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All Eyes on US Employment Data Today
USD - Non-Farms Report Set to Generate Dollar Volatility
The US dollar saw temporary gains against its higher-yielding currency rivals yesterday, following the release of worse than expected euro-zone economic data. The GBP/USD fell more than 60 pips during early morning trading, eventually reaching as low as 1.5774, before bouncing back to the 1.5820 level during afternoon trading. Against the Japanese yen, the greenback advanced close to 30 pips during afternoon trading before peaking at 91.22, slightly below a recent 2 ½ year high.
Today, all eyes are likely to be on the US Non-Farm Employment Change figure, arguably the most important economic indicator on the forex calendar. Analysts expect today's news to come in at 161K, slightly higher than last month's 155K. A higher than expected result today is likely result in increased confidence in the US economic recovery, which may lead to gains for the dollar before markets close for the weekend. Conversely, if today's news comes in below the forecasted level, the greenback could reverse its bullish trend against the JPY.
EUR - After Morning Losses, Euro Stages Bullish Recovery
The euro took losses during early morning trading yesterday, following a worse than expected German retail sales figure which led to doubts about the strength of the euro-zone economic recovery. The EUR/USD fell more than 40 pips during the first part of the day, eventually reaching as low as 1.3540, before an upward correction brought the pair back to the 1.3570 level, just below a 14-month high. Against the British pound, the common-currency spent the day fluctuating between 0.8557 and 0.887.
In addition to US employment data today, euro traders will also want to pay attention to several potentially significant EU economic indicators. Spanish and Italian manufacturing data, followed by the euro-zone unemployment rate, could all boost the euro during morning trading if they signal additional economic growth in the EU. Furthermore, the EUR/USD could see additional gains during afternoon trading if today's NFP figure comes in below expectations.
Gold - Gold Prices Tumble amid Signs of Economic Growth
Signs of global economic growth yesterday, including a better than expected German Unemployment Change figure, caused investors to shift their funds away from safe-haven assets during European trading yesterday. As a result, gold prices tumbled more than $18 an ounce, eventually reaching as low as $1661.19, before bouncing back to the $1664 level.
Today, gold traders will want to pay careful attention to the US Non-Farm Payrolls figure, set to be released at 13:30 GMT. A better than expected figure is likely to generate further optimism in the global economic recovery, which may lead to additional losses for gold during afternoon trading.
Crude Oil - Crude Oil Takes Losses Following US Unemployment Data
The price of crude oil turned bearish during afternoon trading yesterday, following the release of a higher than expected US Unemployment Claims figure which led to concerns that American demand for oil could decrease in the near future. The commodity fell slightly less than $1 a barrel, eventually reaching as low as $96.82 before bouncing back to $97.25.
Turning to today, the US Non-Farm Payrolls figure is likely to have the biggest impact on oil prices before markets close for the weekend. A worse than expected figure is likely to lead to additional concerns regarding future American demand for oil, which may lead to another drop in prices.
A bearish cross is close to forming on the weekly chart's Slow Stochastic, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently approaching overbought territory. Opening short positions may be the best option for this pair.
The Williams Percent Range on the weekly chart has fallen in into oversold territory, signaling that an upward correction could occur in the near future. This theory is supported by the Slow Stochastic on the daily chart, which is close to forming a bullish cross. Opening long positions may be the best choice for traders.
The Relative Strength Index on the weekly chart is currently overbought territory, indicating that a downward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. Opening short positions may be the best choice for traders.
Most long-term technical indicators show this pair trading in neutral territory, meaning a definitive trend is difficult to predict at this time. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
The Wild Card
The Bollinger Bands on the daily chart are narrowing, signaling that a price shift could occur in the near future. Furthermore, a bearish cross has formed on the same chart's MACD/OsMA, indicating that the shift could be downward. This may be a good time for forex traders to open short positions ahead of possible bearish movement.