The US dollar received a boost against several of its main currency rivals yesterday, following the release of better than expected ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI figures. Meanwhile, concerns regarding the pace of the global economic recovery sent the price of crude oil tumbling for most of the day. Today, traders will want to pay attention to several potentially significant indicators out of both the euro-zone and US. The euro-zone Minimum Bid Rate and ECB Press Conference, followed by the US Unemployment Claims and FOMC Meeting Minutes, all have the potential to create heavy volatility in the marketplace.
Forex Market Trends
USD – ADP Figure Brings USD/JPY to 2-Week High
A significantly better than expected US ADP Non-Farm Employment Change resulted in the USD turning bullish against several of its main currency rivals yesterday. The ADP figure is considered an accurate predictor of Friday’s all-important Non-Farm Payrolls figure, and the positive figure boosted confidence in the US economic recovery. The USD/JPY shot up to a two-week high after the indicator was released, eventually more than 30 pips to trade close to the 78.60 by the end of European trading. Against the Canadian dollar, the greenback advanced close to 40 pips before peaking at 0.9883 during mid-day trading.
Today, the USD is likely to see another volatile day as another batch of significant US news is set to be released. Traders will want to pay attention to the US Unemployment Claims figure at 12:30 GMT, followed by the FOMC Meeting Minutes at 18:00. Analysts are forecasting this week’s unemployment figure to come in at 371K, which would be slightly higher than last week’s. If the indicator comes in worse than expected, the dollar could give up yesterday’s gains. With regards to the FOMC Meeting Minutes, should they signal a worsening economic situation in the US, the dollar may turn bearish as a result.
EUR – ECB Press Conference Set to Generate Volatility for Euro
Positive economic data out of the US led to risk taking in the marketplace, which helped the euro advance against the safe-haven Japanese yen. At the same time, the common-currency took losses vs. the USD after confidence in the US economic recovery received a boost. The EUR/JPY gained more than 60 pips for the day, eventually reaching as high as 101.45 by the end of European trading. Against the greenback, the euro slipped more than 40 pips during mid-day trading to trade as low as 1.2886, before bouncing back to the 1.2900 level by the evening session.
Today, euro traders will want to pay attention to the euro-zone Minimum Bid Rate and ECB Press Conference, scheduled to take place at 11:45 and 12:30 GMT, respectively. While the ECB is not expected to change euro-zone interest rates, the press conference is typically used as an opportunity to illustrate the current state of the region’s economies. If the ECB voices a pessimistic note with regards to the euro-zone economic recovery, the common-currency could turn bearish during mid-day trading.
Gold – Gold Remains Close to 11-Month High
The price of gold spent most of yesterday’s trading session within reach of an 11-month high hit earlier in the week. Concerns about the pace of the global economic recovery helped keep demand for the precious metal high throughout the day. Gold advanced close to $9 an ounce to trade as high as $1781.66 before dropping to the $1778 level toward the end of European trading.
Today, gold traders will want to pay attention to both the ECB Press Conference at 12:30 GMT followed by the FOMC Meeting Minutes at 18:00. Any indications that either the euro-zone or US economic recoveries are not progressing quickly enough could boost demand for gold, which may cause prices to rise further.
Crude Oil – Oil Tumbles amid Global Economic Fears
The price of crude oil tumbled close to $3 a barrel during European trading yesterday, as concerns regarding slow global economic growth led to speculations that demand for oil could decrease. The commodity fell by more than $2.80 to reach as low as $88.62, before a slight upward correction brought prices to the $88.90 level.
Today, traders will want to monitor economic data out of the US, particularly the weekly unemployment claims figure. Any better than expected news may signal to investors that demand for oil in the US will go up, which could result in the prices moving upward.
The Williams Percent Range on the weekly chart is approaching the overbought zone, signaling that a downward correction could take place in the coming days. Additionally, a bearish cross has recently formed on the same chart’s Slow Stochastic. Going short may be the wise choice for this pair.
The Bollinger Bands on the daily chart are narrowing, signaling that a price shift could occur in the near future. Furthermore, a bullish cross on the same chart’s Slow Stochastic appears to be forming. Traders may want to open long positions for this pair.
Most long-term technical indicators show this pair range-trading, meaning that no defined trend can be determined at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. Additionally, the same chart’s Williams Percent Range is approaching the overbought zone, indicating that the price shift could be bearish. Going short may be the best choice for this pair.
The Wild Card
A bearish cross on the daily chart’s MACD/OsMA is signaling that a downward correction could take place. This theory is supported by the Relative Strength Index on the same chart, which is approaching overbought territory. This may be a good time for forex traders to open short positions ahead of a possible downward correction.
Written by Forexyard.com