Risk Taking Benefits Higher Yielding Assets
Higher yielding assets like the Australian dollar saw significant gains during the European session yesterday after several positive global indicators led to risk taking in the marketplace. In addition, the ongoing tensions between Iran and the West resulted in crude oil extending its recent bullish run. As we close out the week, traders will want to continue monitoring developments out of the euro-zone. Pessimism in the EU economic recovery prevented the euro from benefitting from risk taking yesterday. Any further negative developments in the region today could result in the common-currency dropping further.
USD – Dollar Remains Bearish Following US News
The US dollar took losses against several of its main currency rivals yesterday, as negative US economic indicators led to further doubts regarding the strength of the American economic recovery. The greenback fell to an 11-week low against the Australian dollar following the release of a higher than forecasted US Unemployment Claims figure. The AUD/USD reached as high as 1.0442 before staging a slight downward correction and stabilizing at the 1.0420 level. Against the Japanese yen, the dollar fell to a six-week low at 78.42 after the unemployment statistic was released.
As markets prepare to close for the week, traders will want to note that a lack of significant US news means that dollar movement is likely to be a result of announcements out of the euro-zone. Any additional negative developments with regards to the euro-zone debt crisis could result in risk aversion in the marketplace, in which case the dollar may recoup some of its recent losses against the aussie and yen. That being said, with investor confidence in the US economy still low, the greenback has the potential to take additional losses today.
EUR – Euro Hits Fresh Record Low vs. AUD
The euro extended its recent downward trend against the Australian dollar yesterday, as positive Australian data combined with pessimism in the EU economic recovery weighed down on the common currency. The EUR/AUD fell close to 60 pips during the European session, to reach a record low at 1.1739. The euro also saw bearish movement against the safe-haven Japanese yen throughout the day yesterday. The EUR/JPY tumbled close to 70 pips, eventually hitting 96.11 during the afternoon session.
Today, traders will want to continue monitoring developments out of the euro-zone. The euro has become extremely sensitive to comments from EU leaders regarding the current debt crisis in the region. Any negative announcements today may cause the euro to extend its recent downward trend before markets close for the week. That being said, any positive global indicators could result in risk taking in the marketplace, in which case the euro may see moderate gains.
Gold – Gold Sees Moderate Gains amid Risk Taking
The price of gold saw a mild upward correction during European trading yesterday, as positive global economic indicators led to risk taking in the marketplace. After gaining close to $14 to peak at $1591.44, the precious metal staged a mild downward correction before stabilizing at the $1585 level.
Turning to today, analysts are warning that given the current pessimism among investors regarding the euro-zone economic recovery, gold may have a hard time maintaining its bullish trend. Any negative comments from euro-zone leaders today regarding the region's debt crisis could have a negatively affect gold before markets close for the week.
Crude Oil – Dispute with Iran Leads to Gains for Crude Oil
The price of crude oil advanced as high as $92 a barrel yesterday as supply side concerns due to the ongoing conflict with Iran, combined with an increase in crude demand in the US, caused investors to buy into the commodity. Overall, crude was up well over $1 a barrel during European trading.
As markets get ready to close for the weekend, oil traders will want to continue monitoring developments with regards to the ongoing dispute over Iran's nuclear program. Any signs of escalation in the conflict may result in the price of oil moving up further today.
The Williams Percent Range on the weekly chart has fallen into oversold territory, indicating that this pair could see an upward correction in the near future. Additionally, the daily chart's MACD/OsMA appears to be forming a bullish cross. This may be a good time to open long positions.
Most long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be established at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The daily chart's Slow Stochastic has formed a bullish cross, indicating that this pair could see an upward correction in the near future. Furthermore, the Williams Percent Range on the same chart has dropped into the oversold zone. Opening long positions may be the wise choice for this pair.
The Relative Strength Index on the weekly chart is approaching overbought territory, indicating that this pair could see a downward correction in the coming days. Furthermore, the daily chart's Williams Percent Range has crossed above the -20 level. Traders may want to open short positions for this pair.
The Wild Card
The daily chart's Williams Percent Range has drifted 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 appears to be forming a bearish cross. Going short may be the wise choice for forex traders.
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