The EUR/USD pair took off during yesterday’s trading session. The rally was supported by low demand for loans offered by the ECB to European banks. Investors realized European banks might be in better financial conditions than previously thought and responded by buying the euro while selling other currencies. However, the rally halted following a disappointing U.S. private sector jobs report, and later by warnings from ratings agency Moody’s that it will downgrade Spain’s sovereign debt rating.
USD – ADP Figure Comes in Significantly Lower Than Expected
The dollar started yesterday’s trading session on a bad note, taking losses against the euro as investors put aside fears about euro-zone economies. EUR/USD reached a high of 1.2303, before falling back later in the day. The ADP Non-Farm Payrolls Report, which was forecasted to show an addition of 59K U.S. jobs, came in well below expectations. Subsequently, investor fears regarding the pace of the global economic recovery kept downward pressure on oft-traded EUR/USD pair. Better news later in the day, which showed that American business activity grew for the ninth month straight, kept EUR/USD up but unable to break the 1.2300 level.
EUR/USD is currently trading at 1.2207$. Against the CAD, the greenback soared some 88 pips higher in response to a decline in crude oil prices. With regards to the yen, the USD traded relatively flat and seemed to have reached a turning point as sell pressure declined after the approached the 88.00 level.
Looking ahead to today, traders are advised to pay attention to a number of reports set to be published throughout the day. The ISM Manufacturing PMI and the U.S. Pending Home Sales report are both forecasted to show a decline in the overall state of the U.S. economy. Should the predictions come true, traders can expect EUR/USD to drop further.
EUR – Spain’s Ratings Downgrade Warning Stopped Euro’s Rally
EUR/USD started yesterday’s trading session on a high note, supported by low demand for loans offered by the ECB to European banks. Investors realized European banks might be in better financial conditions than previously thought and responded by buying the Euro while selling other currencies. However, the rally was halted following a disappointing reading on U.S. private sector jobs, and later by warnings from ratings agency Moody’s that it will downgrade Spain’s sovereign debt rating.
Eventually the euro ended yesterday higher against the U.S. dollar. Positive news from the euro-zone showed a decline in German unemployment and a surprisingly strong Irish GDP growth report. In contrast to the euro, the British pound declined against the U.S. dollar to the lowest price since last Friday.
Looking ahead to today investors should pay attention to the British Manufacturing PMI and the weekly U.S. Unemployment Claims report. Both are set to impact European currencies, with most analysts forecasting a further decline in confidence in the global economic recovery as a result. In this case, riskier currencies like the pound and euro are likely to drop.
JPY – Yen Approaching Resistance Line Against USD
The yen is about to end its 4th consecutive week of gains against the U.S. dollar. It is currently trading at 88.30, after the U.S. economic news came in far worse then expected. The USD/JPY is reaching a resistance level where sell pressure is expected to decline as more buyers enter the market at the current rate price.
Both the Japanese yen and U.S. dollar are considered safe haven currencies, but investors as of late seem slightly more in favor of the yen over the USD. Looking ahead to today, investors should pay attention to the numerous U.S. economic indicators set to be released. If they disappoint, the yen should continue to strengthen against the U.S. dollar, possibly taking the pair below $88.
Crude Oil – Fears Regarding Pace of Economic Growth hit Oil Prices
Crude oil prices declined yesterday after U.S. fuel stocks unexpectedly rose as reported by the US Energy Information Administration. U.S. crude oil stocks however, fell by 2.01 million barrels, more than double the expected figure.
Crude oil is currently trading around $75 a barrel. The price of oil has the potential to drop further, should the numerous U.S. economic indicators set to be released today further dampen investor confidence in the global economic recovery.
Gold on the other hand traded relatively flat yesterday, after recent days in which the price was quite volatile. The weekly chart is indicating current levels are high, therefore in the medium term gold price might decline.
The EUR/USD cross has experienced a bearish trend for the past 2 dayss. However, it seems that this trend may be coming to an end. For example, the 2-hour chart’s Stochastic Slow signals that a bullish reversal is imminent. . Going long with tight stops might be a wise choice.
The hourly chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour Chart’s RSI is already floating in the oversold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.
The price of this pair appears to be floating in the over-sold territory on the daily chart’s RSI indicating an upward correction may be imminent. The upward direction on the 4 hour chart’s Momentum oscillator also supports this notion. Going long might be a wise choice.
The cross has experienced much bearishness in the past month, and currently stands at the 1.0730 level. There is much evidence in the chart’s oscillators that supports a possible bullish correction today. This is supported by the daily chart’s RSI. Going long with tight stops may turn out to bring big profits today.
The Wild Card
After the recent sharp drop a correction may be taking place today as the RSI seems to be floating in the oversold territory on the hourly and 8 hour charts and a bullish cross is evident on the 4 hour chart’s Slow Stochastic. Forex traders may be advised to go long for the day.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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