The US dollar saw very little substantial movement during the Asian trading session as investors eagerly await today’s ADP Non-Farm Employment Change figure, set to be released at 13:15 GMT. Analysts are predicting the ADP number to come in below last month’s, which if true, would likely cause the greenback to turn bearish.
Dollar May Reverse Yesterday’s Gains Today
The USD had an unusually strong day yesterday, following the release of better than expected manufacturing data that boosted confidence in the US economic recovery. Following the release of the data, the EUR/USD began to tumble, eventually dropping close to 80 pips. Currently the pair is trading around the 1.3770 level. Similarly, the GBP/USD fell close to 70 pips, and is currently trading close to the 1.6240 level.
The day was not entirely positive for the dollar. Middle East turmoil is still driving investors toward safe haven currencies. As such, the greenback remains bearish against the Swiss franc. The USD/CHF cross dropped close to 40 pips since yesterday morning, and is currently trading around the 0.9280 level.
Today, investors are eagerly anticipating the release of the ADP Non-Farm Employment Change figure, set for 13:15 GMT. The figure is considered to be one of the most important US economic indicators, and heavy trading is expected as a result. At the moment, analysts are predicting a drop in the employment figure over last month. If true, the dollar could reverse yesterday’s gains.
In addition, the Fed Chairman is scheduled to testify 15:00. Should he continue to voice concerns over the unemployment situation in the US, investors are likely to short the buck in evening trading.
Euro Extends Bearish Trend
The EUR/USD unexpectedly turned bearish yesterday, as the combination of the pair hitting a key resistance level and positive US manufacturing data caused investors to short their positions. In addition, the euro has extended its losses against the safe-haven Swiss franc. The EUR/CHF has dropped close to 100 pips since yesterday afternoon, and is currently trading around the 1.2770 level.
While no significant euro-zone data is scheduled to be released today, traders will want to pay close attention to the US ADP Non-Farm Employment Change figure. If the figure comes in at 178K as expected, investors are likely to go long in their EUR/USD positions. At the same time, the ADP figure is notoriously hard to predict. A better than forecasted figure may cause the euro to drop further against the dollar.
Yen Moves Up Based on Safe-Haven Appeal
The yen’s appeal as a safe-haven asset led to gains in overnight trading against riskier currencies like the euro and UK pound. The EUR/JPY is currently down well over 100 pips from yesterday afternoon and is trading at 112.60. Meanwhile, the GBP/JPY has dropped around 95 pips in the same amount of time, and is currently trading around 132.90.
The combination of poor global economic indicators and the continuous uncertainties in the Middle East have caused investors to revert to less volatile currencies like the yen. While there are no significant economic releases out of Japan today, yen traders will want to continue to keep up to date about the situation in Libya. Further violence in the country is likely to continue to drive investors toward the yen.
Spot Crude Oil Closes above $100
Crude oil is once again trading close to the $100 a barrel level as investors remain concerned about the situation in the Middle East. Fears that the violence that has rocked Libya over the last week will spread to other oil producing countries continue to drive prices up.
Today, in addition to any developing news out of the Middle East, traders will also want to pay attention to the US Crude Oil Inventories figure, set to be released at 15:30 GMT. Analysts are predicting an increase in US stockpiles from last week. If true, the price of oil may actually go down during the evening session, as it would be a sign of decreased demand in the US.
Virtually all technical indicators on the 8-hour and daily charts are showing this pair trading in neutral territory. Traders may want to take a wait and see approach for the moment, as a clearer picture is likely to present itself as the day progresses.
A bearish cross on the 8-hour chart’s Stochastic Slow indicates that the pair is in overbought territory and may see a downward correction in trading today. In addition, the Williams Percent Range on the daily chart is hovering in the overbought region. Going short may be the preferred strategy today.
A bullish cross has formed on the 8-hour chart’s MACD, indicating that the pair could see upward movement today. This theory is supported by the Relative Strength Index on the daily chart. Going long appears to be preferable for this pair today.
Both the Relative Strength Index and Williams Percent Range on the daily chart indicate that the pair is in oversold territory. Traders can take this as a sign that the pair may see an upward correction in trading today.
The Wild Card
The Relative Strength Index on the daily chart has just crossed over into the oversold zone, indicating the pair could see upward movement today. Furthermore, the 8-hour chart’s MACD has just formed a bullish cross. Forex traders now have an opportunity to open up long positions and catch this trend at the beginning.