Disappointing Jobs Report Turns Dollar Bearish
The USD tumbled on Friday, following a worse than expected Non-Farm Employment Change report that signaled a slowing down in the US economic recovery. The news increased speculations that the Fed will soon initiate a new round of quantitative easing and resulted in gains for higher yielding assets, including gold and silver. This week, traders will want to pay attention to several pieces of economic news. In particular, Thursday's FOMC Statement has the potential to generate market volatility if the Fed announces new plans to boost the US economy.
USD – All Eyes on Thursday's FOMC Statement
The US dollar tumbled against virtually all of its main currency rivals on Friday, after a disappointing jobs report indicated a further slowing down in the US economic recovery. The USD/JPY fell close to 100 pips after the news was announced, eventually reaching the 78.01 level. The pair was able to stage a minor upward correction to reach 78.21 before markets closed for the weekend. Against the Swiss franc, the greenback dropped more than 140 pips during afternoon trading, eventually closing out the day at 0.9445.
This week, the dollar see further losses if the Fed decides to initiate a new round of quantitative easing to boost the US economic recovery when they meet on Thursday. In addition, traders will want to pay attention to several potentially significant US indicators set to be released over the coming days. Tuesday's trade balance report, followed by the PPI figure on Thursday and retail sales data on Friday, could all result in the greenback extending its recent losses if they come in below their expected levels.
EUR – Euro Finishes Week on a Bullish Note
The euro was able to rally against most of its main currency rivals on Friday, after a worse than expected US jobs report caused investors to revert their funds to the common-currency. The EUR/USD shot up close to 180 pips over the course of the day and eventually closed out the week at 1.2815, its highest level since May of this year. Against the Japanese yen, the common currency gained more than 50 pips to reach a two-month high at 100.23.
Turning to this week, the euro is likely to be influenced by a batch of potentially significant US news, particularly the FOMC statement on Thursday. That being said, traders will also want to pay attention to the results of an Italian ten-year bond auction, also scheduled to take place on Thursday. Last week's unveiling of a plan to combat the euro-zone debt crisis by the ECB led to gains for the euro. If Thursday's auction indicates strong demand for Italian bonds, the common-currency may extend its recent bullish movement.
Gold – Gold at 6-Month High after US Jobs Report
Gold shot up to its highest level in six-months on Friday, after a disappointing US jobs report led to an increase in speculations that the Fed will soon take action to boost the US economic recovery. The precious metal traded as high as $1741.49 before markets closed for the weekend, up more than $50 an ounce for the day.
This week, gold traders will want to continue monitoring the affects US news is having on the dollar. If the greenback extends its recent bearish trend, gold could continue moving upward as it would become cheaper for international buyers to purchase. Particular attention should be given to Thursday's FOMC statement, as it is forecasted to generate the most volatility in the marketplace.
Crude Oil – Hopes for Fed Stimulus Plan Boosts Oil
The price of crude oil was able to advance more than $2 a barrel on Friday, as hopes that the Fed will soon move in and take action to boost the US economic recovery led to risk taking in the marketplace. After falling to $94.07 during mid-day trading, crude was able to advance during the second half of the day to finish out the week at $96.33.
This week, traders should be warned that if the Fed decides not to announce a new round of quantitative easing when they meet on Thursday, crude may reverse some of its recent gains. In addition, oil traders will also want to pay attention to a US inventories report on Wednesday. Any sign of weakened demand for oil in the US could also turn the commodity bearish.
The Bollinger Bands on the weekly chart are narrowing, signaling that this pair could see a shift in price in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed over into the overbought zone, indicating that the change in price could be downward. Opening short positions may be the wise choice for this pair.
The daily chart's Relative Strength Index is approaching overbought territory, signaling that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Going short may be the wise choice for this pair.
While the weekly chart's Williams Percent Range has dropped into oversold territory, most other long-term technical indicators show this pair range trading. 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 is currently in oversold territory, which indicates that this pair could see a bullish correction in the near future. Additionally, the Williams Percent Range on the weekly chart has fallen to the -90 level, giving further support to the theory of impending upward movement. Going long may be the smart choice for this pair.
The Wild Card
The Relative Strength Index and Williams Percent Range on the daily chart have both crossed into the oversold zone, indicating that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart appears close to forming a bullish cross. Going long may be the smart choice for forex traders today.
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