French, Greek Elections Set to Impact Euro
A disappointing US jobs report resulted in the safe-haven US dollar sliding against the Japanese yen while rallying against riskier currencies like the AUD and EUR to close out last week's trading session. Turning to today, elections held in France and Greece over the weekend are forecasted to generate significant market volatility. Any indication that Greece could back away from recent austerity measures as a result of the election could result in the euro extending its current bearish trend.
USD – US Jobs Report Causes USD/JPY to Tumble
Last Friday's US Non-Farm Payrolls figure came in at 115K, well below the forecasted 173K. The news represented the third month in a row of declining hiring in the US, and resulted in renewed speculation that the Fed may initiate a new round of quantitative easing in the near future. Following the news, the USD/JPY tumbled close to 50 pips before closing out the week at 79.86. Against riskier currencies, the dollar did see fairly significant gains, as investors decided to revert their funds to safe-havens following the news. The AUD/USD dropped close to 90 pips on Friday to finish the week at 1.0176.
Turning to today, dollar movement is likely to be determined by how investors interpret two euro-zone elections held over the weekend. Any signs that Greece could back away from austerity measures it recently enacted could result in further gains for safe-haven currencies like the USD. Later in the week, traders will want to pay attention to a speech from Fed Chairman Bernanke scheduled for Thursday. Any indications that a new quantitative easing package is on the way could result in further dollar losses against the yen.
EUR – Risk Aversion Leads to Significant Euro Losses
The euro turned bearish against most of its main currency rivals during trading last Friday, as a negative US jobs report combined with concerns about French and Greek elections led to risk aversion in the marketplace. Investors fear that new governments in either France or Greece could result in a conflict with Germany regarding the best way to help bolster euro-zone economies. The EUR/USD, which peaked at 1.3176 early in the day, fell close to 100 pips to finish the week at 1.3082. The EUR/JPY dropped around 115 pips to close out Friday's session at 104.47.
Today, the euro is forecasted to see significant volatility as investors interpret the results of the two euro-zone elections. Further losses could be seen if Greece is seen as backing away from austerity measures it agreed to in order to receive an international bail-out package several months ago. Additionally, the German Retails Sales figure could result in modest euro losses if it comes in below the forecasted 0.8%. As the biggest economy in the region, German indicators tend to have a significant impact on the euro.
Gold – Gold Sees Significant Gains to Finish Week
Gold turned bullish for the first time in a week last Friday, as poor US employment data sent investors to safe-haven assets. Gold has steadily increased its status as a stable asset in recent months and has generally benefitted from poor global data. The precious metal finished out the week at $1642.03 an ounce, up from $1626.35 during morning trading.
Turning to this week, traders will want to continue monitoring data out of both the euro-zone and US. Any signs that the global economic recovery is slowing down further could result in gold extending its bullish trend. That being said, any positive indicators could result in risk taking in the marketplace, which may cause the precious metal to give up some of its recent gains.
Crude Oil – Crude Oil Falls below $98 Following US News
The price of crude oil tumbled over $4 a barrel during trading on Friday, reaching as low as $97.49, as a worse than expected US jobs report led to risk aversion in the marketplace. In addition, a general slowing down in the pace of the global economic recovery along with steadily increasing crude oil inventories in the US have been taken as signs that demand for oil has decreased, which has contributed to prices dropping.
Turning to this week, oil traders will want to pay attention to news out of the euro-zone. Any indications that this past weekend's elections will cause additional risk aversion in the marketplace could lead to oil dropping further. Additionally, a speech from the Fed Chairman later in the week could result in market volatility. Mention of a new round of quantitative easing may result in oil extending its bearish trend.
The Williams Percent Range on the weekly chart has dropped into oversold territory, indicating that this pair could see upward movement in the coming days. Furthermore, the MACD/OsMA on the same chart appears to be forming a bullish cross. Traders will want to keep an eye on this pair, as it could stage an upward correction in the near future.
A bearish cross has formed on the weekly chart's Slow Stochastic, in a sign that downward movement could occur for this pair. In addition, another bearish cross on the daily chart's MACD/OsMA is providing further evidence of an impending correction. Traders may want to go short in their positions.
Most long term technical indicators place this pair in neutral territory, meaning that no definitive trend can be predicted at this time. The one exception is the weekly chart's MACD/OsMA, which has formed a bearish cross. Traders will want to keep an eye on some of the other indicators on the weekly chart for signs of an impending downward correction.
The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that this pair could see downward movement in the near future. Furthermore, the Relative Strength Index (RSI) on the same chart is moving upward and appears poised to cross into the overbought zone as well. Traders will want to keep an eye on the RSI. If it crosses above 70, it may be a good time to open short positions.
The Wild Card
A bearish cross has formed on the daily chart's Slow Stochastic, indicating that this pair could see an upward correction. This theory is supported by the Williams Percent Range on the same chart, which has dropped below the -80 level. This may be a good time for forex traders to open long positions ahead of upward movement.
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