The euro saw very mild gains against the US dollar and Japanese yen during trading yesterday, as investors remained cautious about going overly bullish on the common-currency ahead of an ECB policy meeting on Thursday. Today, traders should anticipate volatility in the marketplace, especially for the US dollar, as several potentially important American indicators are set to be released. At 12:15 GMT, the ADP Non-Farm Employment Change figure could result in losses for the greenback if it comes in below the expected 122K. Traders will also want to note the results of the ISM Manufacturing PMI and FOMC Statement, as both could have a significant impact on the USD.
USD – ADP Non-Farm Figure Set to Generate Volatility
A slow news day yesterday resulted in very little movement for the US dollar against its main currency rivals. After dropping close to 20 pips during the first part of the day, to trade as low as 78.12, the USD/JPY was able to bounce back to the 78.25 level in the afternoon trading. Against the CAD, the greenback was able to move up to the 1.0040 level after a worse than expected Canadian GDP figure was released. Overall, the USD/CAD advanced close to 40 pips during the European session.
Today, dollar traders can anticipate significantly more volatility in the marketplace following the release of the ADP Non-Farm Employment Change at 12:15 GMT. The ADP indicator is considered an accurate predictor of Friday’s all important Non-Farm Payrolls figure and consistently leads to heavy price swings for the greenback. Later in the day, traders should note the FOMC Statement at 18:15. Any indications that the Fed is getting ready to initiate a new round of quantitative easing could result in dollar losses during evening trading.
EUR – Investors Eagerly Awaiting ECB Meeting
The euro saw a light trading day yesterday, as investors continued to wait for Thursday’s ECB policy meeting to see if any new steps to boost the euro-zone economic recovery will be unveiled. The EUR/USD moved up more than 60 pips over the course of the day, eventually reaching as high as 1.2317 before correcting itself and dropping to the 1.2290 level. Against the Japanese yen, the euro was up just over 30 pips by the afternoon session to trade as high as 96.26.
Turning to today, the euro could see heavy movement against the US dollar depending on the result of the US ADP Non-Farm Employment Change figure. If the figure comes in above the forecasted 122K, confidence in the US economic recovery could go up, which may result in the EUR/USD dropping during mid-day trading. On Thursday, traders will want to remember to pay attention to the ECB Press Conference at 12:30 GMT. If any new plans to lower Spanish and Italian borrowing costs are announced, the euro could see significant gains.
Gold – Gold Able to Stay Above $1620 Level
After advancing close to $7 an ounce during the first half of the day, gold proceeded to drop during afternoon trading as investors remained uncertain regarding any new plans the ECB has to combat the euro-zone debt crisis. That being said, the precious metal was able to stay above the $1620 level as investors continued to view it as a safe-haven asset.
Today, any movement for gold is likely to come as a result of US indicators set to be released throughout the day. Should any of the news disappoint and result in losses for the dollar, gold would become cheaper for international buyers, which may result in higher demand and a boost in prices.
Crude Oil – Oil Falls Close to $2 during Afternoon Trading
While the price of crude oil saw moderate gains during the first part of the day to trade as high as $90.26 a barrel, the commodity proceeded to drop close to $2 during the afternoon session, eventually reaching the $88.36 level. Analysts attributed the downward movement to fears that the US Federal Reserve will not initiate a new round of quantitative easing to boost the US economic recovery.
Today, oil prices may fall further depending on the results of the US Crude Oil Inventories figure and FOMC Statement. An increase in US crude oil stockpiles could signal to investors that demand has gone down, which may result in a drop in the price of oil. Furthermore, if the FOMC does decide to refrain from initiating a new round of quantitative easing, oil could see additional downward movement.
The Williams Percent Range on the weekly chart has crossed into the oversold zone, indicating that this pair could see upward movement in the near future. Furthermore, the Bollinger Bands on the daily chart are narrowing, signaling that a price shift could occur in the near future. Going long may be the smart choice for this pair.
A bullish cross appears to be forming on the weekly chart’s MACD/OsMA, signaling that an upward trend could occur in the coming days. That being said, most other technical indicators show this pair range trading. Traders may want to take a wait and see approach for this pair.
The Bollinger Bands on the daily chart are narrowing, indicating that this pair could see a price shift in the near future. Additionally, the Williams Percent Range on the weekly chart appears close to dropping into oversold territory. Traders will want to monitor the Williams Percent Range. Should it drop below the -80 level, it may be time to open long positions.
A bearish cross on the weekly chart’s Slow Stochastic indicates that this pair could see downward movement in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed into overbought territory. Going short may be the wise choice today.
The Wild Card
Technical indicators on the daily chart are signaling that gold could see downward movement in the near future. The Williams Percent Range has crossed into overbought territory, while the Slow Stochastic has formed a bearish cross. Forex traders may want to go short in their positions ahead of a possible downward breach.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.