Better than forecasted German manufacturing data led to modest gains for higher-yielding assets during European trading yesterday. That being said, a record high Spanish unemployment rate limited bullish movement for currencies and commodities like the euro and crude oil. Turning to today, the main pieces of economic news are expected to be the German Ifo Business Climate at 9:00 GMT, followed by the US New Home Sales at 15:00. Riskier currencies like the EUR and GBP could see upward movement if either indicator comes in above their expected levels.
Forex Market Trends
USD – Dollar Volatility Expected After US Housing Data
A disappointing UK BBA Mortgage Approvals figure yesterday resulted in significant gains for the US dollar against the British pound. Meanwhile, the greenback saw bullish movement against the Japanese yen throughout the day, as signs of progress in the global economic recovery encouraged investor risk taking.
The GBP/USD began falling shortly after the mortgage approvals figure was released, eventually reaching as low as 1.5755 by the end of the European session, down close to 100 pips. Positive Chinese and German manufacturing data, followed by a better than expected US Unemployment Claims figure, resulted in the USD/JPY gaining more than 140 pips during the Asian and European sessions to trade as high as 89.89.
Today, dollar traders will want to pay attention to the US New Home Sales figure, scheduled to be released at 15:00 GMT. Expectations are for the figure to come in at 387K, which would signal an improving situation in the US housing market. A better than expected figure today could help the dollar extend yesterday’s bullish trend against the yen before markets close for the weekend.
EUR – German News May Lead to Additional Euro Gains Today
The euro saw gains against both the US dollar and Japanese yen yesterday, following the release of better than expected German manufacturing data during the morning session. Still, analysts were quick to warn that record high Spanish unemployment likely limited the euro’s bullish trend. The EUR/USD gained close to 60 pips during the European session, eventually reaching as high as 1.3362, before dropping back to 1.3345. The EUR/JPY advanced more than 100 pips during mid-day trading to reach as high as 120.10.
The main piece of news for euro traders today is likely to be the German Ifo Business Climate figure, set to be released at 9:00 GMT. With analysts predicting the indicator to come in at 103.1, slightly higher than last month’s result, the euro could see additional upward movement before markets close for the weekend. At the same time, traders should note that if the indicator comes in below expectations, confidence in the euro-zone recovery will likely go down, which would result in losses for the common-currency.
Gold – Gold Prices Fall amid Positive Global Economic Signs
The price of gold fell throughout European trading yesterday, as positive global economic indicators, specifically Chinese and German manufacturing indicators, weakened demand for safe-haven assets. The precious metal fell close to $17 an ounce during the mid-day session to trade as low as $1664.69 before bouncing back to $1670 later in the day.
As markets get ready to close for the weekend, gold traders will want to pay attention to both the German Ifo Business Climate and US New Home Sales figures. If either indicator comes in above their forecasted levels, gold may extend its bearish trend.
Crude Oil – US Unemployment Data Leads to Gains for Crude Oil
After trading flat for most of the European session yesterday, crude oil prices received a boost following the release of a better than expected US Unemployment Claims figure. The indicator led to speculations that demand for oil in the US will go up as the economy improves. Prices advanced close to $1 a barrel during the mid-day session, eventually reaching as high as $96.36.
Turning to today, oil traders will want to pay attention to the US New Home Sales figure, set to be released at 15:00 GMT. If the indicator comes in above the forecasted 387K, it will likely be taken a sign of further improvements in the US economy, which would lead to additional gains for crude oil.
A bearish cross has recently formed on the weekly chart’s Slow Stochastic, indicating that a downward correction could take place in the coming days. This theory is supported by the Williams Percent Range on the same chart, which is currently in overbought territory. Opening short positions may be the smart choice for this pair.
The Williams Percent Range on the weekly chart has crossed into oversold territory, indicating that an upward correction could occur in the near future. That being said, most other long-term technical indicators show this pair range trading, making a definitive trend hard to predict. Taking a wait and see approach may be the wise strategy until a clearer picture presents itself.
The Relative Strength Index on the weekly chart has crossed into overbought territory, indicating that a downward correction could occur in the near future. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Opening short positions may be the wise choice for this pair.
The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift could occur in the near future. Additionally, the MACD/OsMA on the same chart has formed a bullish cross, signaling that the shift could be bullish. Opening long positions may be the best choice for this pair.
The Wild Card
A bullish cross on the daily chart’s Slow Stochastic signals that this pair could see an upward correction in the near future. This theory is supported by the Relative Strength Index on the same chart, which has crossed into oversold territory. Opening long positions may be the smart choice for forex traders today.
Written by Forexyard.com