Heavy News Day Looks to Trigger Extreme Volatility in the Forex Market

1922

A heavy news day is expected today, as leading economic releases from France, Germany, Great Britain and the U.S. are scheduled. The abnormal amount of significant news events is likely to create high volatility throughout the majority of today’s trading session, and traders are advised to be prepped.

USD

Dollar Strengthens on Positive Expectations for This Week’s U.S. Economic Releases

The U.S. dollar climbed yesterday against most of its major currency counterparts. The dollar began Monday’s trading session with a 120 pip gain against the euro, and the EUR/USD reached as low as the 1.3430 level. The dollar also saw a 40 pip gain vs. the Japanese yen.

The dollar strengthened today against most of its rivals after analysts released their projection for the economic indicators which are expected later on this week. The forecasts include positive results for some of the more significant economic indicators, such as the Retail Sales and Consumer Price Index, and as a result supported demand for the greenback.

Another support for the dollar came after European finance ministers ruled out immediate steps to fight the region’s debt crisis. This has weakened the euro, and as a result boosted its primary rival – the USD.

Looking ahead to today, many significant publications are expected from the U.S. economy. Most attention should be given to the Retail Sales reports and to the Long-Term Purchases indicator, which represents the balance of domestic and foreign investment. These reports are expected to show positive results. If the end results will meet expectations, the dollar may see another bullish session today.

EUR

Euro Falls after Finance Ministers Rule out Immediate Steps to Fight Debt Crisis

The euro fell against most of the major currencies during Monday’s trading session. The 17-nation currency began yesterday’s session with sharp drops against both the U.S. dollar and the Japanese yen The EUR/USD fell 120 pips and the EUR/JPPY dropped 70.

The euro slid yesterday after European finance ministers ruled out immediate steps to fight off the region’s debt crisis. The officials agreed that a permanent rescue mechanism to be set up in 2013 would total 500 billion euros, yet they did not announce immediate steps as expected. The German Finance Minister added that the markets are so stable right now that it’s better not to unsettle them with superfluous discussions.

The market received the announcement with a measure of disappointment after expecting to the officials to agree on immediate steps, and this has added to the bearish pressure on the euro.

As for today, a batch of data is expected from the euro-zone. The most significant releases look to be the German Preliminary Gross Domestic Product and the German ZEW Economic Sentiment. Germany holds the largest and strongest economy in the euro-zone, and thus its financial outlook has a significant impact on the euro. If the end results will provide positive data, the euro might correct yesterday’s losses.

JPY

Yen Sees Mixed Results Vs. The Majors

The Japanese yen saw a rather jumpy session during yesterday’s trading. The yen mainly saw ups and down against most of the major currencies, which concluded in a 40 pip drop against the U.S. dollar and a 40 pip gain against the euro.

The Japanese currency was mostly influenced by its rivals yesterday. The yen fell against the dollar after analysts estimated that U.S. Retails Sales climbed by 0.6 percent on January, and the nation’s Consumer Price Index rose by 0.4 percent.

On the other hand, the yen strengthened against the euro as the euro-zone’s finance ministers ruled out immediate steps to fight off the region’s debt crisis. This has added to the bearish pressure on the euro, which slid against most of the major currencies, including the yen.

Looking ahead to today, no significant releases are expected from the Japanese economy. Traders are advised to follow the Japanese equity markets, and also to follow the economic publications which are expected from the U.S. and the euro-zone, as these are likely to have a large impact on the yen as well.

Crude Oil

Crude Oil Falls To $84.56 a Barrel on Growing U.S. Oil Supplies

Crude oil began Monday’s trading session with a sharp bullish trend and reached as high as $86.49 a barrel. However, a swift reversal then took place, and the commodity fell almost 200 pips, reaching as low as $84.56 a barrel

Crude began yesterday’s trading with a bullish trend after unrest spread from Egypt to other Middle Eastern nations. This has renewed concerns that crude supplies from the region could be disrupted, with the biggest concerns revolving around protests in Iran, the world’s fourth-largest crude oil exporter.

Nevertheless, by midday crude prices saw a sharp drop as oil traders weighed growing U.S. oil supplies against unrest in the Middle East. U.S. crude stockpiles are expected to increase by 1.2M barrels and gasoline stocks are expected to increase by 800,000. It is clear that traders are currently more influenced by the rising supplies in the U.S. than the possible disruption in oil supplies from the Middle East.

As for today, traders should follow all updates regarding the unrest in the Middle East, especially in Iran, as this may keep impacting the oil market. In addition, traders are advised to follow the leading economic releases from the U.S. and the euro-zone, as these are also likely to affect crude prices today.

Technical News

EUR/USD

After falling to the 1.3426 level, the EUR/USD pair began correcting its losses, and is currently trading near the 1.3510 level. In addition, as the RSI on the 4-hour chart has crossed the 30-line and continues to point up, it seems that the bullish correction might proceed today, with the potential to reach the 1.3600 level.

GBP/USD

The cable has been range-trading for the past couple of weeks, shifting between the 1.5960 and the 1.6270 levels. Now, as a bearish cross is taking place on the daily chart’s MACD it seems that a bearish move might be forthcoming. Going short seems to be the right choice today.

USD/JPY

The pair saw a very timid trading session yesterday, remaining near the 83.30 level. Currently a bearish cross on both the daily chart’s Slow Stochastic and the 4-hour chart’s MACD indicates that a bearish move could be imminent, with the potential to push the pair as low as the 82.00 level.
USD/CHF
After peaking at the 0.9770 level the pair started correcting its gains, and is currently trading near the 0.9690 level. In addition, as all the oscillators on the 4-hour chart are pointing down, it seems that the bearish correction might proceed today. Going short with tight stops might be the right strategy today.

The Wild Card

Gold

Over the past week, gold saw several failed attempts to breach through the $1,368 resistance level. Now, as the Bollinger Bands on the weekly chart are tightening and a bullish cross takes place on the Slow Stochastic, it seems that gold might cross the resistance level today. This might be a great opportunity for forex traders to catch the trend at its beginning.

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