With a week relatively light on US data, investor eyes will be squarely zeroed in on Federal Reserve speakers. The Fed could offer clues about a possible plan to stimulate the US economy through a fresh round of asset purchases this week; discussion of which has weighed on the dollar lately.
Economic News
USD – USD Under Pressure following QE Assessment
After falling to a low of $1.3829 yesterday, as a wave of profit-taking that began on Friday continued into Monday, the pair recovered overnight, briefly breaching the $1.4000 level. The dollar has since recovered with the pair currently trading around $1.3906.
Despite an overall bearish sentiment on the dollar, analysts are saying that the downside looked limited as short dollar positions were extended and the euro faced strong resistance at $1.40. Investors are more certain there will be further easing after Fed Chairman Ben Bernanke on Friday offered his most explicit signal yet the US central bank was set to relax monetary policy further. The question now is the amount.
With a week relatively light on US data, investor eyes will be squarely zeroed in on Federal Reserve speakers. The Fed could offer clues about a possible plan to stimulate the US economy through a fresh round of asset purchases this week; discussion of which has weighed on the dollar lately.
EUR – EUR Sees Mixed Results after Trichet’s Weekend Comments
The EUR experienced mixed results yesterday against its currency counterparts. Against the Japanese yen the euro had fallen, but pared its losses to currently trade little-changed at 113.26 as of this morning. Against the British pound, the 16-nation single currency rose modestly, climbing towards 0.8800, but falling just short before turning back downwards.
The euro lost somewhat against the US dollar yesterday after weekend comments from European Central Bank (ECB) President Jean-Claude Trichet supported the bank’s purchase of government bonds issued by weaker euro zone members. Trichet’s remarks contrasted with those of the head of the German central bank, who last week said the ECB should wrap up its bond-purchasing program.
Today traders are expecting the release of the ZEW economic sentiment report from Germany and the region in general. Forecasts are for a decline in both figures, which will no doubt put sell pressure on the EUR going into a light news week.
JPY – Yen Little Changed against Currency Rivals
The Japanese yen bounced back against the EUR yesterday as ECB President Trichet’s remarks over the weekend caused modest bearish pressure on the European currency. The pair dropped as low as 112.40 before paring those losses and climbing back towards 113.60 in yesterday’s late trading sessions.
The JPY was little changed against the dollar, however, as the pair stagnated around the 81.20 price level. Concerns about another Japanese monetary intervention appear to have passed into the background this week as many analysts are expecting few such maneuvers ahead of this weekend’s G20 meetings. Traders may be expecting a sharp revaluation following the weekend’s meetings, but for the moment the JPY appears to be holding steady against most currencies.
Crude Oil – Oil Prices Higher as Analysts Debate its Forecasted Direction
Crude Oil prices spiked yesterday as the US dollar weakened against a basket of currencies. After falling as low as $80.50 a barrel, the price of oil quickly ascended over $3 in value to currently trade at $83.71. The rapid price swings experienced by oil lately have many analysts at odds over the direction of crude prices.
With OPEC claiming that production is where it should be and oil fundamental picking up, many were expecting a steady range-trading behavior by oil. This expectation was shattered, however, as the USD began to plummet against all of its currency rivals and driving commodity prices higher. Expectations now appear confused as oil prices are continuing to reach upward.
Technical News
EUR/USD
There appear to be fresh bearish crosses on the weekly Stochastic (slow) and daily MACD, both suggesting a downward movement is imminent for this pair. As the price floats in the over-bought region of the weekly RSI, short positions appear to be growing in relevance.
GBP/USD
This pair has been experiencing mild downward movements over the past 48 hours and long-term technical appear to be pointing in that direction. The weekly Stochastic (slow) shows a fresh bearish cross, as does the daily MACD. Going short may be a wise tactic today.
USD/JPY
After such a long and sustained bearish movement this pair’s technical indicators are beginning to consolidate into a signal for an upward correction. The daily and weekly MACD suggest bearish crosses are impending, and the price seems to be floating deep within the over-sold region of the daily and weekly RSI. Going long may turn out to be a favorable position as the day wears on.
USD/CHF
The price of this pair appears to be floating deep within the over-sold region of the weekly RSI, highlighting upward pressure. A recent bullish cross on the weekly Stochastic (slow) supports this notion. Going long appears to be preferable.
The Wild Card
AUD/JPY
This pair’s recent flat trading behavior has allowed downward momentum to build up, according to a number of indicators. The weekly Stochastic (slow) shows a recent bearish cross and the weekly RSI has the price beginning to descend out of the over-bought region. The daily MACD also appears to be indicating a fresh bearish cross. All of these signals appear to be suggesting that now may be a great entry price for forex traders looking to short this pair.
Written by Forexyard.com