The euro staged a small but significant upward correction during European trading yesterday, following an agreement among euro-zone leaders to set up a permanent bailout fund. The news briefly lifted the EUR/USD above the 1.3200 level, but the pair was not able to sustain its bullish momentum and began falling shortly after. Today, traders can expect heavy volatility in the marketplace ahead of the US ADP Non-Farm Employment Change at 13:15 GMT. A better than expected figure could help the USD in afternoon trading.
USD – USD Takes Losses amid Positive Euro-Zone News
The US dollar slipped against its main currency rivals throughout the day yesterday, following positive euro-zone news that led to risk taking in the marketplace. The EUR/USD briefly drifted above the 1.3200 level, while the GBP/USD approached 1.5800 before staging a slight downward correction. Against the safe haven Japanese yen, the dollar was relatively unchanged after hitting a three-month low, which prompted fears that the Bank of Japan would intervene in the currency markets to limit the JPY’s growth.
Turning to today, a batch of significant US economic indicators are forecasted to generate market volatility during European trading. Particular attention should be given to the ADP Non-Farm Employment Change figure. The ADP figure is a precursor to Friday’s all important Non-Farm Employment Change. It is widely considered an accurate indicator of the current employment situation in the US and traders should be aware that heavy market movement will likely take place following its release. Should the figure come in above expectations, the USD could see a boost as a result.
EUR – EUR Stages Recovery Following EU News
News that euro-zone leaders came to an agreement to set up a permanent bailout fund lifted the euro throughout yesterday’s trading session. While Greece still has yet to come to an agreement with its creditors regarding a debt-swap deal, investors responded to the EU news by shifting their funds away from safe-havens to riskier assets. The EUR/USD briefly crosses the 1.3200 line as a result, while the EUR/JPY shot up over 50 pips before staging a downward correction.
Analysts are still maintaining that any gains the euro makes in the coming days are likely to be temporary. Even if Greece finally announces a debt-swap deal, as it is widely expected to do by the end of the week, optimism in the euro-zone economic recovery is likely to be short lived. Signs that Portugal is close to defaulting on its debt are one several indications that the euro-zone crises is far from over.
Today, traders will want to pay attention to the US ADP Non-Farm Employment Change figure, as it is likely to determine the direction the euro takes in afternoon trading. Last week, negative US news led to major gains for the common currency. Should today’s news come in below forecasts, the euro may be able to extend its bullish trend.
JPY – JPY Maintains Gains against US Dollar
The Japanese yen remained close to a three-month high against the US dollar throughout yesterday’s trading day. The JPY’s prolonged bullish trend prompted fears among traders that the Bank of Japan (BOJ) may intervene in the currency markets to limit the yen’s growth. A strong yen tends to have an adverse effect on Japan’s export heavy economy, and the BOJ has taken steps a number of times in the past to reduce the currency’s value.
Turning to today, the USD may be able to recoup some of its recent losses against the yen, providing a batch of US news comes in at or above expectations. Both the US ADP Non-Farm Employment Change and ISM Manufacturing PMI are likely to generate heavy volatility. Traders will want to pay attention to the results of both events, as they may set the trend for the USD/JPY for the next several days.
Crude Oil – Oil Soars Above $100 a Barrel
Positive euro-zone news generated a significant amount of risk taking yesterday, giving crude oil a healthy boost throughout the day. The commodity shot up over 150 pips, to well above the psychologically significant $100 a barrel level. Riskier commodities like crude oil often become more expensive when the euro goes up in value.
Today, traders will want to note the results of a batch of US news that could set the trend for oil going into the rest of the week. The US ADP Non-Farm Employment Change figure, set to be released at 13:15, is likely to generate the most volatility. Should the dollar capitalize on the results of the employment figure, crude may see a downward reversal as a result.
According to technical indicators on the daily chart, this pair is in overbought territory and may see a downward correction in the near future. A bearish cross has formed on the Stochastic Slow, while the Williams Percent Range is currently at the -10 level. Traders may want to go short in their positions ahead of the downward breach.
Technical indicators are showing that this pair may have hit a significant resistance point and could see a correction in the near future. The daily chart’s Relative Strength Index is in well into the overbought zone, while a bearish cross has formed on the Stochastic Slow. Going short may prove to be the wise choice.
Technical indicators on both the daily and weekly charts are showing that this pair is oversold and may see an upward correction in the near future. The daily chart’s MACD/OsMA has formed a bullish cross, while the weekly chart’s Relative Strength Index is hovering close to the oversold zone. Traders may want to go long in their positions.
Most technical indicators show this pair trading in the oversold zone, meaning that an upward correction could take place in the near future. The Williams Percent Range on the daily chart is at the -90 level, while the Relative Strength Index on the same chart has dropped to the 15 level. Going long may be the preferred strategy today.
The Wild Card
Technical indicators on the daily chart are showing that this pair is oversold and may see an upward correction in the near future. The Stochastic Slow has formed a bullish cross, while the Relative Strength Index has drifted into the oversold territory. Forex traders may want to go long in their positions ahead of an upward breach.
© 2006 by FxYard Ltd
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