ECB Rate Cut Leads to Broad Euro Losses
Forexyard forex analysis update 6/7/2012
The euro fell across the board yesterday, following euro-zone interest rate cut which caused investors to shift their funds to safe-haven assets. The EUR/USD dropped to a one-month low, while the EUR/JPY fell some 140 pips during afternoon trading. Turning to today, all eyes are likely to be on the US Non-Farm Employment Change, scheduled to be released at 12:30 GMT. The greenback saw gains yesterday after a better than expected ADP Non-Farm Employment Change figure was announced. If today’s news also comes in above the forecasted 91K, the dollar may close out the week on a bullish note.
USD – Non-Farm Payrolls Set to Impact USD
The US dollar saw significant gains against virtually all of its main currency rivals yesterday, as a euro-zone interest rate cut combined with better than expected American employment data caused investors to shift their funds to the greenback. The USD/JPY shot up to a two-week high after the ADP Non-Farm Employment Change figure was announced. The pair eventually reached as high as 80.08 before staging a minor downward correction. Against the British pound, the dollar gained over 100 pips for the day. The GBP/USD eventually fell as low as 1.5497.
Turning to today the US Non-Farm Employment Change figure is likely to generate significant market volatility when it is released at 12:30 GMT. The indicator is widely considered the most significant economic event on the forex calendar. Should today’s news come in above the forecasted 91K, the dollar could extend yesterday’s gains before markets close for the week. That being said, if today’s news disappoints, the greenback may take heavy losses against its main currency rivals.
EUR – Euro May Extend Losses Today
The euro took heavy losses against its main currency rivals yesterday, following the European Central Bank’s decision to cut euro-zone interest rates to a record low 0.75%. The EUR/USD fell almost 170 pips after the rate cut was announced, eventually hitting the 1.2362 level, a one-month low. Against the British pound, the euro fell close to 80 pips for the day, eventually reaching as low as 0.7964. Meanwhile, the EUR/JPY was down around 140 pips for the day to trade as low as 98.78.
As we close out the week, traders should anticipate another volatile day for the euro, as the US Non-Farm Payrolls figure is scheduled to be released. Should the indicator come in above the forecasted level, investors may continue shifting their funds to the greenback, which could result in the EUR/USD falling further. At the same time, traders will want to recall that the US employment data has come in below expectations for the last several months. If it happens again today, the euro could recoup some of its recent losses.
Gold – Gold Takes Moderate Losses after Euro-Zone News
he price of gold fell yesterday, after a euro-zone interest rate cut led to gains for the US dollar. A strong dollar tends to cause gold to turn bearish, as the precious metal becomes more expensive for international buyers. Gold fell be over $20 an ounce, eventually reaching as low as $1597.13 before staging a slight upward correction and stabilizing at the $1610 level.
Today, any movement gold sees is likely to be a result of the US Non-Farm Payrolls figure. If the news results in further gains for the greenback, gold may take additional losses before markets close for the week.
Crude Oil – Crude Oil Sees Gains after US Inventories Figure
After falling just under $2 a barrel during mid-day trading yesterday, following the euro-zone interest rate cut, the price of oil was able to recoup some of its losses after the US Crude Oil Inventories figure was announced. US inventories fell by 4.3 million barrels last week, well below the forecasted 1.6 million drop. The news signaled to investors that oil demand in the US is increasing.
Closing out the week, crude oil could see additional gains if the US Non-Farm Payrolls figure comes in above the forecasted 91K. Any better than expected news may be taken as a sign by investors that the US economic recovery is gaining traction and that demand for oil will continue increasing.
The Williams Percent Range on the weekly chart is approaching oversold zone. If it continues moving down, it may signal a possible upward correction in the coming days. This theory is supported by the MACD/OsMA on the same chart, which has formed a bullish cross. Going long may be the wise choice for this pair.
Most long-term technical indicators place this pair in neutral territory, meaning that no defined trend can be predicted at this time. Taking a wait and see approach may be a wise choice, is a clearer picture is likely to present itself in the near future.
The MACD/OsMA on the daily chart appears close to forming a bearish cross, signaling a possible downward correction in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the best option at this time.
The Williams Percent Range on the weekly chart has almost crossed into overbought territory. Furthermore, a bearish cross has formed on the daily chart’s MACD/OsMA. Traders may want to go short in their positions ahead of a possible downward correction.
The Wild Card
Technical indicators are showing that crude oil has entered overbought territory and could see a downward correction. The daily chart’s Slow Stochastic appears to be forming a bearish cross while the Williams Percent Range on the same chart has crossed above the -20 line. Forex traders may want to open short positions ahead of possible downward movement.