Spanish Worries Continue to Weigh Down on Euro
Rising Spanish bond yields combined with fears that the country will soon need an international bailout sent the euro to new lows against its main currency-rivals yesterday. The EUR/USD fell to its lowest level in more than two-years, while the EUR/JPY fell close to a 12-year low. Today, analysts are warning that, depending on the results of French and German manufacturing and services data, the euro could fall further. Traders will also want to pay attention to a speech from Fed Chairman Bernanke. If the Fed Chairman hints at a new round of quantitative easing to boost the US economy, the euro could reverse some of its recent losses against the greenback.
USD – Safe-Haven USD Gains on Riskier Currencies
The US dollar extended its upward trend against most of its main currency rivals during European trading yesterday, as investors remained fearful about the debt situation in Spain. In addition, renewed concerns about the health of Greece's economy sent investors to safe-haven assets. The EUR/USD dropped close to 80 pips to reach 1.2066, its lowest level since June of 2010. The AUD/USD fell just over 70 pips before finding support at the 1.0250 level. The USD was not as fortunate against its safe-haven rival, the JPY. The USD/JPY fell to a six-week low at 77.94 before staging a reversal and moving up to 78.20.
Turning to today, dollar traders will want to pay attention to a speech from Fed Chairman Bernanke, set to take place at 12:45 GMT. Given that the US economy has slowed down in recent months, investors will be closely watching today's speech to see if the Fed Chairman will hint at a new round of quantitative easing. If he does, the dollar could reverse some of its gains from yesterday. That being said, if Bernanke remains quiet about any new steps to boost the US economic recovery, the dollar could extend its recent bullish trend.
EUR – Euro Slides Downward as Greek Worries Return to Marketplace
Investors once again grew fearful regarding the economic situation in Greece yesterday, following a report that the International Monetary Fund may not continue financing the country. The news, combined with rising borrowing costs in Spain, sent investors away from riskier assets and resulted in the euro falling across the board. After falling over 100 pips during overnight trading, the EUR/JPY hit a 12-year low at 94.23 during early morning trading. Against the British pound, the euro dropped to a 3 ½ year low at 0.7758 before staging a mild upward correction and stabilizing at the 0.7800 level.
Today, euro traders will want to pay attention to the French and German Manufacturing and Services Purchasing Managers Indices, set to be released at 7:00 and 7:30 GMT. Should any of the data indicate that the euro-zone debt crisis is weighing down on either the French or German economies, the common-currency may take additional losses during the European session. In addition, any negative reports or announcements regarding the Greek economy could result in further euro bearishness.
Gold – Strengthened USD Weakens Gold
The price of gold fell as low as $1562.92 an ounce during mid-day trading yesterday, as a strengthened US dollar made the precious metal more expensive for international buyers. Overall, gold fell more than $20 over the course of the day before staging a minor upward correction and stabilizing at $1570.
Today, gold traders will want to pay attention to the USD, and any movement it sees following a speech from Fed Chairman Bernanke. If the Fed Chairman strikes a pessimistic tone regarding the pace of the US economic recovery, investors may begin speculating that a new round of quantitative easing may be coming, in which case the dollar could reverse its bullish trend. As a result, gold could begin moving upward again.
Crude Oil – Risk Aversion Causes Oil to Reverse Bullish Trend
Risk aversion in the marketplace due to renewed worries regarding the Spanish and Greek economies resulted in the price of crude oil falling throughout the day yesterday. The euro-zone news outweighed the supply side fears due to conflict in the Middle East that had caused oil to turn bullish last week. The commodity dropped almost $2 a barrel during European trading, eventually reaching as low as $87.92.
Today, oil traders will want to continue monitoring any developments in the euro-zone, as they are likely to continue influencing the direction crude takes. Should the euro continue to slide against the US dollar, oil could take additional losses, as the commodity would become more expensive for international buyers.
The weekly chart's Slow Stochastic appears to be forming a bullish cross, indicating that this pair could see an upward correction in the coming days. Furthermore, the same chart's Williams Percent Range has crossed over into oversold territory. Traders may want to open long positions for this pair.
Long-term technical indicators indicate that this pair is range trading, meaning that no defined trend can be determined 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 Relative Strength Index has crossed into oversold territory, signaling possible upward movement for this pair in the near future. In addition, the Slow Stochastic on the same chart appears to be forming a bullish cross. Going long may be the wise choice for this pair.
The weekly chart's Williams Percent Range is currently well into overbought territory, signaling that downward movement could occur in the coming days. Furthermore, the Relative Strength Index on the same chart is currently at the 70 level. Opening short positions may be the wise choice for this pair.
The Wild Card
The Relative Strength Index on the daily chart has crossed over into oversold territory, indicating that this pair could see an upward correction in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross. Forex traders may want to open long positions ahead of a possible upward breach.
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