The JPY fell against virtually all of its main currency rivals yesterday after it was announced that elections would be held in Japan, possibly as soon as next month. The US dollar also saw minor losses against the euro amid speculations that interest rates in the US will remain at their current low levels until the beginning of 2016. Turning to today, news out of the US is likely to generate significant activity in the marketplace. Traders will want to pay attention to the Core CPI and Unemployment Claims figures at 13:30 GMT, followed by the Philly Fed Manufacturing Index at 15:00.
USD - Dollar Remains Bullish amid Uncertainties in the Global Economy
The dollar was able to extend its recent gains against several of its higher-yielding currency rivals yesterday, amid uncertainties in the global economy. The GBP/USD fell more than 40 pips during mid-day trading to reach a two-month low after the release of a pessimistic Bank of England inflation report. After trading as low as 1.5855, the pair was able to stage a modest upward correction before stabilizing at the 1.5870 level. The AUD/USD fell more than 45 pips over the course of the European session before reaching as low as 1.0408.
[Related -Integrated Device Technology Inc. (IDTI) Q1 Earnings Preview: Another Beat and Pop?]
Today, US news is forecasted to impact the marketplace. Traders will want to pay particular attention to the Core CPI, Unemployment Claims and Philly Fed Manufacturing Index. Both the Unemployment Claims figure and manufacturing index are forecasted to come in below their previous readings. If true, confidence in the US economic recovery may decrease, which could result in the dollar giving up some of its recent gains during afternoon trading.
EUR - Hopes that Greece Will Receive Bailout Funds Lead to EUR Gains
[Related -Herbalife Ltd. (NYSE:HLF) Q2 Earnings Preview: The Potential To Shock?]
The euro was able to recover some of its recent losses against the US dollar yesterday, as hopes that Greece will soon receive a new round of bailout funds, combined with speculations that the Federal Reserve will keep US interest rates low for the foreseeable future, led to some risk taking. The EUR/USD was able to advance close to 40 pips during the morning session, eventually trading as high as 1.2748, well above its recent two-month low. Against the British pound, the common-currency was able to gain 28 pips to trade as high as 0.8031.
Today, several EU economic indicators could result in euro volatility. Traders will want to pay attention to the CPI, Core CPI and Flash GDP figures, all set to be released at 10:00 GMT. If any of the indicators come in below expectations, the euro could give up some of yesterday's gains. Later in the day, US news is set to impact the markets. Any signs that the US economic recovery is slowing down could help the euro advance higher against the greenback.
JPY - Yen Turns Bearish Following Call for New Japanese Elections
The yen took significant losses across the board yesterday, after the Japanese Prime Minister called for new elections, possibly as soon as next month. Opinion polls indicate that the political party most likely to win favors additional monetary easing in Japan. As a result the USD/JPY was able to gain close to 80 pips throughout the day eventually reaching 80.30 by the end of European trading. The EUR/JPY advanced more than 100 pips before stabilizing around the 102.30 level.
Today, yen traders will want to pay attention to news out of both the euro-zone and US. Any worse than expected data could result in investors shifting their funds to safe-haven assets, which may help the yen recover some of yesterday's losses. Conversely, positive international news could lead to additional yen losses throughout the day.
Crude Oil - Positive Euro-Zone News Results in Gains for Oil
The price of crude oil shot up more than $1 a barrel during afternoon trading yesterday, as signs that Greece will soon receive a new round of bailout funds led to risk taking in the marketplace. Furthermore, escalating tensions in the Middle East led to some supply side fears among investors. By the end of European trading, the commodity was trading above the $86.80 level.
Today, oil traders will want to pay attention to the US Crude Oil Inventories figure, set to be released at 16:00 GMT. Analysts are forecasting the figure to come in at 2.5M, which if true, would represent an increase over last week. A higher than forecasted figure may lead to speculations that demand in the US will go down, which could result in oil giving up some of yesterday's gains.
Most long-term technical indicators place this pair in neutral territory, meaning that a defined trend is difficult to predict at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The daily chart's Williams Percent Range has fallen into oversold territory, indicating that an upward correction could take place in the near future. Additionally, a bullish cross has formed on the same chart's Slow Stochastic. This may be a good time for forex traders to open long positions.
The Relative Strength Index on the weekly chart is approaching the overbought zone, signaling that this pair could see a downward correction in the coming days. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Going short may be the wise choice for this pair.
While a bearish cross appears to be forming on the weekly chart's MACD/OsMA, most other long-term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a more defined trend may present itself in the coming days.
The Wild Card
The Bollinger Bands on the daily chart are narrowing, signaling that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross, indicating that this price shift could be downward. This may be a good time for forex traders to open short positions ahead of possible downward movement.
Article Source: Japanese Elections Announcement Causes Yen to Tumble