Yesterday saw little significant movement among the main currency pairs, as investors eagerly await the results of the European Central Bank’s (ECB) latest round of long-term refinancing, set to be announced today. The EUR/USD remained above 1.3400 for most of yesterday’s session, while the USD/JPY was able to hold above the 80.00 level. Today, in addition to the ECB news, traders will also want to pay attention to a testimony from US Fed Chairman Bernanke at 15:00. Any pessimistic comments from Bernanke regarding the pace of US economic growth may negatively impact the USD.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.3499 | 1.5932 | 81.20 | 0.9090 | 1.0842 | 0.8498 |
| 1.3471 | 1.5888 | 80.86 | 0.9056 | 1.0793 | 0.8470 | |
| 1.3410 | 1.5860 | 80.66 | 0.9008 | 1.0762 | 0.8452 | |
| Support | 1.3365 | 1.5816 | 80.34 | 0.8978 | 1.0713 | 0.8424 |
| 1.3338 | 1.5789 | 80.15 | 0.8944 | 1.0682 | 0.8406 | |
| 1.3292 | 1.5744 | 79.83 | 0.8922 | 1.0633 | 0.8378 |
Economic News
USD – Bernanke Speech May Generate Dollar Volatility Today
The US dollar saw little significant movement against its main currency rivals yesterday, despite mixed US economic indicators that led to some doubt regarding the pace of the US economic recovery. The Core Durable Goods Orders figure, which came in well below expectations, did little to hurt the dollar against the JPY. The USD/JPY spent most of the day trading steadily at around the 80.50 level. Similarly, the EUR/USD spent much of the day range trading at around the 1.3445 level.
Today, traders can expect significantly higher volatility, as euro-zone and US news is set to be released. Analysts are predicting that the European Central Bank’s planned refinancing operation could result in an increase in risk taking. If true, the dollar could fall against currencies like the EUR and AUD. Additionally, a speech from the US Fed Chairman, scheduled to take place at 15:00 GMT may result in movement for USD pairs. A pessimistic tone regarding the pace of the US economic recovery could further weaken the greenback.
EUR – ECB Loan Program May Boost Risk Taking
After spending much of yesterday’s session range trading against its main currency rivals, euro-zone news may result in an increase in risk taking today. The European Central Bank is scheduled to release up to 500 billion euros in cheap loans today, in a move designed to help stabilize fragile euro-zone economies. If the refinancing operation goes as planned, economically weaker countries, like Spain and Portugal, will have additional time to solve their sovereign debt issues.
Analysts are predicting that riskier currencies like the euro may see gains as a result of the ECB operation. That being said, any gains the common-currency makes could turn out to be temporary. Fears that additional euro-zone countries could face credit downgrades in the near future may weigh down on the currency. In addition, the high cost of oil is currently seen as limiting the pace of the global economic recovery. Should the price of oil remain high, investors could begin reverting to safe-haven assets.
JPY – Euro-Zone News Could Result in Yen Volatility
The Japanese yen saw slight gains against the US dollar during European trading yesterday, as investor concerns regarding the pace of global economic growth led to some risk aversion in the marketplace. The USD/JPY briefly fell below the psychologically significant 80.00 level before rebounding to 80.50, where it remained for most of the day. The EUR/JPY traded steadily for most of the day at around the 108.10 level, as investors await euro-zone news set to be released today.
Analysts are warning that the yen may see some losses today, as the European Central Bank gets ready to implement a refinancing strategy that will inject fresh capital into the euro-zone economies. Assuming the refinancing operation goes as planned, investors may move their funds to riskier assets, which could result in the yen dropping against currencies like the euro and Aussie.
Crude Oil – Oil Falls as Weak Demand Outweighs Supply Side Fears
Investor fears that the high price of crude oil could limit the pace of global economic growth led to some risk aversion in trading yesterday. Additionally, weak demand for oil in the US has temporarily outweighed any supply side fears due to the ongoing conflict between the West and Iran. As a result, the price of crude fell for the second day straight, and briefly dropped below the $108 a barrel level during European trading.
Turning to today, traders will want to pay attention to the US Crude Oil Inventories, scheduled to be releases at 15:30 GMT. Analysts are forecasting the figure to come in at 1.4M, which if true, would signal a high level of oil inventories. A high level of supplies in the US is typically a sign of weak demand which can lead to a drop in prices. At the same time any escalation in tensions with Iran could lead to a spike in the price of crude.
Technical News
EUR/USD
The daily chart’s technical indicators place this pair in overbought territory, meaning that downward movement could occur in the near future. A bearish cross has formed on the Slow Stochastic, while the Williams Percent Range is hovering around the -10 level. Going short may be a wise choice for this pair.
GBP/USD
The Slow Stochastic on the weekly chart has formed a bearish cross, indicating that downward movement could occur in the coming days. That being said, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach ahead of any possible price shifts.
USD/JPY
Most technical indicators on the weekly chart place this pair in overbought territory. The Relative Strength Index has crossed the 70 line, while the Williams Percent Range is at -10. Traders may want to short this pair ahead of a possible downward breach.
USD/CHF
The daily chart’s Slow Stochastic has formed a bullish cross, indicating that the pair could see upward movement in the near future. This theory is supported by the weekly chart’s Williams Percent Range, which has dropped below -90. Going long may be the preferred strategy for this pair.
The Wild Card
AUD/JPY
Following several weeks of upward movement, technical indicators are now showing that this pair could see some downward movement. The Williams Percent Range on the daily chart is currently in overbought territory, while the Slow Stochastic on the same chart has formed a bearish cross. Forex traders may want to go short in their positions today.
Written by Forexyard.com