A worse than expected Advance GDP figure sent the dollar tumbling to multi-week lows against several of its main currency rivals on Friday. The EUR/USD closed out the week at 1.3249, up close to 100 pips for the day. Against the JPY, the greenback was down 115 pips to finish the day at 80.27. Turning to this week, the US Non-Farm Payrolls figure should be closely watched when it is released on Friday. In addition, Tuesday’s US ISM Manufacturing PMI and Wednesday’s ADP Non-Farm Employment Change may lead to significant activity in the marketplace. The dollar may extend its losses should any of the indicators come in below expectations.
Forex Market Trends
USD – Dollar Volatility Expected Ahead of Non-Farm Report
A disappointing US GDP figure resulted in heavy losses for the dollar to close out last week’s trading session. The news reinforced market sentiment that the Federal Reserve may soon initiate a new round of quantitative easing to help generate momentum for the US economic recovery. In addition to falling around 95 pips against the euro and well over 100 pips vs. the Japanese yen, the dollar also took losses against the AUD and CHF. The AUD/USD shot up around 120 pips for the day to close out the week at 1.0470, while the USD/CHF dropped close to 70 pips to close out Friday’s session at 0.9065.
Turning to today, a lack of significant US news means that the dollar could extend its current bearish trend ahead of potentially significant news later in the week. That being said, traders will still want to pay attention to the US Core PCE Price Index and Consumer Spending figures, both scheduled to be released at 12:30 GMT. Should either of the indicators come in above expectations, the dollar may see slight upward movement during afternoon trading.
Later in the week, the dollar will have plenty of opportunities to recoup its recent losses ahead of Friday’s all-important US Non-Farm Payrolls figure. Tuesday’s ISM Manufacturing PMI, followed by Wednesday’s ADO Non-Farm Employment Change and Thursday’s ISM Non-Manufacturing PMI are all considered valid indicators of overall economic health. Positive data could lead to dollar gains in the days ahead.
EUR – Euro Remains Low Despite Smooth Italian Debt Auction
While the euro saw fairly significant gains against the US dollar on Friday, the common currency remained bearish vs. most of its other rivals despite a positive Italian debt auction. The euro’s downward movement was attributed to a Spanish credit rating downgrade earlier in the week, which led to risk aversion among investors. The EUR/JPY dropped around 110 pips during Friday’s session to close out the week at 106.35. Against the AUD, the euro dropped close to 80 pips to finish the day at 1.2648.
Turning to this week, while most investors will likely be focusing on US employment data scheduled for Friday, euro-zone news is still forecasted to generate market volatility. Specifically, traders will want to pay attention to Thursday’s European Central Bank (ECB) Press Conference. The press conference follows the ECB’s monthly interest rate announcement, also known as the Minimum Bid Rate. While no changes are expected in euro-zone interest rates, the press conference may offer clues as to the current state of the euro-zone economic recovery and could lead to heavy trading in the marketplace.
JPY – BOJ Monetary Easing Does Little to Damage Yen Strength
The Bank of Japan’s long expected new round of monetary easing resulted in temporary losses for the yen in overnight trading on Friday. That being said, the JPY bounced back throughout the European session as risk aversion led to gains for safe-haven currencies. In addition to gains vs. the USD and euro, the yen also moved up against currencies like the Australian dollar and Swiss franc. The AUD/JPY dropped close to 90 pips in early morning trading, reaching as low as 83.54 before staging an upward correction. The pair eventually closed out the week at 84.04. Beginning in overnight trading, the CHF/JPY dropped around 85 pips to close out the week at 88.51.
Turning to this week, traders will want to pay attention to a batch of data out of the US and euro-zone. Both the US and euro-zone have seen negative fundamental data in recent weeks that has led to doubt in the pace of their respective economic recoveries. Should any of this week’s news, including Friday’s closely watched US Non-Farm Payrolls, lead to further investor pessimism, safe haven currencies like the yen could extend their recent gains.
Crude Oil – Crude Oil Sees Gains amid Bearish US Dollar
Crude oil saw moderate gains on Friday, as a bearish US dollar resulted in the commodity becoming cheaper for international buyers. Overall, crude was up over $1 a barrel for the day, peaking at $104.97, just below the psychologically significant $105 resistance level. Crude ended up closing out the week at $104.75.
Turning to this week, news out of the euro-zone is likely to lead to volatility in the price of oil. Thursday’s ECB Press Conference in particular is forecasted to highlight the current state of the euro-zone economic recovery. Any signs of further euro-zone debt troubles could cause crude oil to turn bearish. That being said, should any US news this week, including Friday’s all important Non-Farm Payrolls figure, result in the dollar sinking lower against the euro, crude oil could extend its bullish trend.
The Williams Percent Rang e on the daily chart has crossed over into overbought territory, indicating that downward movement could occur in the near future. Additionally, a bearish cross has formed close to the 80 level on the same chart’s Slow Stochastic. Going short may be the wise choice for this pair, ahead of a possible downward correction.
In a sign that a downward correction could occur in the near future, the Relative Strength Index has crossed into overbought territory. This theory is supported by the weekly chart’s Williams Percent Range, which is currently well above the -20 level. Going short may be the wise choice for this pair.
The daily chart’s Williams Percent Range has crossed over into oversold territory, indicating that this pair could see upward movement in the near future. Additionally, the weekly chart’s Slow Stochastic seems to be close to forming a bullish cross. Traders will want to keep an eye on the Slow Stochastic. Should the cross form, opening long positions may be the wise choice.
The daily chart’s Williams Percent Range has dropped into oversold territory indicating that upward movement could occur in the near future. That being said, most other long term technical indicators show this pair range trading. Taking a wait and see approach may be the best choice for this pair.
The Wild Card
The daily chart’s Slow Stochastic has formed a bullish cross, indicating that this pair could see upward movement in the near future. In addition, the Williams Percent Range on the same chart has crossed over into oversold territory. This may be a good opportunity for forex traders to open long positions ahead of a possible upward correction.
Written by Forexyard.com