The US dollar extended its bearish trend during yesterday’s trading session, as investors continued to digest the disappointing US Advance GDP figure released last week. The greenback hit a two month low against the Japanese yen while the GBP/USD rose to an eight-month high. Turning to today, most European markets are closed for the May Day holiday. That being said, traders will want to pay attention to news out of the US. Specifically, the US ISM Manufacturing PMI is forecasted to generate significant market volatility. A better than expected result could help the dollar recoup some of its recent losses.
USD – US Manufacturing PMI May Help Dollar
The dollar largely remained bearish against its main currency rivals yesterday, following disappointing US news last week which renewed concerns that the Fed will soon initiate a new round of quantitative easing. By the afternoon session, the USD/JPY was down an additional 40 pips from when markets opened for the week, and approached the psychologically significant 80.00 level. The GBP/USD, which during early morning trading hit an eight-month high at 1.6300, staged a slight bearish correction during mid-day trading. The pair eventually stabilized around the 1.6250 level.
Turning to today, traders will want to pay attention to the US ISM Manufacturing PMI, scheduled to be released at 14:00 GMT. Analysts are forecasting today’s news to come in at 53.0, slightly below last month’s figure of 53.4. That being said, should the news come in as expected, it would signal growth in the US manufacturing sector and may help the greenback recoup some of its recent losses. At the same time, traders will want to note that if the PMI comes in below the expected level, the dollar could see further losses against safe haven currencies like the JPY.
EUR – Risk Aversion Keeps EUR Bearish vs. JPY
Risk aversion continued to drive market activity yesterday following news that Spain recently slipped back into recession, and drove the euro lower against the safe-haven Japanese yen. The EUR/JPY dropped close to 70 pips yesterday, reaching as low as 105.73 before staging a slight upward correction during the afternoon session. Meanwhile, a worse than expected Canadian GDP figure resulted in the EUR/CAD spiking over 60 pips. The euro was also able to largely maintain its recent gains against the US dollar, following last week’s disappointing US Advance GDP figure. The EUR/USD spent most of the day around the 1.3225 level after peaking at 1.3266 during early morning trading.
Turning to today, traders will want to note that most European markets are closed due to the May Day holiday. That being said, market volatility is still expected as both the UK and US are scheduled to release manufacturing PMI’s. The euro has been largely bearish against the UK pound in recent days. With today’s UK Manufacturing PMI forecasted to show additional growth in the British economy, the EUR/GBP could move down further. Additionally, today’s news is forecasted to show growth in the US manufacturing sector, which could result in the euro taking losses against the greenback.
AUD – Aussie Drops against Main Rivals
The increase in risk aversion following negative news out of the euro-zone and US led to moderate losses for the Australian dollar during yesterday’s trading session. The AUD/USD, which started off the week at 1.0471, dropped over 60 pips over the course of the day, reaching as low as 1.0410. Against the JPY, the aussie dropped well over 80 pips, and was trading at 83.20 by the afternoon session.
Turning to today, the aussie may be able to recoup some of its losses against the Japanese yen, providing that news from the UK comes in at or above its forecasted level. At the same time, should the US ISM Manufacturing PMI show additional growth in the American economy, the AUD could continue to fall against the US dollar.
Crude Oil – Euro-Zone Data Leads to Drop in Price of Oil
Negative Spanish data combined with concerns that the US Federal Reserve will soon initiate a new round of quantitative easing caused investors to shift their funds to safe-haven assets yesterday. The news caused the price of crude oil to fall over $1 a barrel during the European session. The commodity eventually stabilized around the $104.05 level.
Turning to today, a lack of euro-zone news means that the direction the price of oil takes will largely be determined by the US ISM Manufacturing PMI, scheduled for 14:00 GMT. Should the PMI come in below its forecasted level, the dollar may slip further against its main currency rivals, which could help oil recoup some of yesterday’s losses.
The Williams Percent Rang e on the daily chart has crossed over into overbought territory, indicating that downward movement could occur in the near future. Additionally, a bearish cross has formed close to the 80 level on the same chart’s Slow Stochastic. Going short may be the wise choice for this pair, ahead of a possible downward correction.
In a sign that a downward correction could occur in the near future, the Relative Strength Index has crossed into overbought territory. This theory is supported by the weekly chart’s Williams Percent Range, which is currently well above the -20 level. Going short may be the wise choice for this pair.
The daily chart’s Williams Percent Range has crossed over into oversold territory, indicating that this pair could see upward movement in the near future. Additionally, the weekly chart’s Slow Stochastic seems to be close to forming a bullish cross. Traders will want to keep an eye on the Slow Stochastic. Should the cross form, opening long positions may be the wise choice.
The daily chart’s Williams Percent Range has dropped into oversold territory indicating that upward movement could occur in the near future. That being said, most other long term technical indicators show this pair range trading. Taking a wait and see approach may be the best choice for this pair.
The Wild Card
The daily chart’s Relative Strength Index has just dropped into the oversold zone, indicating that this pair could see upward movement in the near future. Furthermore, the Slow Stochastic on the same chart appears close to forming a bullish cross Forex traders will want to monitor to the Slow Stochastic. Should the cross form, it may be a good idea to open long positions.
© 2006 by FxYard Ltd
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