Concerns Regarding US Economy Leads to Losses for USD
The US dollar took losses against several of its main currency rivals yesterday, amid concerns regarding the US economic recovery, highlighted by a worse than expected Advance GDP figure. Meanwhile, the euro extended its bullish trend, as positive signs out of the EU banking sector encouraged investors to shift their funds to riskier assets. Today, investors will be paying attention to news out of both the EU and US. The German Unemployment Change and US Unemployment Claims figures, set to be released at 8:55 and 13:30 GMT, both have the potential to generate market volatility.
USD – Dollar Remains Bearish amid Disappointing US News
Decreased confidence in the US economic recovery, highlighted by a worse than expected Advance GDP figure, caused the US dollar to extend its recent bearish trend throughout the day yesterday. Against the Swiss franc, the greenback fell more than 80 pips during European trading, eventually reaching as low as 0.9135. The GBP/USD gained more than 60 pips during mid-day trading, eventually peaking at 1.5798, before a slight downward correction brought the pair back to the 1.5775 level.
Today, the main piece of US economic news is likely to be the weekly Unemployment Claims figure, set to be released at 13:30 GMT. Analysts expect today's news to come in at 362K, which if true, would represent an increase in unemployment claims from last week, and may result in additional losses for the greenback during afternoon trading. Later in the week, traders will not want to forget to pay attention to the US Non-Farm Payrolls figure, as it is expected to generate extreme volatility for the dollar before markets close for the weekend.
EUR – Confidence in EU Economic Recovery Helps Boost Euro
Confidence in the euro-zone economic recovery boosted risk taking in the marketplace yesterday, which helped the euro extend its bullish trend vs. most of its main currency rivals. Specifically, a rejuvenated European banking sector encouraged investors to shift their funds to higher-yielding assets, including the euro. The EUR/USD was able to reach a new 14-month high at 1.3561 during mid-day trading, while the EUR/JPY gained more than 100 pips during the European session to trade as high as 12384, a 33-month high.
The main piece of European news today is likely to be the German Unemployment Change figure, set to be released at 8:55 GMT. As the biggest economy in the euro-zone, news out of Germany tends to have a significant impact on euro pairs. If today's news comes in above the forecasted 9K, risk aversion among investors may cause the euro to reverse some of its recent gains during mid-day trading. Conversely, if today's news signals additional improvements in the EU, the common-currency could extend its gains.
Gold – Gold Turns Bullish Following US News
A disappointing US Advance GDP figure led to speculations that the Fed will leave its current monetary easing policy in place for the foreseeable future, which resulted in significant gains for gold during afternoon trading yesterday. The precious metal shot up more than $16 an ounce after the news was released, eventually reaching the $1680 level.
Today, gold traders will want to pay attention to the US Unemployment Claims figure, set to be released at 13:30 GMT. If the figure signals a further slowing down in the US economic recovery, investors may shift their funds to gold and boost prices further.
Crude Oil – Oil Takes Losses amid US Demand Worries
Oil prices took moderate losses during afternoon trading yesterday, amid concerns regarding a decrease in demand in the US, the world's leading oil consuming country. Oil prices fell close to $0.75 during mid-day trading, eventually reaching as $97.40 before bouncing back to the $97.60 level.
Turning to today, oil traders will want to pay attention to unemployment indicators out of both Germany and the US. If either of the indicators signals improvements in either the US or Germany, investors may shift their funds to riskier assets, which would in turn boost oil prices.
A bearish cross is close to forming on the weekly chart's Slow Stochastic, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently approaching overbought territory. Opening short positions may be the best option for this pair.
The Williams Percent Range on the weekly chart has fallen in into oversold territory, signaling that an upward correction could occur in the near future. This theory is supported by the Slow Stochastic on the daily chart, which is close to forming a bullish cross. Opening long positions may be the best choice for traders.
The Relative Strength Index on the weekly chart is currently overbought territory, indicating that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Opening short positions may be the best choice for traders.
Most long-term technical indicators show this pair trading in neutral territory, meaning a definitive trend is difficult to predict at this time. 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 Wild Card
The Slow Stochastic on the daily chart is close to forming a bullish cross, indicating that an upward correction could occur in the near future. Furthermore, the Relative Strength Index on the same chart has fallen into oversold territory. This may be a good time for forex traders to open long positions ahead of possible upward movement.
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