The US dollar took losses against most of its main currency rivals throughout European trading yesterday, amid speculations that the Fed would announce an expansion of its bond buying program to boost the US economic recovery. As a result, commodities, including gold and crude oil, saw upward movement over the course of the day. Today, US news is once again forecasted to generate market volatility. In addition to any developments in the ongoing “fiscal cliff” negotiations, traders will also want to pay attention to the Core Retail Sales, Retail Sales, PPI and Unemployment Claims figures, all set to be released at 13:30 GMT.
Forex Market Trends
USD – Dollar Takes Losses against Riskier Currency Rivals
Speculations that the Fed would announce a new round of quantitative easing yesterday caused the US dollar to fall against most of its higher-yielding currency rivals. The AUD/USD rose as high as 1.0555 during European trading, its highest level in almost three-months. Against the CAD, the greenback fell 0.9852, its lowest level since mid-October. Still, the news was not all bad for the dollar. The USD/JPY hit an eight-month high at 82.90 due to speculations that the Bank of Japan is likely to initiate a new round of monetary easing in the very near future.
Today, dollar traders will want to pay attention to a batch of US news set to be released during mid-day trading. With both the Core Retail Sales and PPI figures forecasted to come in below last month’s results, the USD could see additional bearish movement during afternoon trading. That being said, a better than expected Unemployment Claims or Retail Sales figure could help the greenback recoup some of its recent losses.
EUR – Risk Taking Helps Euro Extend Gains
The euro was able to advance against several of its main currency rivals throughout the day, as the combination of positive German data from earlier in the week and signs of progress in US “fiscal cliff” negotiations led to investor risk taking. The EUR/USD gained more than 50 pips during the European session, eventually reaching as high as 1.3052 before dropping back to the 1.3030 level. Against the Japanese yen, the common-currency advanced more than 60 pips to trade as high as 108.20.
Today, euro traders will want to pay attention to any announcements out of the EU Economic Summit, scheduled to take place throughout the day and tomorrow. While positive German news helped the euro in recent days, uncertainties regarding the economic and political situations in Italy and Spain still threaten to turn the currency bearish. If today’s summit signals any kind of slowdown in the EU economic recovery, the euro could see downward movement going into the end of the week.
Gold – Gold Capitalizes on Bearish US Dollar
Gold prices increased throughout the day yesterday, amid bearish movement for the US dollar which made the precious metal more affordable for international buyers. As a result, prices were able to advance close to $7 an ounce during European trading before peaking at $1718.80. By the beginning of evening session, gold was priced just below the $1717 level.
Today, gold traders will want to pay attention to announcements out of the EU economic summit regarding the current state of the euro-zone recovery. Any indication of an economic slowdown in the EU could result in gold giving up some of yesterday’s gains.
Crude Oil – Signs of Increased Demand Boost Oil Prices
The price of oil was able to move up close to $1 a barrel during European trading yesterday, amid signs of an increase in global demand. Furthermore, speculations that the US Federal Reserve was getting ready to expand its bond buying program generated risk taking among investors, which helped boost commodity prices. By the end of the European session, crude was trading just below the $87 level.
Today, oil traders will want to pay attention to a batch of US news, set to be released at 13:30 GMT. Should any of the news come in above expectations, it may be taken as a sign that US demand for oil will increase, which could help crude extend its bullish trend.
The Bollinger Bands on the weekly chart, indicating that this pair could see a price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is approaching the overbought zone, signaling that the shift could be downward. Traders may want to open short positions for this pair.
While the Relative Strength Index on the daily chart is approaching the overbought zone, most other long-term technical indicators show this pair range trading. Taking a wait and see approach may be the best choice at this time, as a clearer picture is likely to present itself in the near future.
Both the Williams Percent Range and Relative Strength Index on the weekly chart are currently in overbought territory, signaling that this pair could see a downward correction in near future. Furthermore, the Slow Stochastic on the same chart is close to forming a bearish cross. Opening short positions may be the best choice for this pair.
The daily chart’s Bollinger Bands are narrowing, indicating that a price shift could occur in the near future. Furthermore, the Williams Percent Range on both the daily and weekly charts is approaching the oversold zone, signaling that the shift could be bullish. Opening long positions may be the smart choice for this pair.
The Wild Card
The daily chart’s Relative Strength Index has crossed over into overbought territory, signaling that this pair could see a downward correction in the near future. Furthermore, the MACD/OsMA on the same chart appears close to forming a bearish cross. Opening short positions may be the smart choice for forex traders today.
Written by Forexyard.com