Forex Trading: Euro Rebounds Ahead Of Spanish Bond Auction Today
Euro Rebounds Ahead of Spanish Bond Auction Today
The euro was able to stage an upward correction against several of its main currency rivals yesterday, as hopes that a deal would soon be reached to provide Greece with a new round of bailout funds. The Japanese yen sunk lower throughout the day, as speculations that the Bank of Japan will initiate a new round of monetary easing next month continued to weigh down on the currency. Today, traders will want to note that US markets will be closed in observance of the Thanksgiving holiday. That being said, market volatility is expected during mid-day trading following a Spanish 10-year bond auction.
USD – USD/JPY Extends Bullish Trend
The US dollar saw additional bullish movement against the Japanese yen throughout the day yesterday, as speculations regarding the upcoming Japanese elections weighed down on the JPY. The USD/JPY hit a fresh 7 ½ month high at 82.52 during mid-day trading. Overall, the pair gained more than 70 pips during European trading. The day was not all positive for the dollar though. Risk taking among investors caused the USD/CHF to fall close to 60 pips, eventually reaching as low as 0.9380.
Today, with US markets closed for the Thanksgiving holiday, any dollar movement is likely to come as a result euro-zone news. Traders will want to pay particular attention to the Spanish 10-year bond auction, scheduled to take place during the mid-day session. An increase in Spanish borrowing costs may signal a slowing down in the euro-zone economic recovery, which could lead to risk aversion in the marketplace and benefit the dollar.
EUR – German, Spanish Indicators Set to Impact Euro Today
The euro was able to advance against virtually all of its main currency rivals yesterday, as renewed hopes that an agreement to release the next round of Greek bailout funds will happen in the near future. The EUR/JPY shot up close to 130 pips during European trading to reach a 6 ½ month high at 105.83. Against the US dollar, the common currency was able to recover all of its losses from the previous day. The EUR/USD gained more than 80 pips before peaking at 1.2832 during afternoon trading.
Today, euro-zone news is expected to generate heavy market volatility. Traders will want to pay attention to both the German Flash Manufacturing PMI at 08:30 GMT and Spanish 10-year bond auction. If the German data comes in below expectations, fears that the euro-zone crisis is spreading to the region’s biggest economy could cause the euro to turn bearish. Similarly, an increase in Spanish borrowing costs today may lead to losses for the euro.
Gold – Gold Range Trades amid Euro-Zone Uncertainties
The price of gold spent most of the day yesterday range trading, as uncertainties regarding the debt situations in Greece and Spain caused investors to refrain from opening new positions. After gaining more than $4 an ounce during morning trading to trade as high as $1726.35, the precious metal began moving downward before stabilizing at around $1723.
Today, gold traders will want to pay attention to euro-zone news. Specifically, a German manufacturing PMI and Spanish bond auction could result in market volatility. If any of the news signals progress in the euro-zone economic recovery, the price of gold could advance higher during the second half of the day.
Crude Oil – Crude Oil Turns Bullish Following Increase in Middle East Violence
The price of crude oil advanced slightly over $1 a barrel yesterday, following an escalation in the ongoing conflict in Israel and Gaza Strip. Supply side fears among investors caused crude to advance as high as $87.70 before dropping back to the $87.50 level.
Today, the conflict in Israel is once again expected to generate volatility in the price of crude oil. Traders will want to pay attention to any developments in international efforts to establish a cease-fire between Israeli and Hamas leaders. Should the situation calm down, the price of oil could turn bearish.
Most long-term technical indicators are showing this pair trading in neutral territory, making a defined trend difficult to predict. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the daily chart are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the same chart’s MACD/OsMA has formed a bullish cross, signaling that price shift could be upward. This may be a good time for traders to open long positions.
The Relative Strength Index on the weekly chart is approaching the overbought zone, indicating that a downward correction could occur in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed above the -20 level. Traders may want to open short positions for this pair.
The Williams Percent Range is currently pointing downward and is approaching the oversold zone. That being said, most other long-term technical indicators show this pair range trading. Taking a wait and see approach may be a wise choice for this pair, as a clearer picture is likely to present itself in the near future.
The Wild Card
The daily chart’s Slow Stochastic has formed a bearish cross, indicating that a downward correction could occur in the near future. Furthermore, the Relative Strength Index on the same chart is currently in overbought territory. This may be a good time for forex traders to open short positions ahead of a possible downward correction.