Euro Tumbles Following ECB Press Conference

Despite the unveiling of the ECB’s plans to lower borrowing costs in the euro-zone yesterday, the euro fell against most of its main currency rivals during afternoon trading, after it was announced that growth-forecasts in the region have been reduced. Today, traders can anticipate significant market volatility when the US Non-Farm Payrolls figure is announced at 12:30 GMT. The Non-Farm figure is widely considered the most important economic indicator on the forex calendar and its impact is generally felt throughout the marketplace.

Forex Market Trends

Daily Trend up up down up up down
Weekly Trend up up up down down up
Resistance 1.2746 1.6050 79.76 0.9656 1.0432 0.8029
1.2693 1.5997 79.34 0.9604 1.0383 0.7983
1.2660 1.5965 79.08 0.9572 1.0352 0.7954
Support 1.2606 1.5911 78.66 0.9520 1.0301 0.7908
1.2573 1.5878 78.40 0.9488 1.0270 0.7879
1.2520 1.5825 77.98 0.9436 1.0221 0.7832

Economic News

USD – Non-Farm Payrolls Set to Impact USD

Better than expected US economic indicators boosted demand for the USD during European trading yesterday, resulting in the dollar turning bullish against several of its main currency rivals. Both the ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI came in above their forecasted levels. Following the news, the USD/JPY shot up more than 65 pips to the 79.02 level. A slight downward correction later in the day brought the pair to 78.90. Against the Swiss franc, the dollar was able to trade as high as 0.9596, up close to 80 pips for the day.

Turning to today, all eyes are likely to be on the US Non-Farm Payrolls figure, set to be released at 12:30 GMT. Analysts are forecasting that the US added 121K jobs in August, which if true, would be less than in July and could result in dollar losses before markets close for the weekend. That being said, the Non-Farm figure has proven extremely difficult to predict. Any better than expected news could help the greenback extend yesterday’s upward trend.

EUR – Euro-Zone Growth Forecasts Weigh Down on EUR

The euro fell against most of its main currency rivals yesterday after the ECB President reduced forecasts for euro-zone growth and the ECB held interest rates at 0.75%. Additionally, better than expected US news boosted demand for the dollar, turning the EUR/USD bearish. The pair fell more than 90 pips to reach as low as 1.2560 before staging an upward correction to reach the 1.2605 level. Against the British pound, the euro fell more than 40 pips for the day to trade as low as 0.7905 by the afternoon session.

Today, euro traders will want to pay close attention to the US Non-Farm Payrolls figure. If the figure comes in below its forecasted level, speculations that the Fed will initiate a new round of quantitative easing in the near future may increase, which could help the euro recoup yesterday’s losses against the greenback. That being said, any better than expected news could result in the euro taking additional losses before markets close for the weekend.

Gold – Gold Briefly Comes Off 6-Month High

Gold briefly turned bearish during mid-day trading yesterday, following positive American news which boosted demand for the US dollar. A strong dollar typically leads to losses for gold, as the precious metal becomes more expensive for international buyers. Prices fell as low $1696.53 an ounce, down more than $16, before rebounding to the $1708 level.

As markets get ready to close for the weekend, gold traders will want to pay attention to what impact the US Non-Farm Payrolls figure has on the USD during afternoon trading. If the US news comes in above expectations the dollar could turn bullish, which may result in gold decreasing in value. Conversely, a disappointing Non-Farm figure may lead to gold moving past its recent six-month high.

Crude Oil – Crude Oil Benefits from Positive US News

A perceived increase in demand for oil in the US, highlighted by better than expected American news yesterday, helped the crude oil rally during afternoon trading. In addition, the ECB’s recently unveiled bond buying program led to cautious optimism that the global economic recovery may soon start to pick up. As a result, crude gained close to $2 a barrel during afternoon trading to reach as high as $97.50.

Turning to today, oil could extend yesterday’s gains if the US Non-Farm Payrolls figure comes in above the forecasted 121K. Any better than expected news could lead to speculations that the US economic recovery is picking up and that demand for crude in the world’s leading oil consuming country will go up.

Technical News

The Williams Percent Range on the weekly chart has crossed into overbought territory, indicating that downward movement could occur in the near future. Furthermore, a bearish cross has formed on the daily chart’s Slow Stochastic. Opening short positions may be the wise choice for this pair.
While the weekly chart’s Williams Percent Range has crossed over into overbought territory, signaling a possible downward correction, most other technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture may present itself in the near future.
The Bollinger Bands on the weekly chart are narrowing, signaling a possible price shift for this pair in the coming days. Additionally, the Slow Stochastic on the daily chart has formed a bullish cross, indicating that the shift could be upward. Opening long positions may be the wise choice for this pair.
Long-term technical indicators are providing mixed signals for this pair. While the MACD/OsMA on the weekly chart has formed a bearish cross, the Williams Percent Range on the same chart has dropped into oversold territory. Taking a wait and see approach may be the best choice at this time.

The Wild Card

Crude Oil
The Bollinger Bands on the daily chart are narrowing, signaling an impending price shift. Furthermore, both the Williams Percent Range and Relative Strength Index on the same chart appear close to crossing into overbought territory. This may be a good time for forex traders to open short positions ahead of a possible downward correction.

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