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Wednesday, 11 Jan 2012
EUR Sees Mild Gains in Slow News Day
Riskier currencies like the euro saw mild gains in trading on Tuesday, as investors eagerly await euro-zone news set to be released on Thursday and Friday. Debt auctions from Italy and Spain, as well as the European Central Bank's interest rate decision are forecasted to generate heavy volatility for the rest of the week.
USD - USD Falls against Riskier Currencies
The US dollar took slight losses against most of its main currency rivals on Tuesday, as investors continue to unload some of their short USD positions following an increase in risk-taking. This is largely due to meetings between European leaders which many are hoping will lead to a plan to combat the euro-zone debt crisis. That being said, the overwhelming market sentiment is for a bullish dollar. The EUR/USD is still trading below the 1.3000 level and analysts are warning that the pair could stay there for some time.
Traders should note that the dollar's upward momentum is being driven by poor euro-zone news. Investors view the USD as a safe-haven currency and often turn to it in times of economic uncertainty, often at the expense of riskier currencies like the euro and British pound. It is for this reason that the rest of the week's euro-zone news may create heavy market volatility. Any negative news is likely to benefit the USD. Conversely, if any plans to boost the euro-zone economies are unveiled, the dollar could slip against its main currency rivals.
EUR - Risk Taking Benefits Euro
Investors took meetings between European leaders and the IMF as a sign that a plan to help combat the euro-zone debt crisis may soon be unveiled. As a result, riskier currencies like the euro, Australian dollar and British pound saw mild gains on Tuesday. Analysts are warning that these gains may prove to be insignificant in the long run, and that the market is still overwhelmingly in favor of the safe-haven US dollar. Evidence of this can be seen in the EUR/USD, which failed to break the psychologically significant 1.3000 barrier yesterday.
Turning to today, a slow news day once again means that any information out of the euro-zone is likely to dictate the direction markets take. Italian and Spanish debt auctions scheduled for later in the week, as well as the European Central Bank decision on interest rates are forecasted to generate heavy market volatility.
Positive news out of the euro-zone may prove to be highly beneficial for the common currency. At the same time, analysts are saying that the EUR/USD has the potential to drop to the 1.2600 level, should the EU fail to come up with a credible solution to the current crisis.
CAD - Loonie Moves Up vs. USD amid Risk Taking
The Canadian dollar saw some fairly substantial gains against its American counterpart in trading on Tuesday. The loonie was bolstered following meetings between euro-zone leaders which led to risk taking among investors. The CAD, which is largely linked to commodity and equity prices, tends to move up following positive euro-zone news.
Whether the CAD will be able to maintain its gains today is still unknown. The euro-zone situation is still extremely fragile. Any news that creates doubt in the European economic recovery could cause the loonie to reverse course. Furthermore, should the euro-zone crisis worsen, the CAD is likely to turn bearish extremely quickly.
Crude Oil - Crude Once Again Bullish Ahead of Euro-Zone News
Crude oil saw some significant gains in trading on Tuesday, as risk taking among investor bolstered the commodity. Prices once again were above $103 a barrel, as optimistic euro-zone news sent investors toward commodities.
Additionally, increasing tensions between Iran and the west drove oil prices higher. Supply side fears tend to drive up prices, and analysts are now warning that oil could reach as high as $105 a barrel unless something is done to calm the situation in the Middle East.
Turning to today, crude oil may continue to trade higher if rumors of a plan to combat the euro-zone crisis dominate the headlines. Traders will want to pay attention to any announcements from European leaders for indications about what direction oil will take.
Technical indicators on the daily chart place this currency pair in the oversold zone, indicating that an upward correction may take place in the near future. A bullish cross is forming on the Stochastic Slow, while the Williams Percent Range is right around the -90 level. Going long in your positions may be a wise choice.
GBP / USD
Indicators on the weekly chart are showing a possible upward correction for this pair may take place. The Relative Strength Index is drifting toward the oversold zone, while the Williams Percent Range is already below the -90 level. Traders may want to go long in their positions.
USD / JPY
Most long-term technical indicators are showing this pair trading in neutral territory, meaning that a clear trend has yet to present itself. Traders are advised to take a wait-and-see approach with their trades until a clearer picture develops.
USD / CHF
After spiking in trading last week, technical indicators are showing possible bearish movement for this pair in the near future. The daily chart's Stochastic Slow has formed a bearish cross, while the Relative Strength Index is hovering in the overbought zone. Traders may want to go short in their positions.
The Wild Card
Technical indicators are showing that gold may see downward movement in trading today. The 8-hour chart's Williams Percent Range is currently at -10 and pointing down, which typically means that bearish movement is on the horizon. In addition, the daily chart's Relative Strength Index is approaching the overbought zone.
Forex traders may want to go short in their positions today.
|01:30||AUD||ANZ Job Advertisements||m/m||0.9%|
|03:45||USD||Final Manufacturing PMI||56.2||56.1||-|
|04:00||USD||ISM Manufacturing PMI||56.6||56.5||-|
|04:00||USD||ISM Manufacturing Prices||59.5||58.3||-|
|04:00||USD||Total Vehicle Sales||16.4M||16.6M||-|
|09:15||USD||Spanish Manufacturing PMI||-52.6||-52.4||-|
|09:45||EUR||Italian Manufacturing PMI||50.7||50.6||-|
|10:00||EUR||Final Manufacturing PMI||50.7||50.7||-|