After tumbling against virtually all of its main currency rivals during overnight trading yesterday, after the Bank of Japan (BOJ) announced a new round of monetary easing, the JPY was able to recover virtually all of its losses throughout the European session. Today, both euro-zone and US news is forecasted to generate volatility in the marketplace. Traders will want to pay attention to the results of a bond auction out of Spain, followed by the US Unemployment Claims, Philly Fed Manufacturing Index, and finally a speech from ECB President Draghi scheduled for 16:00 GMT.
Forex Market Trends
USD – Manufacturing Data Could Hurt USD Today
Following a strong first half of the day which saw the USD gain against most of its main currency rivals, the dollar spent most of the afternoon session in a bearish trend. Against the Japanese yen, the greenback was able to capitalize on a new round of monetary easing from the Bank of Japan and gained close to 60 pips during overnight trading. After peaking at 79.20, the dollar began to fall and was trading at the 78.30 level by the end of the European session. Against the Swiss franc, the dollar shot up close to 50 pips to reach 0.9306 during the first half of the day, before dropping back to the 0.9270 level.
Today, traders will want to pay attention to several potentially significant pieces of news out of the US. At 12:30 GMT, the weekly Unemployment Claims figure could help the dollar if it comes in below the forecasted 374K. At 14:00, the Philly Fed Manufacturing Index has the potential to create significant volatility. The indicator has come in below its expected level for the last five months. If it once again disappoints today, the dollar could extend its bearish trend during evening trading.
EUR – Draghi Speech Set to Impact Euro Today
The euro took losses against its safe-haven currency rivals yesterday, as investors continued to view the common currency as overbought following the significant uptrend it saw last week. The EUR/USD fell close to 90 pips during early morning trading, eventually reaching as low as 1.2992, before bouncing back to the 1.3050 level. Against the JPY, the euro fell some 150 pips over the course of the European session, eventually reaching as low as 102.09.
Today, the euro could see additional volatility, as several pieces of significant news are set to be released. First, the Spanish ten-year bond auction could provide important clues as to the current state of Spain’s economy and whether they will seek a bailout to help its ailing banking sector recover. Later in the day, a speech from ECB President Draghi, scheduled to take place at 16:00 GMT, could help the euro recoup some of its recent losses if he signals growth in euro-zone economic recovery.
Gold – Gold Hits Fresh 6-Month High
After the Bank of Japan announced a new round of monetary easing during the overnight session, the price of gold turned bullish and eventually reached a new six-month high. The precious metal gained more than $13 an ounce to reach as high as $1779.14 before staging a reversal and falling to the $1771 level.
Today, gold traders will want to pay attention to euro-zone news, specifically a speech from ECB President Draghi at 16:00 GMT. If the ECB President sounds an optimistic note in his speech regarding the euro-zone economic recovery, investors may revert to riskier assets which could boost gold during afternoon trading.
Crude Oil – Crude Oil Tumbles to 1-Month Low
A significantly higher than expected US Crude Oil Inventories figure, combined with comments regarding the high price of oil out of Saudi Arabia, resulted in crude tumbling to a one-month low during afternoon trading yesterday. Overall, the commodity was down close to $4 during the European session, eventually reaching as low as $92.40 a barrel.
Today, crude traders will want to monitor news out of the US, specifically the Unemployment Claims and Philly Fed Manufacturing Index. Any better than expected news could lead to speculations among investors that demand for oil in the US may go up, which could help crude recovery some of yesterday’s losses.
The Slow Stochastic on the weekly chart appears close to forming a bearish cross, signaling that a downward correction could occur in the coming days. This theory is supported by the daily chart’s Williams Percent Range and Relative Strength Index, both of which have crossed into overbought territory. Going short may be the best choice for this pair.
The daily chart’s Relative Strength Index is currently in overbought territory, indicating that this pair could see downward movement in the near future. This theory is supported by the Slow Stochastic on the weekly chart which has formed a bearish cross. Opening short positions may be the preferred strategy today.
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. That being said, most other long-term technical indicators are currently range trading, making the direction of the price shift difficult to predict. Taking a wait and see approach for this pair may be the best choice.
The Slow Stochastic on the daily chart appears close to forming a bullish cross, signaling that this pair could see upward movement in the near future. Furthermore, the Relative Strength Index on the same chart has dropped below the 30 level. Traders may want to open long positions for this pair.
The Wild Card
A bearish cross on the daily chart’s MACD/OsMA is signaling that this pair could see a downward correction in the near future. Furthermore, the Relative Strength Index on the same chart is in overbought territory. Opening short positions may be the wise choice for forex traders ahead of a possible downward correction.
Written by Forexyard.com