Euro Extends Gains Following Positive German Data
A better than expected German Ifo Business Climate figure yesterday, helped the euro extend its recent bullish trend during the European session. Higher-yielding commodities, including crude oil, were also able to benefit from risk taking after the German indicator was released. Today, US news is likely to market sentiment, with the Unemployment Claims, Existing Home Sales and Philly Fed Manufacturing Index set to have the greatest impact. Should any of the indicators come in above expectations, the dollar may be able to reverse some of its recent losses.
USD – US Data Set to Impact Dollar Today
The safe-haven US dollar took losses yesterday, following the release of a better than expected German business climate figure which encouraged investors to shift their funds to higher-yielding assets. The GBP/USD advanced more than 30 pips during morning trading to reach as high as 1.6297, before a downward correction brought the pair to 1.6280 during the afternoon session. Against the Swiss franc, the dollar fell some 35 pips to trade as low as 0.9086. By the end of the European session, the USD/CHF was steady at 0.9099.
Today, US news is likely to have a significant impact on dollar pairs. Traders will want to pay close attention to the Unemployment Claims at 13:30 GMT, followed by the Existing Home Sales and Philly Fed Manufacturing Index at 15:00. While the number of people filing for first time unemployment insurance last week is forecasted to have gone up, both the home sales and manufacturing figures are expected to show improvements in the US economy. Any better than expected news may help the greenback reverse some of its recent losses.
EUR – Strong German Indicator Helps Euro
The euro saw across the board gains yesterday, following the release of a better than forecasted German Ifo Business Climate during the morning session. Against the US dollar, the common currency was able to reach a more than eight-month high at 1.3299 before a slight downward correction brought the pair to 1.3277. The EUR/JPY saw gains of 80 pips to peak at 112.43, its highest level since August of 2011. By the end of European trading, the pair was trading slightly higher than 112.00.
Turning to today, euro traders will want to monitor any developments in the ongoing US budget negotiations between Congressional leaders and President Obama. Any signs that the US will avoid the automatic tax increases and spending cuts set to take place at the beginning of the year, known as the “fiscal cliff”, could lead to risk taking which may help the euro extend its recent gains. That being said, if any of the US economic indicators today, specifically the Philly Fed Manufacturing Index and Existing Home Sales, come in above expectations, the euro could give back some of its recent gains against the USD.
Gold – Gold Extends Losses amid Hopes for “Fiscal Cliff” Deal
The price of gold took losses for a second day straight yesterday, amid speculations that a deal is closer to being reached to avoid the so called “fiscal cliff” of automatic spending cuts and tax increases in the US. The precious metal fell as low as $1665 an ounce, down over $10, to reach a more than three-month low. By the end of European trading, prices rebounded slightly to $1671.
Today, developments in the ongoing US budget negotiations are likely to have the biggest impact on gold prices. Any indication that a deal is closer to being reached may result in gold extending its bearish trend.
Crude Oil – Signs of Increased US Demand Boost Oil Prices
The price of crude oil saw bullish movement yesterday, amid signs that demand in the US, the world's leading oil consuming country, has gone up. The commodity gained more than $0.70 a barrel during the morning session, eventually reaching above $89. By the end of European trading, crude was stable at the $88.80 level.
Turning to today, crude oil prices are likely to be impacted by a batch of US news set to be released during afternoon trading. Should the Unemployment Claims, Philly Fed Manufacturing Index or Existing Home Sales come in better than their forecasted levels, oil prices could see additional gains during the second half of the day.
The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that a downward correction could take place in the coming days. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bearish cross. Opening short positions may be the wise choice for this pair.
While the Relative Strength Index on the weekly chart is approaching the overbought zone, most other long-term technical indicators place this pair in neutral territory, making a defined 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 Relative Strength Index on the weekly chart is in overbought territory, indicating that a downward correction could take place in the near future. This theory is supported by the Slow Stochastic on the same chart, which has formed a bearish cross. Opening short positions may be the wise choice for this pair.
The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift could occur in the coming days. Furthermore, the Williams Percent Range on the same chart is in oversold territory, indicating that the price shift could be bullish. Opening long positions may be the best choice for this pair.
The Wild Card
A bullish cross on the daily chart's MACD/OsMA indicates that an upward correction could take place in the near future. This theory is supported by the Williams Percent Range on the same chart, which has crossed into oversold territory. Opening long positions for this pair may be the best choice for forex traders today.
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