Dollar Sees Mixed Reaction to FOMC Statement
The dollar saw a mixed reaction against its main currency rivals yesterday, following the Fed's decision to expand its bond buying program. Even though the move was widely anticipated, the market still saw substantial volatility, with the USD/JPY jumping 50 pips and the EUR/USD gaining more than 90 pips in the minutes following the decision. Today, US news is once again forecasted to impact the marketplace. Traders will want to pay close attention to the Retail Sales and Core Retail Sales figures, both set to be released at 12:30 GMT. Any better than expected news could help the greenback against the JPY and EUR.
USD – US Data Set to Generate Volatility Today
The dollar was able to bounce back from a seven-month low against the Japanese yen during evening trading yesterday, following the announcement that the Fed was expanding its bond buying program. The USD/JPY jumped some 50 pips following the decision to reach 77.73. A minor downward correction followed, and brought the pair to the 77.60 level. Against the Swiss franc, the dollar fell more than 50 pips following the announcement to trade as low as 0.9364. An upward correction brought the greenback back to the 0.9390 level during evening trading.
Turning to today, dollar traders will want to pay attention to another batch of potentially significant US news. Most importantly, the Retail Sales and Core Retail Sales figures, both scheduled to be released at 12:30 GMT, have the potential to generate volatility for the greenback. In addition, the Prelim UoM Consumer Sentiment indicator at 13:55 could result in the greenback reversing yesterday's gains against the JPY if it comes in below the expected 74.1.
EUR – Euro Sees Gains Following Fed Announcement
The euro advanced against its safe-haven currency rivals during evening trading yesterday, following the Fed's decision to initiate a new round of quantitative easing to boost the US economic recovery. The widely expected move resulted in the EUR/USD gaining more than 90 pips to reach 1.2961, a fresh four-month high. The pair experienced a slight downward correction before finding stability at the 1.2930 level. Against the Japanese yen, the euro advanced more than 70 pips following the news to peak at 100.33.
Today, whether the euro will be able to maintain its bullish trend is largely dependent on a batch of US news set to be released throughout the day. Any disappointing data could result in the common-currency extending its recent gains against the greenback. That being said, if the US indicators come in above their forecasted levels, demand for the greenback could go up, which would result in the euro possibly giving up some of yesterday's gains.
Gold – Gold at Fresh 6-Month High
The price of gold reached a fresh six-month high yesterday, following a decision by the US Federal Reserve to initiate a new round of quantitative easing which resulted in risk taking in the marketplace. The precious metal gained more than $40 an ounce following the decision and was trading above the $1760 level by the evening session.
As we close out the week, gold traders will want to continue monitoring economic indicators out of the US. If the Retail Sales, Core Retail Sales or Prelim UoM Consumer Sentiment figures come in above their forecasted levels, the dollar may be able to see gains during afternoon trading, which could result in gold reversing its current upward trend.
Crude Oil – Risk Taking Boosts Demand for Crude Oil
The price of crude oil shot up by more than $1.50 a barrel during evening trading yesterday, as a move by the Fed to stimulate economic growth in the US led to risk taking in the marketplace. Crude reached as high as $98.32 a barrel, a four-month high after the Fed announced they were initiating a new round of quantitative easing.
Turning to today, oil may be able to extend its recent gains before markets close for the weekend if a batch of US news comes in above their forecasted levels. Any better than expected news may signal to investors that demand for oil in the US will increase. Oil typically sees gains when demand in the US, the world's leading consumer country, increases.
The Bollinger Bands on the weekly chart are narrowing, signaling that this pair could see a price shift in the near future. Furthermore, the Williams Percent Range on the same chart has crossed over into overbought territory, while the Slow Stochastic on the daily chart has formed a bearish cross. Going short may be the wise choice for this pair.
The daily chart's Relative Strength Index has drifted into overbought territory, signaling that a downward correction could occur in the near future. This theory is supported by the Williams Percent Range on the weekly chart, which is currently at the -10 level. Opening short positions may be the smart move for this pair.
A bullish cross appears to be forming on the daily chart's Slow Stochastic, indicating that an upward correction could occur in the near future. Additionally, the weekly chart's Williams Percent Range has crossed into the oversold region. Traders may want to open long positions for this pair.
The Relative Strength Index on the daily chart is currently in oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross. Opening long positions may be the smart choice for this pair.
The Wild Card
The Relative Strength Index on the daily chart has crossed into oversold territory, signaling that this pair could see upward movement in the near future. This theory is supported by the Slow Stochastic on the same chart, which has formed a bullish cross. Forex traders may want to open long positions for this pair.
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