Following a relatively mild session last week, traders can anticipate significant market activity in the coming days, as a batch of significant US news is set to be released. While the most attention will be given to Friday’s Non-Farm Employment Change figure, investors will be also looking at today’s ISM Manufacturing PMI and tomorrow’s FOMC Meeting Minutes for clues as to the current state of the US economy. Positive news may help the dollar move up vs. its main currency rivals, including the euro and Japanese yen.
USD – Manufacturing Data May Give USD a Boost Today
The US dollar saw a mixed day on Friday to close out last week’s trading session, as positive euro-zone news generated some risk taking in the marketplace. The passage of Spain’s budget gave investor confidence in the euro-zone economic recovery a slight boost. As a result, the dollar extended its recent bearish trend vs. the euro. The EUR/USD traded as high as 1.3375 on Friday before experiencing a slight downward correction to finish the week at 1.3340. The greenback fared significantly better against the yen. The USD/JPY was bullish for most of the day, and gained close to 100 pips to close out the week at 82.79.
Turning to today, the main piece of US news is likely going to be the ISM Manufacturing PMI, scheduled to be released at 14:00 GMT. Analysts are predicting that today’s news will come in slightly better than last month’s. If true, it would be a sign of further expansion in the US manufacturing sector, and could help the greenback reverse its current bearish trend against the euro.
Taking a quick look at the rest of the week, traders will want to remember that the all-important US Non-Farm Payrolls figure is scheduled to be released this Friday. The figure is widely considered the most important indicator on the economic calendar, and major volatility is to be expected. Ahead of Friday’s news, attention should also be given to Tuesday’s FOMC Meeting Minutes and Wednesday’s ADP Non-Farm Employment Change figure. Positive news from either indicator could help the dollar going into the rest of the week.
EUR – Spanish Budget Helps Turn EUR Bullish
The passage of Spain’s budget that included tough austerity measures helped renew investor confidence in the euro-zone economic recovery on Friday. As a result, the euro saw gains against both the Japanese yen and Australian dollar to close out the week. The EUR/JPY shot up well over 100 pips on Friday to close out the week at 110.45. Meanwhile, against the AUD, the common-currency advance over 60 pips to finish the week at 1.2881.
While euro-zone news was positive overall last week, analysts are quick to warn that the region’s debt troubles are far from over. This week, traders will want to watch out for any news, especially out of Portugal, Italy or Spain, that may indicate the current state of the euro-zone overall. Particular attention should be given to Wednesday’s ECB Press Conference, as it will likely give investors a good idea of where the economic recovery stands.
Silver – Silver Sees Gains amid Weak US Dollar
The price of silver shot up on Friday, reaching as high as $32.60 before staging a mild downward correction to close out the week at $32.22. Analysts attributed silver’s bullish run to the weak US dollar. Precious metals, like silver, typically see gains in value when the dollar is weak because they become more affordable for international buyers.
Taking a look at the next few days, silver traders will want to pay close attention to a batch of significant US news. With both today’s ISM Manufacturing PMI and Wednesday’s ISM Non-Manufacturing PMI expected to show growth in the US economy, the dollar may see some gains to start off the week. If true, silver may reverse its current bullish momentum.
Crude Oil – Crude Oil May Extend Bearish Trend This Week
A sharp increase in US crude oil stockpiles last week was seen as a sign of reduced demand in the world’s largest energy consumer, and resulted in a bearish trend that lasted until markets closed for the week. Crude oil finished out last week’s trading session at $102.95 a barrel, down almost $5 since the US inventories figure was announced on Wednesday.
Turning to this week, a number of factors are set to impct the price of oil. The ongoing conflict with Iran may drive prices up in the coming days, as stronger sanctions by the West may result in supply side fears among investors. That being said, a batch of US indicators scheduled to be released throughout the week are forecasted to show continued growth in the American economy. Should the dollar turn bullish as a result of the news, the price of oil may go down as a result.
The weekly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, there is a fresh bearish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. In that case traders are advised to swing in after the breach takes place.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. . Going short with tight stops might be a wise choice.
The price of this pair appears to be floating in the over-bought territory on the weekly chart’s RSI indicating a downward correction may be imminent. The downward direction on the Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The pair has recorded much bearish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic Slow signals that a bullish reversal is imminent. An upward trend today is also supported by the RSI. Going long with tight stops may turn out to pay off today.
The Wild Card
Crude oil prices have dropped significantly last week and peaked at $103 a barrel. However, on the 8-hour chart RSI is floating in an oversold territory suggests that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.
© 2006 by FxYard Ltd
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