Today, traders should pay close attention to the release of the U.S. ADP Non-Farm Employment Change report, according ForexYard. This indicator always provides for extreme market volatility in the major currency pairs. Traders may find good opportunities to enter the market following this vital announcement at 13:15 GMT.
Dollar Falls against Majors after U.S. Manufacturing Data
The US dollar slid on Tuesday against other major currencies, hitting a three-month low against the euro, as surprisingly strong US manufacturing data encouraged risk-taking. In addition, the dollar, which saw a safe-haven bids late last week when protests in Egypt intensified, fell broadly as risk appetite returned, hitting a four-week low of 81.33 against the yen and falling 0.9% against the CHF to 0.9355.
The dollar has fallen every day this week against the EUR, Sterling Pound, and yen. Analysts attributed the fall in the dollar, which has been treated as a lower risk, safe-haven investment, to growing optimism that the worst of the financial crisis has passed, causing investors to unwind long dollar positions when fear was widespread, credit was frozen and stock markets were in a free fall.
Another leading indicator released yesterday was U.S Manufacturing PMI. This number handedly beat last month’s result but failed to provide strength to the dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
Looking ahead today, the news event that may have a very large impact on the dollar and its main currency pairs in today’s trading is the ADP Non-Farm- Employment Change around 13:15 GMT. This report is very important as it will likely impact dollar volatility. Traders should pay close attention to the market as there is an opportunity to capitalize on the fluctuations which are likely to follow this release.
EUR Gains on Renewed Risk Appetite
The euro rose against the major currencies on Tuesday, supported by expectations of higher euro-zone interest rates and an increase in investor appetite for riskier assets. As a result, the euro rose as high as $1.3842, its highest since early November. The EUR experienced similar behavior against the GBP and closed at 0.8570. Traders are increasingly convinced that rising inflation in the 17-nation currency bloc will soon force the hand of the European Central Bank as it seeks to curb price pressures. While no one expects the ECB to raise interest rates when it meets on Thursday, building inflationary pressures have led to speculation the central bank may need to raise borrowing costs sometime this year.
Currency levels are being increasingly determined by interest rate differentials. As a result, investors have been willing to purchase euros based on expected higher returns, even as they momentarily ignore Europe’s still-festering sovereign debt problems.
Easing fears Egypt’s political unrest would spread in the Middle East also helped boost the euro and higher-yielding currencies such as the Australian and New Zealand dollars.
Yen Mixed Against Major Currencies
The yen completed yesterday’s trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 112.50 level. The JPY also saw bullishness against the USD as it jumped around 60 points and closed at 81.40.
The JPY’s trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today, especially the ADP Non- Farm Employment Change at 13:15 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
Crude Oil Inventories Data to Drive Oil Trading Today
Crude oil price slipped on Tuesday as fears over oil supply disruptions at the Suez Canal eased, but attention remained fixed on events in Egypt, where massive antigovernment protests continued for another day. Crude oil prices dropped to an intra-day low of $90.30 a barrel before rebounding to settle at 90.90,
Egypt isn’t a major oil supplier, but the Suez Canal and the nearby Sumed pipeline are key chokepoints for global oil supplies. In addition, fears persist that the antigovernment protests could spread to major oil producing countries elsewhere in the region.
As for today, traders should pay attention to the U.S. Crude Oil Inventories report scheduled, as it tends to have a large impact on crude oil’s prices recently, especially for the short-term.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the 4-hour chart’s Stochastic Slow signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice.
The price of this pair appears to be floating in the over-bought territory on the 4-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the 8-hour chart’s Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The USD/JPY cross has experienced a bearish trend for the past week. However, it seems that this trend may be coming to an end. The RSI of the 4-hour chart shows the pair floating in the oversold territory, indicating that an upward correction will happen anytime soon. Going long with tight stops might be a wise choice.
The 8-hour chart is showing mixed signals with its Slow Stochastic fluctuating at the neutral territory. However, there is a fresh bullish cross forming on the 4-hour chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.
The Wild Card
This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the 4-hour chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.