Risk Aversion Continues Ahead of Non-Farms Payrolls
The euro continued to slide throughout yesterday's trading session as risk aversion dominated market sentiment. The common currency dropped to a three-week low against both the US dollar and Japanese yen, while the EUR/CHF dropped below 1.2000 during the morning session. Turning to today, all eyes will be on the US Non Farm Employment Change figure, set to be released at 12:30 GMT. Analysts are forecasting that the US added 211K jobs in March, which if true, may lead to additional gains for the greenback today.
USD – Non-Farms Data Could Help Boost Greenback
The US dollar continued to advance vs. its riskier currency rivals, like the British pound and euro, yesterday following a poorly received Spanish debt auction earlier this week. The GBP/USD fell over 100 pips during European trading yesterday, reaching as low as 1.5804 before staging a mild upward correction. The EUR/USD fell as low as 1.3032, down 125 pips for the day. Against the Japanese yen, the dollar benefited following the weekly US Unemployment Claims figure, which showed additional gains in the US labor sector. The USD/JPY moved up close to 50 pips during European trading.
Turning to today, the US Non Farm Employment Change figure is likely to generate significant market volatility. Providing the employment data comes in as predicted and shows additional gains in the US labor sector, the dollar could continue gaining vs. its main currency rivals. That could be especially true with regards to the euro, which has tumbled lately due to negative euro-zone fundamentals. On the other hand, if the Non-Farms data comes in below the expected 211K, the USD may take some losses against the safe-haven JPY.
EUR – Euro Extends Bearish Trend
The euro tumbled throughout yesterday's trading session, as investors continued to revert their funds to safe-haven assets. The EUR/JPY fell close to 150 pips during European trading, dropping as low as 106.85. Meanwhile, the EUR/CHF briefly dropped below the psychologically significant 1.2000 level. Following the drop, the Swiss National Bank announced that they would intervene to bring the pair back above 1.2000. The euro began its bearish run earlier in the week, following a disappointing Spanish bond auction. Whether or not the common currency can rebound today largely depends on how investors react to today's news.
In previous months, the US Non Farm Payrolls figure has generated risk taking when it came in above expectations and benefitted the euro. Should this occur today, there is a chance that the currency could rebound vs. the safe-haven Japanese yen. That being said, the USD has largely benefitted from positive US news as of late. A better than expected Non Farms figure could result in the EUR/USD sliding further ahead of markets closing for the week.
JPY – Yen Turns Bearish vs. USD
After steadily making gains vs. the US dollar earlier in the week, the Japanese yen turned bearish during yesterday's session. The pair, which had dropped as low as 81.82 during morning trading, moved up as high as 82.39 by the afternoon. Positive US fundamentals were the main contributor to the USD/JPY's bullish correction, including this week's Unemployment Claims figure, which showed additional gains in the US labor sector.
Turning to today, the yen may see additional losses against the dollar, providing that the all-important US Non Farms Payrolls figure comes in at or above the forecasted 211K. That being said, if the figure comes in below 200K, it may be taken as a sign that the US economic recovery is slowing down. In such a case, investors may choose to place their funds with safe-haven currencies, which could result in yen gains to close out the week.
Crude Oil – Crude Oil Stages Mild Recovery
Crude oil turned mildly bullish during last night's trading session, following a steep drop in prices on Wednesday. The price of oil fell as low as $101.03 a barrel following a surprisingly high US Crude Oil Inventories figure released on Wednesday. The commodity was able to bounce back during Asian trading, but still remained low throughout much of the day.
As we close out the week, traders will be closely watching how the markets interpret this month's US Non Farm Payrolls figure. Should the figure come in better than expected, the dollar may see a boost against its main currency rivals, including the euro. In such a case, the price of oil may drop further, as the commodity would become more expensive for international buyers.
Most long term technical indicators place this pair in neutral territory, meaning that no major market movements are expected at this time. That being said, traders will want to keep an eye on the weekly chart's Relative Strength Index, which is currently near the overbought zone. Should the indicator go above 70, it may be a sign of impending downward movment.
The weekly chart's Williams Percent Range is currently at -20, which can be taken as a sign that this pair could see downward movement in the coming days. At the same time, most other long term indicators place this pair in neutral territory. Taking a wait and see approach may be the right choice.
Both the Williams Percent Range and Relative Strength Index on the weekly chart are hovering close to the overbought zone, indicating that this pair could see downward movement in the near future. Traders may want to go short in their positions ahead of a possible bearish correction.
According to the Bollinger Bands on the weekly chart, this pair could see a major price shift in the near future. The Williams Percent Range on the same chart is showing that the shift could be upwards. Going long may be a wise choice for this pair ahead of a possible upward breach.
The Wild Card
A bullish cross on the daily chart's Slow Stochastic indicates that this pair may see upward movement in the near future. The Williams Percent Range on the same chart, which is currently at -80, supports this theory. Forex traders may want to go long in their positions ahead of a possible upward breach.
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