 a barrel by the end of the European session, reaching as high as $103.87, its highest level in over a week.

Turning to today, traders will want to keep an eye on several US economic indicators scheduled to be released over the course of the day. Positive news could lead to an increase in risk taking, which may lead to an additional spike in oil prices. That being said, should any of the news come in below forecasts, investors may shift their funds away from higher yielding assets, like oil.

Technical News

Long term technical indicators show that this pair is trading in neutral territory at the moment, meaning that no definitive direction is known at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s Williams Percent Range is currently at -20. Typically, this is taken as a sign that the pair is in overbought territory and could see a downward correction. Traders may want to go short in their positions, as bearish movement could occur in the near future.
Technical indicators on the daily chart show that the USD/JPY has entered the oversold territory and may see an upward correction in the near future. These include the Slow Stochastic, which has formed a bullish cross, and the Williams Percent Range, which is currently at -90. Going long may be the wise choice for this pair.
Technical indicators on both the daily and weekly charts are showing that this pair is range trading at the moment, meaning that no definitive trend is known. Taking a wait and see approach for this pair may be a wise choice, as a clearer picture is likely to present itself.

The Wild Card

The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. A bearish cross on the same chart’s Slow Stochastic indicates that the price shift could be downward. This may be a good opportunity for forex traders to open short positions ahead of a possible downward breach.

Written by