Despite a better than expected German ZEW Economic Sentiment figure yesterday, the euro took moderate losses over the course of the day, after hitting four-month highs against the USD and JPY earlier in the week. Expectations that the Bank of Japan will soon intervene in the currency market to limit the yen’s recent bullish movement helped the USD/JPY bounce back from a recent seven-month low. Today, a batch of US news is likely to generate substantial volatility in the marketplace. Traders will want to pay attention to the Building Permits and Existing Home Sales figures. If either of them comes in higher than expected, the dollar could see gains against the euro and JPY.
Forex Market Trends
USD – US Data Set to Generate Volatility Today
After dropping to a seven-month low against the JPY last week, the US dollar extended its upward correction throughout the day yesterday, as speculations that the Bank of Japan will soon intervene to limit yen growth caused investors to revert back to the greenback. The USD/JPY traded as high as 78.75 during early morning trading, well above last week’s low of 77.13. The greenback also saw bullish movement against the Australian dollar yesterday. The AUD/USD dropped to the 1.0400 level, well below last week’s high of 1.0623.
Turning to today, dollar traders can anticipate substantial volatility in the marketplace following the release of the US Building Permits figure at 12:30 GMT and the Existing Home Sales at 14:00. The greenback may extend yesterday’s upward momentum if either of the economic indicators signals growth in the US economy. At the same time, should any of today’s news come in below their expected levels, the dollar could reverse its recent gains.
EUR – Euro Comes Off Recent Highs
After hitting four-month highs against both the US dollar and Japanese yen earlier in the week, the euro saw bearish movement against several of its main currency rivals yesterday, leading some analysts to speculate that the currency has peaked for the time being. The EUR/USD spent most of the day trading around the 1.3050 level, well below its recent high of 1.3171. Against the JPY, the euro fell more than 50 pips during the first part of the day to trade as low as 102.60.
Today, euro traders will want to pay attention to a batch of US news set to be released during mid-day trading. Should either the Building Permits or Existing Home Sales come in above better than expected, the euro could extend yesterday’s losses against the greenback. Tomorrow, traders will not want to forget to pay attention to several potentially significant pieces of euro-zone news, including manufacturing and services data out of Germany and France, the EU’s largest economies.
Gold – Gold Stages Downward Correction
The price of gold fell over the course of the day yesterday, as investors became concerned that the precious metal was overbought after hitting a near seven-month high last week. Gold spent most of the day trading around the $1755 an ounce level, well below the $1777 level it hit after the Fed announced a new round of quantitative easing in the US on Thursday.
Today, gold traders will want to carefully monitor news out of the US and its impact on risk appetite among investors. Any better than expected news could help the US dollar extend its recent upward movement, which may result in the price of gold falling further. Typically, a strong US dollar causes foreign investors to shift their money away from gold, as it becomes more expensive for them.
Crude Oil – US Inventories Figure Set to Impact Crude
After tumbling more than $4 a barrel earlier in the week, crude oil saw another bearish day yesterday, as investors continued to sell off riskier currencies and commodities. Crude spent much of the day trading around the $96.50 level, well below last week’s high of $100.38.
Today, oil traders will want to pay particular attention to the US Crude Oil Inventories figure, set to be released at 14:30 GMT. Should the indicator come in above expectations, it may signal to investors that demand in the US has gone down, which could result in the price of crude slipping further during afternoon trading.
The Williams Percent Range on the weekly chart has crossed into overbought territory, signaling that a downward correction could occur in the coming days. Furthermore, the Slow Stochastic on the same chart appears close to forming a bearish cross. Going short may be the best choice for this pair.
A bearish cross on the weekly chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. In addition, the Relative Strength Index on the daily chart has crossed into the overbought zone. Going short may be the best choice for this pair.
While a bullish cross has formed on the daily chart’s MACD/OsMA, most other long term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s Williams Percent Range is in oversold territory, indicating that this pair could see upward movement in the coming days. Furthermore, the daily chart’s Slow Stochastic has formed a bullish cross. Traders may want to open long positions for this pair.
The Wild Card
The Relative Strength Index on the daily chart has crossed into overbought territory, signaling that a downward correction could occur in the near future. Furthermore, a bearish cross on the same chart’s Slow Stochastic points to possible downward movement. This may be a good time for forex traders to open short positions for this pair.
Written by Forexyard.com