Positive NFP Report Gives Dollar Temporary Boost
The US dollar saw gains against several of its main currency rivals on Friday, following a better than expected US Non-Farm Payrolls (NFP) report which signaled growth in the US labor sector. That being said, the dollar's bullish trend was short-lived as focus once again returned to the impending US “fiscal cliff”. This week, traders will want to pay attention to several potentially significant international economic indicators, including the German ZEW Economic Sentiment, US Trade Balance, US FOMC Statement and finally the German Flash Manufacturing PMI.
USD – All Eyes on US FOMC Statement This Week
The US dollar saw temporary gains against several of its main currency rivals on Friday, following better than expected US employment data which signaled further improvements in the US labor sector. That being said, the greenback quickly turned bearish as investors focused their attention on the upcoming US “fiscal cliff”. Against the Japanese yen, the dollar shot up close to 60 pips during mid-day trading, to reach as high as 82.81, before dropping back to 82.47 where it closed out the week. The USD/CHF gained more than 50 pips during the first part of the day before peaking at 0.9380. A bearish reversal brought the pair to 0.9343 when markets closed.
This week, dollar traders will want to pay attention to several potentially significant pieces of US news. Perhaps most importantly will be Wednesday's FOMC Statement and Press Conference. In addition, this month's Trade Balance, PPI, Retail Sales and Core CPI all have the potential to generate volatility in the marketplace. Should any of the indicators come in above their expected values, the dollar may see gains against currencies like the euro, yen and Swiss franc.
EUR – Euro Remains Bearish amid EU Interest Rate Speculations
The euro continued its downward trend against both the US dollar and Japanese yen on Friday, amid speculations that the European Central Bank is considering cutting interest rates in the near future. The EUR/USD fell more than 70 pips during the first half of the day to reach as low as 1.2874, before an upward correction brought the pair to 1.2925 where it closed out the week. Against the yen, the euro fell some 70 pips to trade as low as 106.09 before a bullish reversal brought the pair to 106.61.
This week, euro traders will want to pay attention to several German indicators. Decreased economic growth forecasts for Germany helped contribute to the euro's bearish movement last week. If tomorrow's ZEW Economic Sentiment or Friday's Flash Manufacturing PMI come in below their expected levels, investors may shift their funds to safe-haven assets, which is likely to result in the euro taking additional losses.
Gold – Euro-Zone News Set to Impact Gold This Week
After taking sharp losses immediately following the release of a better than expected US Non-Farm Payrolls report on Friday, the price of gold was able to recover before markets closed for the weekend. The precious metal fell close to $20 an ounce during the mid-day session to trade as low as $1683.43, before an upward reversal brought prices back to $1703.92.
This week, traders will want to pay attention to news out of the EU, specifically any mention of possible future interest rate cuts, which could result in gold turning bearish again. Furthermore, if any German news this week comes in below expectations, gold is likely to take losses as a result.
Crude Oil – “Fiscal Cliff” Fears Keep Oil Bearish
A better than expected US employment report on Friday, which signaled to investors that American demand for oil is likely to increase, helped crude gain more than $1 a barrel during mid-day trading. The commodity was not able to hold onto its gains though, as fears of the impending US “fiscal cliff”, in which automatic tax increases and spending cuts are set to take place if US leaders fail to agree to a budget, led to risk aversion. Oil ended up finishing the week at $85.99, down approximately $0.60 for the day.
This week, oil traders will want to continue monitoring any developments regarding the “fiscal cliff” negotiations. If the deadlock between US Congressional leaders and President Obama persist, oil prices may see additional bearish movement as a result.
The Bollinger Bands on the weekly chart are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart is close to forming a bearish cross, signaling that the price shift could be downward. Going short may be a wise choice for this pair.
Most long-term technical indicators show that this pair is range trading at the moment, making a definitive trend difficult to predict. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart's Slow Stochastic has formed a bearish cross, signaling an impending downward correction. Furthermore, the same chart's Williams Percent Range has crossed over into overbought territory. Opening short positions may be the wise choice for this pair.
While the Williams Percent Range on the daily chart has crossed over into overbought territory, most other long-term technical indicators show this pair range trading at this time. Taking a wait and see approach may be the preferred strategy at this time, as a clearer picture is likely to present itself in the near future.
The Wild Card
The Relative Strength Index on the daily chart is currently in overbought territory, indicating that this pair could see a downward correction in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions, ahead of possible downward movement.
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