Concerns Regarding US Economy Boost Safe-Haven Currencies
While riskier currencies and commodities received a significant boost after it was announced that Barack Obama had been reelected as US President, fears regarding the future of the US economy quickly resulted in investors shifting their funds back to safe-haven assets. Specifically, investors are worried about an impending deadline the US Congress has to agree to a budget before automatic spending cuts are triggered. Today, traders will want to pay close attention to the euro-zone Minimum Bid Rate and ECB Press Conference, followed by the US Trade Balance and Unemployment Claims figures.
USD – Risk Aversion Helps Dollar Recover Earlier Losses
Fears regarding potentially significant budget cuts and tax increases if the US congress fails to agree to a budget, known as the “fiscal cliff,” drove investors to safe-haven assets throughout the day yesterday. As a result, the US dollar was able to recoup most of the losses it took during the Asian session the night before. The USD/CHF gained close to 70 pips, eventually reaching as high as 0.9470 before dropping back to the 0.9455 level. Against the Canadian dollar, the greenback advanced close to 60 pips before peaking at 0.9937.
Today, several indicators out of the US have the potential to generate dollar volatility. Traders will want to pay attention to both the Trade Balance and Unemployment Claims figures, both set to be released at 13:30 GMT. With both indicators forecasted to come in worse than their previous readings, the greenback may not be able to maintain its bullish trend from yesterday. Additionally, the ECB Press Conference, also scheduled for 13:30, may create volatility in the marketplace if there are any announcements regarding the next round of Greek bailout funds.
EUR – Euro Tumbles amid Euro-Zone, US Economic Worries
The euro took significant losses during European trading yesterday, as investors, fearful of Greece's ability to implement new austerity measures and upcoming potentially severe budget cuts in the US, shifted their funds to safe-haven assets. The EUR/JPY tumbled more than 140 pips over the course of the mid-day session, eventually trading as low as 101.80. Against the US dollar, the common currency fell as low as 1.2734, down more than 130 pips.
Today, euro traders will want to pay attention to the euro-zone Minimum Bid Rate at 12:45 GMT, followed by the ECB Press Conference at 13:30. While the European Central Bank is not expected to change interest rates, the press conference could provide important clues as to the current state of the euro-zone economic recovery, especially with regards to Greece. Any signs that the Greek economy is sinking deeper into recession may lead to additional euro losses today.
Gold – US Elections Give Gold a Major Boost
The reelection of US President Obama led to speculations that current monetary easing policies in the US will continue for the foreseeable future. As a result, the price of gold shot up to a 2 ½ week high at $1727.18 an ounce during mid-day trading yesterday. Overall, the precious metal advanced more than $18 throughout the day.
Turning to today, gold traders will want to pay attention to the ECB Press Conference, scheduled to take place at 13:30 GMT. If there are any signs that the economic situation in the euro-zone, specifically Greece, is worsening, could result in the price of gold reversing some of its recent gains.
Crude Oil – Crude Oil Tumbles Following US Election Results
The price of crude oil fell by more than $2.60 a barrel yesterday, after the results of the US presidential and congressional elections were announced. Investor fears that the US Congress will be unable to agree on a plan to avoid impending budget cuts and tax increases, thereby weakening the American economic recovery, was the main reason behind oil's bearish movement. By the end of the European session, the commodity stabilized just above the $86.00 level.
Today, oil traders will want to pay attention to the US Trade Balance and Unemployment Claims figures. Any better than expected data could lead to speculations that demand for oil in the US will go up, which may help the commodity recover some of yesterday's losses.
While the daily chart's Relative Strength Index is approaching the oversold zone, indicating that an upward correction could occur in the near future, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture may present itself in the coming days.
The MACD/OsMA on the weekly chart appears close to forming a bearish cross, indicating that a downward correction could occur in the near future. Furthermore, the Relative Strength Index on the same chart is close to crossing over into overbought territory. Traders will want to keep an eye on these two indicators, as they may soon signal an impending downward correction.
The Williams Percent Range on the weekly chart has crossed into the overbought zone, signaling a possible downward correction in the coming days. This theory is supported by the Stochastic Slow on the same chart, which is close to forming a bearish cross. Opening short positions may be the wise choice for this pair.
While the weekly chart's MACD/OsMA appears close to forming a bearish cross, most other long term technical indicators show this pair range trading. This means that determining a definitive trend may be difficult and traders are advised to take a wait and see approach until a clearer picture presents itself.
The Wild Card
The Slow Stochastic on the daily chart has formed a bearish cross, indicating that a downward correction could take place in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed above the -20 line. Forex traders may want to open short positions for this pair, ahead of possible downward movement.
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