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Monday, 26 Mar 2012
Euro Rallies vs. USD to Finish Week
The euro hit a three-week high vs. the US dollar on Friday, following a disappointing US housing figure. The New Home Sales figure came in at 313K, well below the 326K analysts had been forecasting. The EUR/USD moved up as a result, reaching as high as 1.3282 before staging a slight downward correction to close out the week at 1.3268. Turning to today, traders will want to note the US Pending Home Sales figure, scheduled to be released at 14:00 GMT. Should the figure come in below the forecasted 1.0%, the euro may be able to extend its bullish run against the USD.
USD - Dollar Turns Bearish amid Disappointing Housing Data
The dollar fell against most of its main currency rivals on Friday, following the release of a disappointing housing statistic. While most other sectors of the US economy have shown continuous growth in recent months, housing remains a potential obstacle for the economic recovery. The EUR/USD shot up to a three-week high during the afternoon session on Friday, reaching as high as 1.3282. Against the yen, the dollar dropped as low as 81.95 before correcting itself. The USD/JPY closed out the week at 82.32.
Turning to today, traders will want to monitor several pieces of news out of the US. First, a speech from Fed Chairman Bernanke, scheduled to take place at 12:00 GMT, may generate market volatility should he offer clues as to any future increase in US interest rates. Following the speech, the US will be releasing the Pending Home Sales figure. Should the figure come in below the forecasted 1.0%, the greenback may extend its bearish trend.
Later in the week, a number of potentially significant US indicators are expected to generate heavy activity in the markets. Tuesday's CB Consumer Confidence report may help the dollar recoup some of its recent losses if it comes in at or above the forecasted 70.5. On Wednesday, analysts are predicting a significant increase in the Core Durable Goods figure over last month. If true, it would signal a boost in the US manufacturing sector, and may help the dollar.
EUR - Euro-Zone Bond Auctions Set to Impact EUR
The euro was able to reverse its recent bearish trend against the dollar on Friday, and closed out the week just below a three-week high. That being said, the common currency had a mixed session against its other main currency rivals. The EUR/JPY, which had reached 109.81 during the morning session, fell over the course of the day to close out the week at 109.24. Against the British pound, the euro saw mild gains on Friday. The EUR/GBP moved up close to 20 pips throughout the day and to finish the week at 0.8359.
Turning to today, euro traders will want to note the result of the German Ifo Business Climate, set to be released at 8:00 GMT. As the euro-zone's biggest economy, German indicators tend to have a significant impact on the euro. Today's indicator is considered particularly significant, and could lead to heavy market volatility.
Later in the week, bond auctions from both Spain and Italy are likely to give investors a better idea of how the euro-zone economic recovery is progressing. Spain and Italy are considered two of the weaker economies in the euro-zone. Should either of the bond auctions not go as well as predicted, the euro may see losses as a result.
AUD - Aussie Stages Recovery on Friday
After tumbling throughout last week, the Australian dollar was able to stage a mild recovery during Friday's session. Riskier currencies, like the AUD, turned overwhelmingly bearish last week, as euro-zone growth fears combined with negative Chinese economic indicators drove investors to safe-haven assets. That being said, the AUD/USD did see fairly significant gains on Friday, gaining close to 100 pips to close out the week at 1.0466.
Turning to this week, euro-zone news may determine whether the aussie is able to extend its recent gains. Today's German Ifo Business Climate, which is forecasted to come slightly above last month's, may generate risk taking in the market, which could help the AUD. Any gains could be temporary though, as bond auctions later in the week from two of the euro-zone's weaker economies may cause investors to revert back to safe-havens.
Crude Oil - Crude Oil Sees Gains to Close Week
Crude oil moved up throughout Friday's session, reaching as high as $107.37 a barrel before staging a downward correction to close out the day at $106.77. Overall, the commodity was up more than $1 for the day. Analysts attributed crude's bullish session to a disappointing US housing figure, which caused the greenback to fall against several of its main currency rivals. Typically, a weak dollar means that commodities, like oil, become cheaper for international buyers, which eventually leads to an increase in prices.
Turning to this week, the direction oil takes will likely depend on news out of the euro-zone. Specifically, bond auctions out of Spain and Italy, which may signal a further slow-down in the euro-zone economic recovery, could cause investors to revert their funds back to safe-haven assets. In such a case, the price of crude oil could drop.
The Bollinger Bands on the weekly chart appear to be narrowing, indicating that a price shift could occur in the coming days. The Williams Percent Range on the daily chart is in overbought territory, signaling that the shift could be downwards. Traders may want to go short in their positions ahead of a possible bearish correction.
Most long term technical indicators show this pair in neutral territory, meaning that no major shift in price is expected at this time. That being said, traders will want to keep an eye on the MACD/OsMA on the daily chart. It looks like a bearish cross may be forming. If so, it may be a sign of a possible impending downward correction.
The weekly chart's Relative Strength Index is hovering right around the overbought zone, indicating that this pair could see downward movement. This theory is supported by the Williams Percent Range on the same chart, which is currently at -20. Traders may want to go short in their positions ahead of a possible downward correction.
While the Williams Percent Range on the daily chart is currently in the oversold region, which is typically a sign of impending upward movement, most other technical indicators are in neutral territory at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture may present itself later on.
The Wild Card
The daily chart's Slow Stochastic has formed a bearish cross, meaning that this pair could see downward movement in the near future. In addition, the Williams Percent Range is trading in the overbought zone, which is typically a sign of an impending downward correction. Forex traders may want to go short in their positions today.
|01:00||AUD||HIA New Home Sales||1.2%||*||-|
|EUR||German Prelim CPI||m/m||0.3%||0.0%||-|
|01:00||EUR||Italian 10-y Bond Auction||2.60|1.5||*||-|
|02:30||AUD||Private Capital Expenditure||q/q||-4.2%||-0.8%||-|
|08:55||EUR||German Unemployment Change||-12K||-6K||-|
|09:00||EUR||M3 Money Supply||y/y||1.5%||1.5%||-|
|09:00||EUR||Italian Retail Sales||m/m||-0.7%||-0.2%||-|
|11:00||GBP||CBI Realized Sales||21||25||-|
|13:30||USD||Prelim GDP Price Index||q/q||2.0%||2.0%||-|
|15:00||USD||Pending Home Sales||m/m||-1.1%||0.6%||-|
|15:30||USD||Natural Gas Storage||88B||79B||-|
|00:05||GBP||GfK Consumer Confidence||-2||-1||-|
|00:30||JPY||Tokyo Core CPI||y/y||2.8%||2.7%||-|