A better than forecasted US Non-Farms Payroll figure on Friday led to risk taking in the marketplace, which turned currencies like the euro and AUD bullish. Furthermore, commodities and precious metals received a significant boost following the release of the US news. Today, the main piece of news is likely to be a speech from Fed Chairman Bernanke, set to take place at 13:00 GMT. Later in the week, traders will want to pay attention to Tuesday’s Australian Cash Rate, Thursday’s US Trade Balance report and Friday’s British PPI Input figure. All three are considered important for their respective economies and have the potential to generate volatility in the marketplace.
Forex Market Trends
USD – Non-Farms Data Results in Dollar Losses
The safe-haven US dollar took significant losses against its main currency rivals on Friday, as a better than expected US Non-Farm Payrolls figure resulted in risk taking in the marketplace. The AUD/USD shot up close to 100 pips during the European session to peak at 1.0569. The pair eventually finished out the week at 1.0561. Against the Swiss franc, the dollar fell more than 170 pips to trade as low as 0.9694 before staging a slight recovery to close the day at 0.9703.
Turning to today, traders will want to pay close attention to a speech from Fed Chairman Bernanke, set to take place at 13:00 GMT. While Friday’s Non-Farm Payrolls came in above expectations, the unemployment rate in the US increased slightly from 8.2% to 8.3%. As a result, some analysts are predicting that the Fed Chairman may hint at a new round of quantitative easing today to boost the US economy. If he does, the greenback could extend its recent losses during afternoon trading.
EUR – Euro Sees Major Gains amid Risk Taking
The euro saw significant gains against several of its main currency rivals on Friday, after better than expected US jobs data boosted confidence in the global economic recovery, which in turn led to risk taking in the marketplace. The EUR/USD finished out the week at 1.2383, up over 200 pips during the European session, and only a few pips below its high for the day at 1.2390. Against the JPY, the euro gained just over 200 pips during European trading to reach as high as 97.38. The pair staged a minor downward correction and ended up closing out the week at 97.19.
This week, euro traders will want to pay attention to announcements out of the euro-zone, particularly with regards to plans to lower borrowing costs in Spain and Italy. If euro-zone leaders decide to divulge any information about how they plan to stabilize troubled economies in the region, the common currency may extend its recent bullish trend. That being said, analysts are also warning that Spain may be getting ready to make a formal bailout request to assist its ailing banking sector, in which case investors could shift their funds away from the euro.
Gold – Weakened Dollar Leads to Gains for Gold
The price of gold got a significant boost on Friday, after better than expected US jobs data caused the safe-haven greenback to slide against its main currency rivals. As a result, gold became more affordable for international buyers which led to an increase in demand. The precious metal finished out the week at $1603.21 an ounce, up more than $20 during the second half of the day, and slightly below its high for the day at $1606.53.
This week, gold traders will want to continue monitoring US and euro-zone data and how it affects the dollar. Any negative news could result in risk aversion in the marketplace, which may lead gains for the safe-haven greenback and gold giving up some of its recent gains. That being said, should investor confidence in the global economic recovery increase further, gold may be able to extend its recent bullish trend.
Crude Oil – Crude Boosted By Increase in US Demand
The price of crude oil received a significant boost during European trading on Friday, after a better than expected US Non-Farm Payrolls figure led investors to speculate that demand for oil in the US could go up. Last week’s lower than expected US Crude Oil Inventories figure supported that theory. As a result, the price of oil reached as high as $91.66 a barrel before finishing out the week at $91.37.
This week, any better than expected data out of the US could help the price of crude oil increase further. Traders will want to pay attention to speeches from Fed Chairman Bernanke today and tomorrow, as well as Thursday’s Trade Balance figure for clues as to what direction the US economic recovery is taking.
While the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur, most other technical indicators signal this pair is in neutral territory. Taking a wait and see approach may be the best option, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. The MACD/OsMA on the same chart has formed a bearish cross, signaling that the price shift could be downward. Traders may want to open short positions for this pair.
The Williams Percent Range on the weekly chart is approaching the oversold zone, indicating that this pair could see an upward correction in the coming days. Furthermore, the Slow Stochastic on the same chart is close to forming a bullish cross. Traders will want to keep an eye on these two indicators, as they may signal an impending bullish correction in the coming days.
The daily chart’s Williams Percent Range has dropped into oversold territory, signaling possible upward movement in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the best option at this time.
The Wild Card
A bearish cross has formed on the daily chart’s Slow Stochastic, indicating that this pair could see downward movement in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory. This may be a good time for forex traders to open short positions ahead of a possible downward correction.
Written by Forexyard.com