While the euro remained bearish against its main currency rivals throughout yesterday’s trading session, it avoided falling to a new four-month low against the US dollar. The marketplace was unusually calm, as a bank holiday in Europe resulted in limited movements among the most traded currency pairs. As we close out the week, traders will want to note that another slow news day may result in low liquidity in the marketplace. Typically, low liquidity situations can result in exaggerated movements among currency pairs and commodities for seemingly no reason. Any mention of additional euro-zone worries may result in a significant drop for the euro.
Forex Market Trends
USD – Manufacturing Data Causes USD to Tumble
The US dollar tumbled vs. the Japanese yen during the afternoon session yesterday, following a significantly worse than expected Philly Fed Manufacturing Index. The manufacturing index came in at -5.8, well below the forecasted level of 10.3. Following the news, the USD/JPY fell close to 50 pips before finding support around the 79.75 level. Against the Swiss franc, the dollar saw gains during early morning trading before reversing later in the day. After reaching as high as 0.9480, the USD/CHF began falling, eventually dropping to the 0.9445 level.
As we begin to close out the week, dollar traders will want to note that a slow news day may result in exaggerated movements in the marketplace for seemingly no reason. Additionally, attention should be given to any announcements out of the euro-zone, especially with regards to the possible effects the current Greek political crisis may have on other indebted countries in the region, including Italy and Spain. Negative announcements could weigh heavily on riskier currencies, which may result in dollar gains throughout the European session.
EUR – Euro Limits Losses in Slow Trading Day
After dropping as low as 1.2666 during the morning session, the euro was able to recoup some of its losses against the US dollar, reaching as high as 1.2736. The currency was able to benefit from poor US manufacturing data which turned the USD bearish. Analysts were quick to warn that fears that Greece will be forced to exit the euro-zone is weighing down on the euro and that any gains could turn out to be temporary. Risk aversion in the marketplace following the disappointing US news caused the euro to fall against the Japanese yen. The EUR/JPY dropped over 60 pips during mid-day trading, eventually hitting the 101.32 level.
Turning to today, the euro may be able to hold onto its gains vs. the greenback if investors determine that the poor US news will lead the Fed to initiate a new round of quantitative easing to help boost the US economic recovery. At the same time, traders will want to remember that euro-zone fundamentals remain extremely poor. Any additional negative announcements today, especially with regards to the economic and political situation in Greece, could lead to further losses for the euro against the JPY.
AUD – Aussie Benefits From Positive Asian Data
The Australian dollar was able to move up vs. the USD following positive Japanese news during morning trading yesterday. Additionally, disappointing manufacturing data out of the US caused the AUD/USD to move up further. Overall, the pair was up almost 60 pips during European trading, reaching as high as 0.9951 during the afternoon session. The aussie was not as fortunate against the safe-haven Japanese yen. The AUD/JPY fell close to 100 pips over the course of the day, reaching as low as 79.04.
Turning to today, the recent disappointing news out of the US may help the aussie extend yesterday’s gains before markets close for the week. That being said, euro-zone political fears are keeping investors from shifting their funds to riskier assets. With market sentiment currently bearish toward higher yielding currencies, the AUD could drop further against the yen.
Crude Oil – Crude Oil Sees Mild Bullish Movement
The price of crude oil saw steady gains throughout the morning session yesterday, climbing as high as $93.84 a barrel before dropping during mid-day trading. Analysts attributed the bullish movement to better than forecasted economic growth in several Asian countries. That being said, poor news out of the euro-zone and US eventually brought the commodity as low as $92.79.
Turning to today, market sentiment toward the euro-zone is likely to dictate the direction oil takes. Fears that Greece will be forced to exit the euro-zone have led to significant risk aversion in the marketplace. Any announcements today that would indicate this trend will continue may weigh down on the price of oil.
Most long-term technical indicators place this pair in oversold territory, indicating that upward movement could occur in the near future. The Williams Percent Range on the weekly chart is currently at -90, while the daily chart’s Slow Stochastic has formed a bullish cross. Traders may want to go long in their positions.
While the daily chart’s Slow Stochastic has formed a bullish cross, most other technical indicators place this pair in neutral territory. This includes the weekly chart’s Relative Strength Index and MACD/OsMA. Taking a wait and see approach may be the wise choice for this pair.
The Williams Percent Range on the daily chart has drifted into overbought territory, indicating that this pair could see downward movement in the near future. Additionally, a bearish cross on the weekly chart’s MACD/OsMA has formed. Traders may want to go short in their positions.
A bearish cross on the daily chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. Additionally, the Relative Strength Index on the same chart is currently in the overbought zone. Opening short positions may be the wise choice for this pair.
The Wild Card
The daily chart’s Relative Strength Index is currently in overbought territory, indicating that downward movement could occur in the near future. Additionally, a bearish cross has formed on the same chart’s Slow Stochastic. Forex traders may want to go short in their positions before markets close for the week.
Written by Forexyard.com