Euro Stages Slight Rebound in Overnight Trading

After falling to one year lows against several of its main currency rivals, the Euro was able to bounce back slightly last night. Following news that U.S. interest rates will likely remain at their current levels for the foreseeable future, the single currency was able to make very slight advances against the greenback and is currently trading around the 1.3200 level.

Economic News

USD – Dollar Gains Big on Euro-Zone Woes

The U.S. Dollar was able to stage an impressive rally against several of its main currency rivals yesterday, including the Euro and British Pound. Negative news coming out of the Euro-zone largely fueled the greenback’s gains, which were largely maintained despite the announcement that U.S. short-term interest rates will remain at their current levels for some time.

Currently, EUR/USD is trading around the 1.3200 level, over 150 pips down from 24-hours ago. The drop in GBP/USD was even more drastic. At the moment, the pair is trading around the 1.5170 level, almost 300 pips down from this time yesterday. In both cases, the Dollar should be able to maintain its respective gains in trading today, providing news set to be released today shows a continuous improvement in the American economy.

Traders will want to pay attention to the U.S. Unemployment Claims Report, the results of which will be announced at 12:30 GMT today. With most analysts predicting a slight drop in the number of new unemployment claims compared to last week, the Dollar may see gains, not only against the Euro, but also against riskier currencies like the Canadian Dollar and Aussie.

EUR – Euro Tumbles Following Spanish Downgrade

Adding to the long list of economic problems currently confronting the Euro-zone, Spain’s long term credit rating was downgraded yesterday, causing the single currency to tumble against its major counterparts. In addition to the USD, the Euro has also fallen against the more volatile currencies like the Canadian Dollar and Aussie. In the last 24-hours, the single currency has fallen over 60-70 pips against both the CAD and AUD.

Today, traders will want to pay attention to several European news events likely to impact the marketplace. At 7:55 GMT, the German Unemployment Change is set to be released. As the leading Euro-zone economy, Germany plays a somewhat inflated role in how the Euro moves in the forex marketplace. Additionally, a speech from ECB President Trichet is set to take place at 11:30 GMT. Typically, a speech from the ECB President creates mild market volatility, but considering the events of yesterday, todays might take on added significance. Whether either of these news events will help the Euro recoup yesterday’s losses is yet to be seen.

JPY – Yen Able to Maintain Gains Despite Return To Risk Taking

Capitalizing on the continued bad economic news coming out of the Euro-zone, the Yen was able to record significant gains against the single currency in trading yesterday. At one point, EUR/JPY fell over 100 pips before correcting itself slightly. Currently the pair is trading around the 123.95, still down 80 pips or so from its high yesterday.

Against the U.S. Dollar, the Yen has not been as fortunate. Good U.S. economic news has fueled an uptrend in the USD/JPY pair over the last several days. The pair went as high as 94.28 yesterday, and is currently trading only slightly lower at 93.90.

Today, JPY traders will want to focus on both the U.S. and Japanese economic news. If American unemployment figures come in higher then expected, the Yen may be able to make some gains on the greenback. Furthermore, the Japanese Prelim Industrial Production report, set to be released at 23:50 GMT, will likely boost the Yen providing the results are at or above the forecasted figure of 0.9%.

Crude Oil – Crude Struggling to Maintain Prices Above $83 a Barrel

After dropping as low as $81.40 a barrel yesterday, crude oil managed to stage a mild comeback in evening trading. Prices were largely boosted due to the latest news regarding the formation of a Greek rescue plan. That being said, crude is currently stuck around the $83 level, a far cry from earlier in the week when prices were well above $84 a barrel.

Today, crude prices will likely be determined by U.S. economic news. If the American unemployment figure gives the greenback a boost, oil prices will likely fall as a result. That being said, if a disappointing unemployment figure is released, risk taking may return to the forex marketplace leading to a boost for the commodity.

Technical News

The price of this pair appears to be floating in the over-sold territory on the daily chart’s RSI indicating an upward correction may be imminent. The upward direction on the 8-hour chart’s RSI also supports this notion. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. Going long with tight stops may turn out to be the right choice today.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.
The USD/CHF cross has experienced a bullish trend for the past week. However, it seems that this trend may be coming to an end. The RSI of the daily chart shows the pair floating in the overbought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.

The Wild Card

Gold prices rose significantly in the last week and peaked at $1065.10 for an ounce. And now, the daily chart’s Slow Stochastic is giving bullish signals, indicating that gold prices might go up. This might give forex traders a great opportunity to enter a very popular trend.

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