Euro-Zone Data Signals Further Economic Downtrend

The euro fell against the US dollar yesterday, following the release of a worse than expected German economic sentiment figure and GDP data which signaled an economic contraction in the euro-zone. At the same time, better than expected news out of the US resulted in gains for crude oil during the afternoon session. Today, US news is once again expected to generate volatility. Traders will want to note the results of the Core CPI figure, Empire State Manufacturing Index and TIC Long-Term Purchases. Any positive data may lead to additional risk taking in the marketplace, which could result in additional gains for commodities and higher-yielding currencies.

Forex Market Trends

Daily Trend up down up down down up
Weekly Trend up down up down down up
Resistance 1.2428 1.5768 79.74 0.9852 1.0580 0.7952
1.2379 1.5720 79.30 0.9805 1.0532 0.7907
1.2345 1.5693 79.03 0.9775 1.0503 0.7880
Support 1.2298 1.5645 78.60 0.9732 1.0451 0.7836
1.2265 1.5617 78.33 0.9700 1.0424 0.7808
1.2216 1.5570 77.89 0.9653 1.0371 0.7763

Economic News

USD – US Retail Sales Give USD a Boost vs. JPY

The USD/JPY shot up to its highest level in almost a month yesterday, after positive US retail sales data signaled to investors that the American economic recovery is progressing quicker than originally thought. The pair was up more than 50 pips during European trading to reach as high as 78.92. A slight downward correction later in the day brought the dollar down to the 78.80 level. Against the Swiss franc, the greenback also saw gains of around 50 pips before peaking at 0.9743. By the afternoon session, the USD/CHF was trading around the 0.9730 level.

Turning to today, dollar traders will want to pay attention to a batch of US news scheduled to be released during mid-day trading. The Core CPI and Empire State Manufacturing Index, both set to be released at 12:30 GMT, have the potential to lead to additional gains for the greenback if they come in above their forecasted levels. Additionally, the TIC Long-Term Purchases at 13:00 GMT may signal additional growth in the US economy if it comes in above the expected 47.5B.

EUR – EU GDP Data Weighs on Euro

Economic contraction in the euro-zone, highlighted by yesterday’s Flash GDP figure, turned the euro bearish against several of its main currency rivals, including the US dollar and British pound. After solid gains during Asian trading, the EUR/USD fell from a high of 1.2384 to the 1.2.325 level by the end of the European session. Against the GBP, the common-currency dropped close to 30 pips to trade as low as 0.7856 by the start of the afternoon session.

Today, a bank holiday throughout much of the euro-zone means that risk appetite in the marketplace is likely to be determined by a batch of US news scheduled to be released during mid-day trading. Any signs of growth in the US economy may lead to risk taking among investors which could boost the euro against safe-haven currencies like the Japanese yen. That being said, if the US indicators come in below their forecasted levels, investors may shift their funds to safe-haven assets, which could result in the euro extending yesterday’s losses.

Gold – Gold Tumbles Following US Data

Positive US retail sales data yesterday signaled a boost in the US economic recovery and caused investors to lessen expectations that the Fed will move to initiate a new round of monetary stimulus. As a result, higher yielding assets like gold took significant losses during the mid-day session. The precious metal fell more than $25 an ounce to reach as low as $1590.62. An upward correction later in the day brought prices slightly above the psychologically significant $1600 level.

Today, gold traders will want to once again pay attention to a batch of US news, as it will likely determine risk appetite among investors. Should the news once again come in above the forecasted levels, gold could take additional losses during the afternoon session.

Crude Oil – Positive US News Sends Oil Higher

Oil received a boost during European trading yesterday, after positive US retail sales data signaled to investors that demand in the world’s largest energy consuming country could go up. Crude gained over $1 a barrel over the course of the day, and eventually peaked at $93.89. A slight downward correction brought the commodity to the $93.25 level later in the day.

Today, in addition to any developments in the Middle East, oil traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. The US inventories figure has come in below the forecasted level for the last two weeks, indicating that the American economy is growing. If today’s news once again signals an increase in oil consumption, crude prices could advance further during afternoon trading.

Technical News

A bullish cross appears to be forming on the weekly chart’s MACD/OsMA, indicating that upward movement could occur in the coming days. That being said, most other technical indicators show this pair range trading, making a definitive trend hard to predict. Taking a wait and see approach may be the best choice at this time.
Most long term technical indicators place this pair in neutral territory, meaning that a definitive trend is hard to predict at this time. 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 weekly chart are narrowing, signaling that a price shift could occur in the coming days. Additionally, the Williams Percent Range on the weekly chart is currently about to drop into oversold territory, indicating that the shift could be bullish. Going long may be the right approach for this pair.
Both the Williams Percent Range and the Relative Strength Index on the weekly chart are very close to crossing into overbought territory, signaling that downward movement could occur in the coming days. Traders will want to closely watch these two indicators. If they do signal that the pair is overbought, it may be a good time to open short positions.

The Wild Card

A bullish cross on the daily chart’s Slow Stochastic indicates that an upward correction could occur in the near future. Additionally, the Williams Percent Range has crossed into the oversold zone. This may be a good time for forex traders to open long positions, as bullish movement could occur shortly.

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