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Friday, 27 Jan 2012
EUR Bullish as Investors Shift Focus to Fed Decision
The euro staged a strong upward correction throughout the day yesterday, as investors shifted focus away from the euro-zone crisis to a recent decision from the US Federal Reserve. The Fed announced earlier in the week that US interest rates would remain at their current levels for at least the next two years. The news brought the EUR/USD to a five-week high, at 1.3175. Today, traders will want to pay attention to the US Advance GDP figure. A positive reading may give the USD a temporary boost to close out the week.
USD - Fed Decision Turns USD Bearish
The US dollar turned overwhelmingly bearish throughout yesterday's trading session, following the Fed announcement that US interest rates would remain at their current levels for at least the next two years. The greenback took further losses after the weekly US Unemployment Claims came in higher than forecasted. The news brought the EUR/USD to a five-week high, while the USD/JPY reversed gains made earlier in the week and tumbled close to 80 pips.
As we close out the week, analysts are forecasting the USD to maintain its current bearish trend. The surprising decision from the Fed caused investors to question the pace of the US economic recovery. This sentiment was reinforced by several economic indicators out of the US yesterday that came in below expectations. Traders will want to note the results of the Advance GDP figure today, scheduled to be released at 13:30 GMT. A positive number may give the dollar a temporary boost before markets close.
Traders will not want to forget that next week the US will release its monthly Non-Farm Payrolls (NFP) figure. The NFP is widely considered the leading economic indicator on the forex calendar and consistently leads to market volatility. Should the NFP show further growth in the US employment sector, riskier currencies like the euro may see upward movement.
EUR - Positive Greek News Sends EUR/USD to Five-Week High
News that Greece is closer to concluding an agreement with its creditors on a debt swap deal helped send the euro higher against most of its main currency rivals during yesterday's trading. The EUR/USD peaked at 1.3175 during European trading, a five-week high. The euro was also helped by news which led investors to believe that the US economic recovery was not proceeding as quickly as once thought.
Whether the euro will be able to maintain its bullish trend to close out the week will likely be determined by several economic indicators set to be released today. Traders will want to pay close attention to the US Advance GDP figure, set to be released at 13:30 GMT. Should the indicator come in below expectations, the euro may see a boost as a result. Furthermore, any positive news regarding Greece is likely to help the common currency ahead of markets closing for the weekend.
JPY - Yen Recoups Earlier Losses against USD
The Japanese yen was able to bounce back against the US dollar during yesterday's trading session. The USD/JPY pair shot up earlier in the week, following news that Japan had logged its first trade deficit in over 30-years. That news was overshadowed by the US Federal Reserve Decision to maintain the current, near-zero interest rates for at least the next two years. The USD/JPY pair dropped close to 80 pips during the European trading session.
Today, the US Advance GDP figure is likely to dictate the direction the USD/JPY will take, with a positive figure likely to boost the dollar to close out the week. Against the euro, the yen may see downward movement if further positive news regarding Greece's debt swap is released.
Crude Oil - Oil Once Again Above $100 a Barrel
The price of crude oil shot up yesterday, following positive European news that helped turn investors on to commodities. Typically the oil becomes more attractive to international investors when the euro increases in value. Yesterday was no exception, as the price of crude once again shot up to over $100 a barrel.
Today, traders will want to pay attention to the direction the euro takes as it is likely to dictate where the price of oil will head. Any further developments in Greece's attempt to close a debt swap deal will likely lead to positive gains for oil as trading closes for the weekend.
Technical indicators are showing that this pair has entered the overbought zone and may see a downward correction. The daily chart's Williams Percent Range has hit the -20 level, indicating that a downward breach could occur. Traders may want to go short in their positions.
A bearish cross has formed on the daily chart's Stochastic Slow, indicating that a downward correction may take place in the near future. In addition, the Williams Percent Range on the same chart is well above the -20 level and pointing down. Going short may be the preferable choice for now.
Following the spike the pair saw in recent trading, technical indicators are now showing that a downward correction could take place in the near future. The 8-hour chart's Relative Strength Index is already well into the overbought zone, while the Stochastic Slow has formed a bearish cross. Short positions may be preferable.
Most technical indicators are showing this pair range trading, meaning that no defined trend is forecasted at the moment. Traders will want to pay attention to the technical indicators on the daily chart, as a better picture is likely to present itself in the near future. Taking a wait and see approach for this pair is advised.
The Wild Card
After a steady increase in the price of gold over the last few weeks, technical indicators are now showing that a downward correction may occur in the near future. A bearish cross has formed on the daily chart's Slow Stochastic, while the Relative Strength Index on the same chart has drifted into the overbought zone. Forex traders may want to go short in their positions today. forex
|23:50||JPY||M2 Money Stock||y/y||4.4%||4.4%||-|
|00:00||JPY||Monetary Policy Statement||*||*||*|
|00:00||JPY||BoJ Press Conference||*||*||*|
|00:00||GBP||10-y Bond Auction||2.73|1.8||*||-|
|00:01||GBP||BRC Retail Sales Monitor||y/y||3.9%||*||-|
|00:30||AUD||NAB Business Confidence||8||*||-|
|06:00||JPY||Prelim Machine Tool Orders||y/y||40.3%||*||-|
|07:00||EUR||German Trade Balance||18.5B||19.3B||-|
|10:00||GBP||Inflation Report Hearings||*||*||*|
|15:00||GBP||NIESR GDP Estimate||0.8%||*||-|
|23:30||AUD||Westpac Consumer Sentiment||-3.0%||*||-|