The euro tumbled against virtually all of its main currency rivals yesterday afternoon, after the ECB refrained from announcing any new significant new measures to boost euro-zone growth. The news led to risk aversion in the marketplace, which in turn benefitted safe-haven currencies including the USD and JPY. Today, all eyes are likely to be on the US Non-Farm Employment Change, set to be released at 12:30 GMT. Analysts are predicting that the US added around 100K jobs last month, slightly higher than the 80K added in June. If true, the dollar could see additional gains before markets close for the weekend.
Forex Market Trends
USD – Dollar Benefits From Risk-Aversion
The dollar saw significant gains against virtually all of its higher yielding currency rivals yesterday, after the ECB failed to unveil any new plans to boost growth in the euro-zone, as some had been predicting. The USD/CHF advanced close to 130 pips following the news, reaching as high as 0.9867 before moving slightly downward and finding support at the 0.9840 level. The AUD/USD fell close to 90 pips during the afternoon session, to reach as low as 1.0452. The pair was able to stage a slight reversal, and was trading at the 1.0480 level by the evening session.
Today, all eyes are likely going to be on the US Non-Farm Payrolls figure, set to be released at 12:30 GMT. The indicator is widely considered the most important event on the forex calendar, and consistently leads to market volatility. After a better than expected ADP Non-Farm Employment Change figure earlier this week, investors are cautiously optimistic that today’s news will come in above the forecasted 100K. Any positive news could help the greenback extend yesterday’s bullish trend before markets close for the weekend.
EUR – Euro Resumes Bearish Trend
The euro turned overwhelmingly bearish yesterday, after the ECB Press Conference failed to reassure anxious investors that the euro-zone will be able to recover from its debt crisis. Against the US dollar, the euro tumbled over 175 pips during the afternoon session, eventually reaching as low as 1.2171. The pair was able to recover slightly and eventually stabilized around the 1.2200 level. The EUR/JPY fell close to 150 pips to trade as low as 95.14. By the afternoon session, the pair had recovered slightly and was trading at the 95.50 level.
Today, analysts are warning that the euro could extend its recent losses if euro-zone officials fail to reassure investors regarding the prospects for an economic recovery in the region. Furthermore, if the US Non-Farm Payrolls figure comes in above analyst predictions, investor confidence in the US economic recovery could go up, which could benefit the US dollar against the euro. That being said, any disappointing US news could help limit the euro’s losses against the greenback.
Gold – Gold Reverses Recent Gains
After advancing more than $11 an ounce during mid-day trading yesterday, gold took heavy losses during the afternoon session amid an increase in risk aversion in the marketplace. The precious metal fell as low as $1587.65 after euro-zone officials failed to announce any new plans to lower Spanish and Italian borrowing costs. By the close of European trading, gold was trading just below the $1600 level.
As markets prepare to close for the weekend, gold traders will want to pay attention to US employment news, set to be released at 12:30 GMT. If the data comes in positive, the dollar could extend yesterday’s bullish trend against the euro, which may lead to gold taking additional losses during the second half of the day.
Crude Oil – Crude Oil Falls More Than $2 after Euro-Zone News
The price of crude oil fell as low as $86.91 a barrel during afternoon trading yesterday, following disappointing euro-zone news which caused investors to revert their funds to safe-haven assets. Overall, the commodity fell close to $2.50 after the news was released.
Today, analysts are warning that if risk aversion continues to dominate market sentiment, the price of oil has the potential to fall further. Additionally, should the US dollar benefit from US employment news, set to be released at 12:30 GMT, the price of oil would become more expensive for international buyers, which may lead to more bearish movement during the second half of the European session.
The weekly chart’s Slow Stochastic has formed a bullish cross, signaling that this pair could see upward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed over into oversold territory. Going long may be a wise choice.
While it appears that the MACD/OsMA on the daily chart is close to forming a bearish cross, most other long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be predicted at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself in the near future.
The Williams Percent Range on the weekly chart has crossed into oversold territory, indicating that this pair could see upward movement in the near future. Furthermore, the MACD/OsMA on the daily chart has formed a bullish cross. Going long may be the wise strategy for this pair.
The Bollinger Bands on the weekly chart have begun to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Opening short positions may be the smart move at this time.
The Wild Card
A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement before markets close for the weekend. Additionally, the Relative Strength Index on the same chart has crossed into oversold territory. Forex traders may want to open long positions ahead of a possible bullish correction.
Written by Forexyard.com