Source: ForexYard
The US dollar tumbled against its main currency rivals on Friday, following the release of a worse than expected US Core CPI report. The CPI figure reaffirmed speculations that the Fed will keep interest rates at their current levels for the foreseeable future. This week, traders will want to pay attention to the ongoing negotiations between US Congressional leaders and President Obama regarding the upcoming “fiscal cliff”. Any signs of progress could lead to risk taking in the marketplace. Additionally, investors will be closely watching Wednesday’s German Ifo Business Climate for clues as to the current state of the euro-zone economic recovery.
Economic News
USD – Disappointing CPI Figure Sends Dollar Tumbling
The US dollar took significant losses on Friday, following a worse than expected Core CPI report which led to speculations that the Fed will keep US interest rates at their current levels for the foreseeable future. The USD/JPY fell more than 60 pips during the first half of the day, to eventually trade as low as 83.0, before bouncing back to 83.50 where it closed out the week. Against the Swiss franc, the greenback dropped some 80 pips to trade as low as 0.9164.
This week, investors will closely monitoring any developments in the ongoing budget negotiations between US Congressional leaders and President Obama. The deadline is quickly approaching before automatic tax increases and spending cuts are triggered, known as the “fiscal cliff”. Any kind of breakthrough in the negotiations is likely to lead to risk taking in the marketplace, which could send the safe-haven dollar lower. In addition, dollar traders will also want to pay attention to Wednesday’s Building Permits figure, Thursday’s Philly Fed Manufacturing Index and Existing Home Sales reports, and finally Friday’s Core Durable Goods Orders.
EUR – ECB President’s Speech May Give Extra Boost to Euro
Speculations that US interest rates would remain at their current levels for the foreseeable future led to risk taking in the marketplace on Friday, which resulted in significant euro gains. Against the US dollar, the common currency more than 100 pips during afternoon trading, eventually reaching as high as 1.3170, its highest level since last May. The pair ended up closing out the week at 1.3160. The EUR/JPY gained some 90 pips during the second half of the day, to eventually trade as high as 109.92.
This week, euro traders will want to pay attention to several key EU news events. First, today’s speech from ECB President Draghi, set to take place at 14:30 GMT, could give the euro an additional boost if there are signals of improvements in euro-zone economic growth. On Wednesday, all eyes will be on the German Ifo Business Climate figure. As the EU’s biggest economy, indicators out of Germany tend to have a significant impact on euro pairs. A better than expected business climate figure could lead to additional euro gains.
Gold – Gold Takes Slight Losses amid Stalled US Budget Negotiations
The price of gold took slight losses on Friday, as questions regarding stalled US budget negotiations to avoid the upcoming “fiscal cliff” weighed down on precious metals. Gold fell as low as $1692.95 an ounce during mid-day trading, down more than $8, before bouncing back to the $1695 level when markets closed for the week.
This week, developments in US budget negotiations are likely to have the biggest impact on gold prices. Any breakthroughs in the talks between Congressional leaders and President Obama are likely to result in increase in investor risk taking, which could turn the precious metal bullish.
Crude Oil – Oil Sees Gains Following Positive Chinese News
The price of crude oil was able to gain close to $0.80 a barrel on Friday, following a positive Chinese manufacturing report which signaled to investors that global demand may increase. Crude closed out the week at $86.86.
This week, crude traders will want to pay attention to a batch of US news. Specifically, the Philly Fed Manufacturing Index and Core Durable Goods Orders will provide clues as to the current state of the US economic recovery and how high demand for oil is. Additionally, Wednesday’s Crude Oil Inventories figure will be closely watched by investors to determine the level of demand for oil is in the US.
Technical News
EUR/USD
The Bollinger Bands on the weekly chart are beginning to narrow, indicating that this pair could see a price shift in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed over into overbought territory, signaling that the price shift could be bearish. Traders may want to open short positions for this pair.
GBP/USD
A bearish cross on the weekly chart’s MACD/OsMA indicates that a downward correction could take place in the near future. Furthermore, the Relative Strength Index on the same chart appears close to crossing into the overbought zone. Opening short positions may be the best long-term choice for this pair.
USD/JPY
The Slow Stochastic on the weekly chart has formed a bearish cross, indicating that a downward correction could occur in the near future. Additionally, the Williams Percent Range on the same chart has crossed into overbought territory. Opening short positions may be the wise choice for this pair.
USD/CHF
The weekly chart’s Williams Percent Range has crossed into oversold territory, indicating that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart appears close to forming a bullish cross. Traders may want to open long positions for this pair.
The Wild Card
NZD/USD
The Relative Strength Index on the daily chart has crossed into overbought territory, indicating that a downward correction could take place in the near future. Furthermore, the Slow Stochastic on the same chart appears close to forming a bearish cross. This may be a good time for forex traders to open short positions ahead of possible downward movement.
Forex Market Analysis provided by ForexYard.
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