Euro Gains on Speculation ECB May Support the Currency

The EUR rose more than 1% against the U.S dollar and Japanese yen on Wednesday, recouping a steep drop that had extended into the early hours. A fresh round of speculation about other policy actions, including the possibility European officials were preparing to intervene in currency markets to prop up the EUR, kept volatility high.

Economic News

USD – U.S. Dollar Declines after Fed minutes

The U.S dollar extended losses against the EUR on Wednesday after the Federal Reserve upgraded its outlook on the U.S. economy, boosting risk appetite in the market. Given the euro zone’s debt problems, the euro has become a proxy for risk appetite, rising when there’s positive economic news.

The Federal Reserve gave an upbeat outlook of the U.S. economy in the minutes of the most recent meeting of its policy-setting committee.
Data showed the U.S. Consumer Price Index fell for the first time in a year last month and the closely watched core inflation rate eked out its smallest annual gain since 1966, further supporting the Fed’s vow to keep interest rates low for some time.

EUR – EUR Rebounds after 4 Year Low

The European currency rallied from a 4-year low against the U.S dollar on Wednesday, as traders bought the EUR on speculation the European Central Bank will announce further steps to halt the region’s debt crisis.

In early trading, the EUR was up 1.6% against the Dollar at $1.2378 after strengthening as high as $1.2399. The single currency hit session highs after the release of the Federal Reserve’s minutes of its latest meeting, which showed the Fed upgraded its outlook on the U.S. economy, boosting risk appetite in the market.

The EUR has fallen about 15 percent against the U.S dollar so far this year, hammered by concerns that Europe’s debt problems and austerity measures could hamper the Euro Zone’s economic recovery. Traders said that the EUR next support is seen at $1.2133 and if that level is broken, the next support level would be at the psychologically important $1.2000.

JPY – The Yen Rises across the Board

The Yen climbed against 15 of its 16 most-traded counterparts as results of an investigation into the sinking of a South Korean naval ship prompted demand for Japan’s currency as a refuge. The Japanese yen stayed higher versus the greenback, reclaiming its stake as the currency of choice when investors want to be as far away as possible from risky currencies and positions.

The JPY also jumped as much as 3.5% against the Australian dollar; a pair often looked at as an indication of risk aversion.

Oil – Oil Ends Lower in Choppy Trading

Crude-oil failed to post any sizeable gains Wednesday, as investors remained cautious about the global economic recovery and, by extension, about the demand for oil. Crude prices declined 22 cents, or 0.3%, to settle at $72.48 a barrel as investors continued to be worried about the euro and about the economic recovery.

A relatively positive report on inventories and better prospects for economic growth of the U.S. spurred several forays into positive territory, but oil couldn’t sustain them.

Crude oil has been rocked this week over jitters that Europe’s fragile financial situation has the potential to could the outlook for oil demand.

Technical News

There is a bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the weekly chart’s Momentum oscillator also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy.
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.
The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The bullish trend is loosing its steam and the pair seems to consolidate around the 1.1525 level. The daily chart’s Slow Stochastic is showing a fresh bearish cross suggesting that downwards correction might take place in the nearest time frame. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card

Platinum prices have dropped significantly yesterday and peaked at $1618.50 an ounce. However, on the 8-hour chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

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