USD Receives Boost Following Bernanke Speech
The US dollar saw significant gains during the afternoon session yesterday, following a speech from Fed Chairman Bernanke which resulted in investors shifting their funds back to the greenback. Turning to today, dollar traders can anticipate another volatile day, as a batch of US news is scheduled to be released. Attention should be given to the Building Permits figure, set to be released at 12:30 GMT, followed by the second part of Bernanke's testimony at 14:00 GMT. Any signs that the Fed will hold off on a new round of quantitative easing for the time being may help boost the greenback in afternoon trading.
USD – Dollar Recoups Losses in Afternoon Trading
The USD saw broad gains against its higher-yielding currency rivals during the afternoon session yesterday, following a speech from Fed Chairman Bernanke in which he failed to mention a new round of quantitative easing to boost the American economic recovery. The GBP/USD fell close to 80 pips during the second half of the day before eventually finding support at around the 1.5550 level. Against the Swiss franc, the greenback spiked more than 70 pips to peak at the 0.9850 level.
Turning to today, several US news events have the potential to generate market volatility. First, the Building Permits at 12:30 GMT is expected to come in slightly below last month's figure. Should the news come in below the forecasted 0.76M, investor confidence in the US economic recovery may decrease, which could lead to dollar losses during mid-day trading. At 14:00 GMT, the Fed Chairman is forecasted to deliver the second part of his testimony. If he once again declines to mention any new initiatives to boost the US economy, the dollar may extend yesterday's gains during the evening session.
EUR – Euro Tumbles vs. Safe-Haven Currencies
The euro took significant losses against its safe-haven currency rivals yesterday, as negative German data reinforced investor fears that the euro-zone crisis is affecting the region's biggest economy. The EUR/USD fell over 100 pips during European trading, eventually reaching as low as 1.2187 before staging a mild upward recovery. The pair eventually stabilized at the 1.2215 level. Against the Japanese yen, the euro tumbled to the 96.40 level, down 95 pips for the day.
Today, euro traders will want to pay attention to any announcements out of the euro-zone related to the ongoing crisis in the region. Any further negative news regarding the debt situations in Spain and Italy may result in the euro extending yesterday's losses. Additionally, US news has the potential to impact the euro. Should any of the economic data signal improvements in the US economy, the euro may continue falling vs. its safe-haven currency rivals.
Gold – Gold Tumbles amid Risk Aversion
The price of gold fell by well over $20 an ounce throughout European session yesterday, as risk aversion returned to the market place amid poor German news. Gold fell as low as $1571.05 during the afternoon session, before staging a mild upward recovery and stabilizing at the $1578 level.
Turning to today, gold traders will want to pay attention to US news, specifically the second part of Fed Chairman Bernanke's testimony at 14:00 GMT. Should the Fed Chairman once again refrain from outlining specific steps to boost the US economy, risk aversion in the marketplace may increase, which could result in gold falling further.
Crude Oil – Crude Oil Reverses Gains Following Bernanke Speech
After steadily increasing in value since late last week due to ongoing tensions with Iran, the price of crude oil turned bearish yesterday following a speech from Fed Chairman Bernanke. Investors shifted their funds to safe-haven assets after the Fed Chairman failed to mention a new round of quantitative easing to boost the US economic recovery. As a result, crude fell from $89.59 a barrel to $87.76 during the afternoon session.
Today, oil traders will want to pay attention to the US Crude Oil Inventories figure at 14:30 GMT. Last week, oil saw a significant boost after the US inventories figure showed a sharp increase in oil consumption. Should today's news once again signal that oil demand is up in the world's leading energy consuming country, crude could reverse yesterday's losses.
The weekly chart's Williams Percent Range has dropped into oversold territory, signaling that an upward correction could occur in the coming days. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bullish cross. Going long may be the correct strategy for this pair.
A bullish cross on the daily chart's MACD/OsMA indicates that this pair may see upward movement in the near future. In addition, the Williams Percent Range on the weekly chart is currently angling downward, and may soon cross into oversold territory. Traders will want to keep an eye on this indicator, as it may signal possible bullish movement in the near future.
Most long-term technical indicators show this pair trading in neutral territory, meaning that no defined trend can be predicted at this time. Traders may want to take a wait and see approach, as a clearer picture may present itself in the near future.
The daily chart's Relative Strength Index has crossed into overbought territory, indicating that this pair could see a downward correction in the near future. Furthermore, the weekly chart's Williams Percent Range is currently at the -10 level. Traders may want to go short ahead of possible bearish movement.
The Wild Card
The Slow Stochastic on the daily chart has formed a bullish cross, indicating that an upward correction could occur in the near future. Furthermore, both the Williams Percent Range and the Relative Strength Index on the same chart have fallen into oversold territory. Going long may be a smart move for forex traders.
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