The euro was able to stay above the 1.3700 level against the US dollar in overnight trading, as analysts are predicting a hike in euro-zone interest rates in the near future. The anticipated hike outweighed investor concerns regarding the prolonged Egyptian turmoil, which had sent riskier assets like the euro down earlier in the week.
USD – USD Tumbles in Overnight Session
The US dollar turned bearish late last night, as rumors began circulating that the euro-zone may raise key interest rates in the near future. The anticipated move caused investors to flock to riskier assets like the euro and sterling, largely at the expense of the greenback. The EUR/USD was once again able to move above the psychologically significant 1.3700 level, after having fallen as low as 1.3570 during yesterday’s session. Currently the pair stands at 1.3716. The GBP/USD shot up close to 60 pips in the overnight session before staging a slight correction. Currently the pair stands at 1.6045.
Today, dollar traders will want to pay close attention to this month’s US ISM Manufacturing PMI, scheduled to be released at 15:00 GMT. The manufacturing industry has proven to be a significant indicator of American economic health. For today’s figure, analysts are predicting a result of around 57.8, which if true would signal industry expansion, albeit less than in December. Assuming the PMI comes in as predicted, the dollar may see some short term gains in the afternoon session.
In addition, traders do not want to forget that this is Non-Farm payrolls week. Wednesday’s ADP Non-Farm Employment Change and Friday’s Non-Farm Payrolls figure are going to inject a substantial amount of volatility into the marketplace. Do not miss this unique opportunity for large profits following the news.
EUR – EUR Trading Mixed Against Main Currency Rivals
An anticipated euro-zone interest rate hike caused the EUR to turn bullish against the safe haven dollar and yen throughout the day yesterday. That being said, the euro was not able to maintain its gains against the Japanese currency in the overnight session. The EUR/JPY has begun correct itself, and has already fallen close to 30 pips since late last night. Currently the pair is trading just above the 112.40 level.
Against the UK pound, the euro was decidedly bearish throughout the day yesterday. The EUR/GBP dropped close to 80 pips yesterday, and has yet to stage a significant upward correction. Currently the pair is trading close to the 0.8550 level.
Today, traders will want to pay particular attention to the UK Manufacturing PMI, scheduled to be released at 09:30 GMT. The PMI is forecasted to say that there was expansion in the British manufacturing sector last month. Should the PMI come in at its anticipated level of 58.0, the euro could move down further against sterling in the morning session today.
JPY – Yen Maintains Bullish Trend
The JPY has been largely able to recover from last week’s surprise sovereign debt rating downgrade, and the USD/JPY pair is once again trading below the 82.00 level. The pair had gone as high as 82.14 during the evening session last night, but ultimately turned bearish as investors chose the safe haven yen amid all of the uncertainties in Egypt.
Against the euro, the yen tumbled during yesterday’s session, but started to stage a recovery overnight. Currently the EUR/JPY is trading at 112.44, down almost 30 pips from late last night.
Today, a lack of significant Japanese news means that the yen will likely move based on the manufacturing data set to be released out of the UK and US. A positive indicator from either the UK or US may lead to renewed risk taking among investors, which would likely cause the yen to turn bearish today.
OIL – Crude Oil Flat Following Bullish Session Yesterday
After shooting up more than $4 yesterday, crude oil traded relatively flat in the overnight session. Oil’s bullish behavior was attributed to the turmoil in Egypt, which has threatened to spread throughout the Arab world. Investors are still fearful that further political unrest in the Middle East may hamper oil production. As such, the price of oil went from as low as $88.34 a barrel yesterday, to as high as $92.30. Currently the commodity is trading at $91.86.
Today, traders will want to keep up with any news from Egypt. Further unrest is likely to drive the price of oil higher. At the same time, the sooner the Egyptian government is able to quell protests and reinstate a level of calm in the country, the sooner the price of oil will likely stabilize.
The Bollinger Bands on the 8-hour chart appear to be tightening, indicating that a price shift is likely to occur in the near future. Furthermore, the Relative Strength Index on the daily chart is in overbought territory, indicating that the shift may be downward. Traders are advised to go short with their positions today.
The Williams Percent Range is currently well into the overbought zone on the daily chart, indicating that a downward correction may occur today. In addition, the Relative Strength Index on the 8-hour chart is also overbought. Going short may be the wise choice today.
The Stochastic Slow on the 8-hour chart has formed a bullish cross, indicating that an upward correction is likely to occur in the near future. The Williams Percent Range on the daily chart is currently at the -90 level, giving further support to the theory of upward movement today. Going long with tight stops may be the preferred strategy today.
Most technical indicators on the hourly chart show this pair range trading, indicating that no specific direction is being predicted at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself later today.
The Wild Card
The Bollinger Bands on the 8-hour chart appear to be narrowing, indicating that a price shift is likely to occur soon. The Williams Percent Range on the same chart is currently in overbought territory, and a bearish cross appears to be forming on the 4-hour chart’s Stochastic Slow. All signs are pointing to a downward correction, giving forex traders an excellent opportunity to open up short positions for potentially significant profits.
© 2006 by FxYard Ltd
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