Disappointing German News Turns EUR Bearish
A worse than expected German Ifo Business Climate indicator yesterday resulted in risk aversion among investors which caused the euro to extend its recent bearish trend. The news also weighed down on commodities, including crude oil which fell throughout the day. Today, several pieces of news have the potential to generate market volatility. Traders will want to pay attention to a speech from ECB President Draghi at 13:00 GMT, followed by the US CB Consumer Confidence figure at 14:00. Any positive comments from Draghi could help the euro recover yesterday's losses, while a better than expected consumer confidence figure could boost the USD/JPY.
USD – Investors Await US Consumer Confidence Figure
The US dollar was able to gain against several of its main currency rivals yesterday, after worse than expected news out of Germany caused investors to shift their funds to the safe-haven greenback. The GBP/USD fell close to 60 pips during European trading, eventually reaching as low as 1.6181 before bouncing back to the 1.6195 level. Against the Swiss franc, the dollar was able to advance more than 50 pips to trade as high as 0.9390. A slight downward correction brought the USD/CHF to the 0.9375 level by the evening session.
Today, the main piece of US economic news is likely to be CB Consumer Confidence figure, set to be released at 14:00 GMT. Analysts are forecasting the figure to come in at 62.9, slightly better than last month's reading of 60.6. Any better than expected news could help the greenback recoup some of its recent losses against the Japanese yen and extend yesterday's gains against the AUD and CHF. At the same time, traders should keep in mind that if today's indicator comes in below the forecasted level, the USD could see losses during afternoon trading.
EUR – Draghi Speech May Lead to Euro Volatility
The euro saw downward movement against virtually all of its main currency rivals after a worse than expected German Ifo Business Climate figure led to doubts regarding the euro-zone's ability to recover from its debt crisis. The EUR/USD fell 65 pips after the news was released to briefly trade below the psychologically significant 1.2900 level. By the afternoon session, the pair had stabilized at 1.2910. Against the British pound, the common currency fell close to 30 pips to reach a two-week low at 0.7953. A slight upward correction brought the euro back up to 0.7969 by the afternoon.
Today, all eyes are likely to be on a speech from ECB President Draghi, scheduled to take place at 13:00 GMT. In addition to the disappointing German news yesterday, the euro has also been weighed down by uncertainties surrounding the debt situations in Spain and Greece. That being said, if Draghi voices optimism today with regards to the euro-zone economic recovery, the common currency may be able to recoup some of yesterday's losses.
Gold – Gold Sees Modest Recovery
After falling more than $13 an ounce when markets opened for the week, gold was able to stage a slight recovery during European trading yesterday. The precious metal was trading as low as $1755.38 during morning trading before bouncing back to the $1763 level, well below last Friday's 6 ½ month high of $1787.
Today, gold traders will want to pay attention to ECB President Draghi's speech at 13:00 GMT. If he sounds an optimistic tone regarding the euro-zone's prospects for economic recovery, risk taking may help gold recover some of yesterday's losses.
Crude Oil – Crude Oil Starts Week on Bearish Note
The price of crude oil fell once again when markets opened for the week yesterday, as risk aversion caused investors to abandon higher-yielding assets. Analysts attributed the bearish movement to disappointing news out of the euro-zone. Crude fell more than $1 a barrel during European trading, eventually reaching the $91.00 level.
Turning to today, oil traders will want to pay attention to a US consumer confidence figure. Any better than expected data could lead to speculations that demand for oil in the US will increase, which may result in the price of oil recovering some of its recent losses during afternoon trading.
A bearish cross on the weekly chart's Slow Stochastic indicates that this pair may see a downward correction in the near future. Additionally, the Williams Percent Range on the same chart has crossed over into overbought territory. Opening short positions may be the wise choice for this pair.
The daily chart's Relative Strength Index has crossed into the overbought zone, signaling a possible downward correction in the near future. This theory is supported by the weekly chart's Williams Percent Range, which is currently above the -20 level. Traders may want to open short positions for this pair.
While a bearish cross has formed on the daily chart's MACD/OsMA, most other technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the near future. Furthermore, the Williams Percent Range on the same chart has crossed into oversold territory, signaling that the price shift could be upward. Opening long positions may be the wise choice for this pair.
The Wild Card
A bearish cross on the daily chart's Slow Stochastic indicates that this pair could see a downward correction in the near future. Additionally, the Williams Percent Range on the same chart is currently above the -20 level, lending further support to the theory of an impending downward correction. Forex traders may want to open short positions for this pair.
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