This week may provide the decision point for the USD. With Non-Farm Payrolls due this Friday, the uncertainty surrounding the American recovery will undoubtedly be made clearer. Today’s report on US personal spending at 12:30 GMT may provide a glimpse into other growth prospects before this week’s more important data releases get published.
USD Lower as Libyan Tensions Escalate
The declining value of the US dollar over the past few weeks has many traders anticipating a potential direction change, particularly as the greenback approaches significant support lines. The EUR/USD rose as high as 1.3840 on Monday, before returning to trade near 1.3815 in today’s early morning hours. The GBP/USD also hit as high as 1.6286, up from its recent dip to 1.6030.
The sudden rise in risk appetite was one explanation being offered for this most recent USD boost. The tensions spreading across the Middle East, however, have some speculating a return of risk aversion as tensions in Libya become more pronounced. This has led many investors to begin shifting away from riskier assets and seeking safety in commodities, which has also driven the USD lower.
This week may provide the much-needed decision point for the USD. With Non-Farm Payrolls due this Friday, the uncertainty surrounding the American recovery will undoubtedly be made clearer. Today’s report of the ISM Manufacturing PMI at 15:00 GMT may provide a glimpse into other growth prospects before this week’s more important data releases get published.
EUR Bullish, but Speculation on NFP Could Undermine Gains
The EUR remained in bullish trading patterns against most of its rivals at the start of this week. The surge into riskier assets has pushed commodity prices higher, driving the USD lower and European currencies to key resistance levels. The EUR/USD currently trades around the 1.3830 level, up slightly since Friday; the EUR/GBP, on the other hand, fell to 0.8485 from Friday’s high of 0.8592.
Fiscal concerns continue to plague Europe and, despite forecasts for a sluggish economic recovery in the US, the euro zone remains categorized as a relatively safer investment for many at this time. As such, the EUR continues to trade higher, but recent signals have indicated that risk aversion may be on the rise. This week’s NFP report seems to be carrying a stronger-than-usual impact in currency speculation.
The euro zone will be undergoing a relatively intense session on today’s economic calendar, with Britain and Europe publishing a long list of indicators throughout the day. It appears likely that at least a few of the major pairs will see sharp movements today and tomorrow, given that this week will experience very significant data releases practically every day, climaxing with Friday’s NFP.
Yen Bearish from Increased Risk Appetite in Europe
The Japanese yen saw a bearish trading session yesterday, losing ground against all of its currency crosses, except the US dollar. The JPY fell against the GBP and closed around 133.50. The yen also lost 130 points versus the EUR, ending Monday at 113.25, up from Friday’s 111.95.
The JPY’s trends will be affected by the rallies of its primary currency pairs today. It seems that the GBP and EUR are expected to continue trading volatile today with the release of a vast array of indicators.
Traders should keep a close look on the news coming from Britain and Europe as these economies will be the deciding factors in the JPY’s movement today. 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 Plummets over $5 a Barrel
During yesterday’s early afternoon hours, Crude Oil received a hasty sell-off when investors unwound their positions for riskier assets. With a recent boost to equity markets, the USD has also found itself losing strength to a number of its currency rivals, particularly the EUR. If this stock rally can continue, we may see these trends persist throughout the rest of the week.
The price of Crude Oil also dropped sharply as the demand for the commodity appears to have abated. U.S. Crude Oil inventories posted a mild decrease in the amount of Crude stocks in storage. The report failed to meet market expectations, helping to drive the price of Crude lower, reaching $96.86 from last week’s high of $103.34.
The recent upswing seen in this currency pair has the price floating near the upper border of the Bollinger Bands on the 4-hour and daily charts, signaling moderate downward pressure. The recent bearish cross on the 4-hour chart’s Stochastic (slow) adds weight to the notion of an imminent downward correction. Going short with tight stops might be a wise choice today.
This currency pair is currently giving off mixed signals. With the RSI on the hourly chart showing the price floating in the over-bought territory, there may be a downward correction in the nearest future. However, with the price floating in the over-sold territory on the daily chart’s RSI, the longer-term movement will likely be in an upward direction. Capturing the imminent downward correction and then riding out the uptrend may be a wise strategy today.
The price of this pair appears to be floating in the over-sold territory on the RSI of the daily chart, indicating modest support to the latest price dip in this pair. There also appears to be a bullish cross forming on the daily chart’s Stochastic (slow) which supports this notion. Going long might be a good choice today.
This pair appears to have found solid support at the 0.9290 level. The daily RSI has the price in over-sold territory and the daily Stochastic (slow) shows a fresh bullish cross and an ascending price movement. These indications appear to suggest an imminent upturn in this pair. Going long may be a smart tactic today.
The Wild Card
After the latest plummet in price, this pair appears to have a number of indicators approaching corrective territory. Forex traders will want to keep an eye on the daily and weekly Stochastic (slow) indicators, as well as the RSIs on both charts for any signs of the impending swing. The key support line to watch for is 6.3025, after which we may likely see corrective price action with targets near 6.4000 and 6.5000, sequentially.