The US dollar took losses against most of its main currency rivals yesterday, as speculations that the Fed may soon initiate a new round of quantitative easing caused investors to shift their funds to higher yielding assets. As a result, riskier currencies like the euro and Swiss franc were able to advance throughout the day. Today, news out of the US is once again forecasted to impact the marketplace. Traders will want to pay attention the Prelim GDP, set to be released at 12:30 GMT, followed by the Pending Home Sales figure at 14:00. Any better than expected news could help the dollar recoup some of its recent losses.
Forex Market Trends
USD – US News Could Boost Dollar Today
The US dollar saw bearish movement against most of its main currency rivals yesterday, as investors continued to await news regarding possible new steps the Fed is getting ready to take to boost the US economic recovery. Against the Swiss franc, the dollar tumbled close to 70 pips during the European session to trade as low as 0.9552. A slight upward correction brought the greenback above the 0.9560 level by the end of European trading. The USD/CAD fell more than 60 pips before finding support at the 0.9851 level.
Turning to today, a batch of US news may be able to help the dollar recoup some of its recent losses. Traders will want to pay attention to the US Prelim GDP and Pending Home Sales figures. Both indicators are forecasted to show improvements in the US economy, which if true, may signal to investors that the Fed will hold off on implementing a new round of quantitative easing. In such a case, the dollar could see gains against its riskier currency rivals, including the CHF and CAD.
EUR – Euro Sees Gains amid ECB Speculation
The euro was able to advance against most of its main currency rivals during the European session yesterday, as investors shifted their funds to riskier assets amid speculations that the ECB may soon take action to lower borrowing costs in Spain and Italy. The EUR/JPY gained more than 80 pips to trade as high as 98.82 before experiencing a slight downward correction. The pair eventually stabilized at 98.65. Against the dollar, the common-currency was able to advance more than 90 pips. After peaking at 1.2572, the EUR/USD dropped to the 1.2560 level.
Today, the euro could see significant volatility as a batch of US news is set to be released during mid-day trading. If any of the data signals growth in the US economy, the dollar may be able to rebound against the euro as a result. Later in the week, traders should not forget to pay attention to the results of the Italian ten-year bond auction, scheduled to take place on Thursday morning. If there is positive demand for Italian bonds, the euro could see bullish movement.
Gold – Gold Remains Close to Recent Highs
The price of gold was able to maintain its upward momentum during trading yesterday, as speculations regarding future monetary easing steps from both the Fed and ECB led to risk taking in the marketplace. The precious metal advanced more than $10 during European trading to trade as high $1670.90, just below its recent four-month high of $1676.64.
Today, gold traders will want to pay attention to the US Prelim GDP and Pending Home Sales figures. Any better than expected news could lessen the chances that the Fed will take steps to boost the US economy. If so, the US dollar may rebound in afternoon trading, which might cause the price of gold to fall.
Crude Oil – US Crude Oil Inventories Figure Set to Generate Volatility
Crude oil was able to recoup some of its losses from earlier in the week yesterday, as fears that an incoming tropical storm could damage US oil production sent prices higher. Crude advanced more than $1 a barrel during the first half of the day to trade as high $96.51. A minor bearish correction brought the commodity to $96.09 by the end of European trading.
Today, the US Crude Oil Inventories figure, set to be released at 14:30 GMT, could lead to significant fluctuations in the price of oil. US stockpiles have steadily decreased in recent weeks, leading to speculations that demand in the world’s leading oil consuming country has gone up. If today’s figure once again comes in below expectations, it may help oil extend yesterday’s gains during afternoon trading.
The weekly chart’s Bollinger Bands are beginning to narrow, signaling that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross, indicating that the price shift could be upward. Opening long positions may be the wise choice.
While the Williams Percent Range on the weekly chart has crossed over into overbought territory, most other long-term technical indicators are currently in neutral territory. Taking a wait and see approach for this pair may be the best choice, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the weekly chart are narrowing, signaling a possible price shift could occur in the coming days. In addition, the MACD/OsMA on the same chart appears close to forming a bullish cross. Traders will want to keep an eye on this indicator. If a bullish cross does indeed form, it may time to open long positions.
Most technical indicators on the daily and weekly charts show this pair range-trading, making it difficult to predict long-term price trends. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself later in the week.
The Wild Card
The Slow Stochastic on the daily chart appears close to forming a bearish cross, signaling that downward movement could occur in the near future. Furthermore, the Williams Percent Range on the same chart has crossed over into overbought territory. Forex traders may want to open short positions ahead of bearish correction.
Written by Forexyard.com