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Thursday, 27 Jan 2011
Further Bearish Movement Expected for USD Today
The EUR/USD pair is once again floating around the 1.3700 level, as analysts are predicting yet another bearish day for the greenback. A batch of data is expected to show declines in the production, employment and home sales sectors of the US economy, which if true, will likely cause the EUR/USD to test new resistance levels.
USD - Dollar Weakens on all Fronts
The dollar fluctuated against its main currency rivals yesterday, following the announcement that the Federal Reserve will keep interest rates at their current record lows for the foreseeable future. Investors interpreted the announcement as a sign that the US economic recovery still has a ways to go, and shorted the greenback as a result. The EUR/USD went as high as 1.3720 yesterday staging a slight downward correction. Currently the pair is trading around the 1.3700 level. The USD/JPY fell over 40 pips last night, and is currently trading at 82.15.
Today, a batch of US economic news may put further downward pressure on the dollar. At 13:30 GMT, traders will want to pay attention to the Core Durable Goods Orders and Unemployment Claims figures, while at 15:00, the Pending Home Sales figure is set to be released. All three indicators are known to create heavy volatility, and are all forecasted to show a decline in their respective sectors of the US economy.
Assuming today's news comes in as forecasted; analysts are warning that the EUR/USD could test the 1.3785 resistance level. At the same time, the Unemployment Claims figure in particular has proven notoriously difficult to predict. Should the figure come in below the expected number of 407K, the dollar may see some short term gains in afternoon trading.
EUR - Euro Trading Mixed Against Main Currency Rivals
While the euro saw some fairly substantial gains against the dollar yesterday, the currency was bearish against the UK pound and Japanese yen. The EUR/GBP fell some 60 pips yesterday, and is currently trading around the 0.8605 level. The EUR/JPY pair fell over 40 pips yesterday before staging a slight correction. Currently the pair is trading around the 112.50 level.
Analysts attribute the mixed euro movement to predictions that the euro-zone will likely raise interest rates before the United States. At the same time the most recent Bank of England MPC meeting highlighted positive growth forecasts for the UK economy, resulting in gains for sterling.
Today, traders will want to pay attention to the major news events out of the United States. Current predictions are calling for a decline in several key US economic sectors, which if true, is likely to further boost the euro against the greenback. Analysts are currently predicting the EUR/USD pair could test the 1.3785 resistance level before the end of the day.
JPY - Yen Records Solid Gains Against USD and EUR
The yen saw a fairly positive overnight session against most of its main currency rivals. After reaching as high as 82.60 during yesterday's session, the USD/JPY saw a downward correction and is currently trading around the 82.15 level. The EUR/JPY saw similar downward movement last night, falling just over 40 pips before staging a very minor upward correction. Currently the pair stands at 112.55.
The yen is forecasted to increase its gains today, assuming that economic indicators being released out of the US come in as forecasted. Negative US figures are likely to lessen the USD's appeal as a safe haven currency while demand for the yen will likely go up.
Tonight, traders will want to pay attention to the Bank of Japan's Monetary Policy Meeting Minutes, set to be released at 23:50 GMT. Any predictions for further growth in the Japanese economy will likely lead to further bullish movement for the yen.
Crude Oil - Oil Prices Remain Above $87 a Barrel
Crude oil received a substantial boost yesterday, as investors rallied around commodities following President Obama's recent State of the Union Address. The price of crude oil rose from $86.18 yesterday, to as high as $87.75 before staging a slight bearish correction. Currently, the commodity is trading around $87.37 a barrel.
Today, traders will want to pay close attention to the main economic indicators set to be released out of the US. Currently analysts are forecasting that the USD will likely fall following today's news. Typically, the price of oil rises when the dollar is bearish, as investors view the commodity as an alternative to the greenback. If crude oil does receive a boost today, it is likely to test the $88.00 resistance level.
Virtually all long-term technical indicators place this pair in overbought territory, indicating a downward correction is likely to occur today. The daily chart's Stochastic Slow has formed a bearish cross, while the Williams Percent Range on the 8-hour chart is currently at -5. Traders are advised to go short today.
Most technical indicators show this pair trading in neutral territory at the moment, although there are signs on the daily chart that the cross may be approaching the overbought zone. Traders are advised to take a wait and see approach today, as clearer signs are likely to appear later on.
Both the Relative Strength Index and the Williams Percent Range on the 8-hour chart place this pair in oversold territory, indicating a bullish correction is likely to occur today. Traders are advised to open up long positions before the upward breach occurs.
A bullish cross has formed on the 8-hour chart's Stochastic Slow indicating that upward movement is likely to occur. Furthermore, the Relative Strength Index on the daily chart is currently in oversold territory. Going long with tight stops may be the preferred strategy today.
The Wild Card
The Williams Percent Range on the daily chart is currently in oversold territory and angling up, indicating that bullish movement is likely to occur for the pair. This theory is supported by a bullish cross on the 8-hour chart's Stochastic Slow. Now may be a great time for forex traders to open up long positions for the pair, before the upward breach takes place.
|13:30||CAD||NZD Core Retail Sales||m/m||0.1%||0.6%||-|
|15:00||USD||Fed Chair Yellen Speaks||*||*||*|
|19:30||EUR||ECB President Draghi Speaks||*||*||*|