The JPY took losses against the US dollar during European trading yesterday, following a downgrade of Japan’s credit rating. The USD/JPY advanced close to 60 pips over the course of the day, eventually peaking at 79.93. Today, dollar traders will want to pay attention to US New Home Sales figure, set to be released at 14:00 GMT. Analysts are forecasting the figure to show improvements in the US real estate sector, which if true, could help the greenback extend yesterday’s gains. In addition to the news out of the US, traders will want to pay attention to any announcements out of the euro-zone. An informal meeting of euro-zone leaders is set to conclude today. Any signs of a new strategy to combat the region’s debt crisis could lead to market volatility.
Forex Market Trends
USD – Dollar Sees Gains across the Board
The US dollar moved up vs. virtually all of its main currency rivals yesterday, following negative data out of the UK and Japan which caused investors to shift their funds to the greenback. A worse than expected UK CPI figure resulted in the GBP/USD tumbling close to 85 pips during the European session. The pair reached as low as 1.5762 before staging a slight upward correction during afternoon trading. Against the JPY, the dollar was able to benefit after Fitch Ratings downgraded Japan’s credit score. The USD/JPY shot up over 60 pips following the news to come within reach of the psychologically significant 80.00 level.
Turning to today, dollar traders will want to pay attention to the US New Home Sales figure, scheduled for 14:00 GMT. Analysts are forecasting the figure to come in at 335K, which if true, would represent the second consecutive month of growth in the US Real Estate sector. Should the news come in as expected, the dollar may be able to extend yesterday’s gains against the yen and UK pound. That being said, if today’s indicator comes in below the predicted level, the greenback could reverse its recent bullish trend.
EUR – Meeting of Euro-Zone Leaders Set to Generate Market Volatility
The euro fell against the US dollar during mid-day trading yesterday, as investor worries about the euro-zone’s prospects for economic recovery continue to dominate market sentiment. The EUR/USD dropped close to 70 pips, reaching as low as 1.2737 before staging a mild upward correction. Against the Japanese yen, the common-currency was able to benefit from a Japanese credit rating downgrade. The EUR/JPY was up around 55 pips during European trading, reaching as high as 102.00 before dropping to the 101.85 level.
Turning to today, euro traders will want to pay attention to any announcements following a meeting of euro-zone leaders regarding any new ways to combat the region’s debt crisis. Significant differences between Germany and France on the best way to promote economic recovery in the euro-zone have led to risk aversion in the marketplace in recent weeks. Unless a more unified policy is unveiled today, the euro could see further losses against the US dollar during afternoon trading.
AUD – Aussie Falls amid Increased Risk Aversion
Risk aversion in the marketplace led to significant losses for the Australian dollar vs. its US counterpart throughout yesterday’s trading session. After reaching as high as 0.9933 during early morning trading, the AUD/USD began to tumble eventually reaching 0.9864. The AUD had slightly better luck against the Japanese yen. The AUD/JPY shot up close to 40 pips during the morning session, but eventually staged a correction to erase its earlier gains.
Today, the direction the aussie takes will likely be determined by news out of the euro-zone. Should a meeting of euro-zone leaders produce any positive ideas regarding how to best stimulate growth in struggling euro-zone economies, investors may shift their funds to riskier assets which could help the AUD during afternoon trading.
Crude Oil – US Crude Inventories may Impact Price of Oil
The price of crude oil fell just over $1 a barrel during European trading yesterday, following an increase in risk aversion due to concerns about the euro-zone economic recovery. The commodity dropped as low as $92.18 during the morning session before bouncing back to the $92.41 level.
Turning to today, oil traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. US crude stockpiles have reached record highs in recent weeks, signaling decreased demand in the world’s largest oil consuming country. Should today’s figure show that US inventories increased again, the price of oil could drop further during the afternoon session.
The MACD/OsMA on the weekly chart has formed a bullish cross, indicating that this pair could see an upward correction in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has dropped into oversold territory. Going long may be the wise choice for this pair.
Most long term technical indicators show this pair range-trading, meaning a definitive trend is difficult to determine at this time. Traders will want to keep an eye on the Relative Strength Index on the daily chart, as it is close to dropping into oversold territory. Should the indicator drop below the 30 line, it may be a sign of an impending upward correction.
The weekly chart’s Williams Percent Range has crossed over into oversold territory, indicating that this pair could see upward movement in the coming days. Additionally, the MACD/OsMA on the daily chart has formed a bullish cross. Opening long positions may be the wise choice for this pair.
The weekly chart’s MACD/OsMA has formed a bearish cross, indicating that a downward correction could occur in the near future. Furthermore, the same chart’s Williams Percent Range has drifted into overbought territory. Traders may want to open short positions ahead of possible downward movement.
The Wild Card
Hang Seng Index
The daily chart’s Relative Strength Index has dropped into oversold territory, indicating that upward movement could be seen in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed below the -80 level. Forex traders may want to go long in their positions ahead of a possible upward correction.
Written by Forexyard.com