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ANALYSIS

German Data Leads to Euro Losses

The euro had another bearish day yesterday, following the release of worse than expected German economic indicators during the morning session. The news led to fears that the euro-zone's biggest economy may be slipping into recession, which caused investors to shift their funds away from the common currency. Today, news out of the US is likely to generate market volatility. Traders will want to pay attention to the Core Durable Goods Orders and Unemployment Claims figures at 12:30 GMT, followed by the Pending Home Sales at 14:00.


Forex Market Trends – 25 October 2012

EUR/USD

GBP/USD

USD/JPY

USD/CHF

AUD/USD

EUR/GBP

Daily Trend

up

up

up

down

up

up

Weekly Trend

down

up

up

up

up

down

Resistance

1.3092

1.6142

80.97

0.9411

1.0460

0.8197

1.3046

1.6098

80.56

0.9364

1.0414

0.8151

1.3015

1.6071

80.30

0.9336

1.0386

0.8122

Support

1.2967

1.6027

79.87

0.9288

1.0338

0.8077

1.2935

1.6000

79.61

0.9259

1.0310

0.8048

1.2888

1.5957

79.19

0.9211

1.0264

0.8003

Economic News

USD - US Indicators Set to Impact Dollar Today

The US dollar had a relatively slow trading day yesterday, despite better than expected US housing data which helped boost investor confidence in the American economic recovery. The USD/JPY was able to gain close to 15 pips during the first part of the day to trade as high as 79.87, slightly below Monday's three-month high of 80.02. Against the Swiss franc, the greenback advanced more than 40 pips during the morning session before staging a downward correction later in the day. The USD/CHF stabilized around 0.9335 by the end of European trading.

Today, dollar traders will want to focus their attention on a batch of US news set to be released during mid-day trading. Specifically, the Unemployment Claims, Core Durable Goods Orders and Pending Home Sales figures all have the potential to create significant market volatility. With analysts predicting all three indicators to show clear improvements in the US economy, the greenback could see gains against its main currency rivals during the second half of the day.

EUR - Euro Takes Losses Following Disappointing German News

A worse than expected German Flash Manufacturing PMI and Ifo Business Climate generated fears that the euro-zone's biggest economy may be nearing recession. As a result, the euro fell against most of its main currency rivals throughout the day. Against the US dollar, the common currency dropped 70 pips during morning trading to trade as low as 1.2917. An upward correction later in the day brought the euro to the 1.2955 level. The EUR/GBP fell some 50 pips to trade as low as 0.8076 before bouncing back to the 0.8085 level toward the end of the European session.

Turning to today, the euro could see additional volatility as a result of a batch of US news set to be released over the course of the day. Any better than expected data may result in the common currency extending yesterday's losses against the greenback. Additionally, euro traders will want to pay attention to announcements out of the euro-zone which could better describe the current state of the region's economies. Negative comments from EU officials might result in further losses for the euro.

Gold - Gold Reverses Slight Gains in Afternoon Trading

Despite a slight boost during morning trading yesterday due to positive Chinese news, gold was not able to maintain its upward momentum and once again turned bearish during the second half of the day. After reaching as high as $1712 an ounce during mid-day trading, the precious metal began falling and by the end of the European session reached as low as $1700.

Today, gold traders will want to monitor news out of the US and how it affects the US dollar. Should the dollar see bullish movement over the course of the day, gold may become more expensive for international buyers which could result in further bearish movement.

Crude Oil - Oil Tumbles Following US Inventories Report

Crude oil fell for the fifth day straight yesterday, as disappointing euro-zone news combined with a significantly higher than expected US Crude Oil Inventories figure led to concerns that global demand will decrease. The commodity dropped more than $1.80 a barrel to trade as low as $85.40 by the end of European trading.

Today, oil may be able to recoup some of its recent losses when a batch of US news is released. Any better than expected news could lead to speculations that demand for oil in the US will increase, which may boost prices as a result. Conversely, should the US indicators disappoint, the price of crude could decline further.

Technical News

EUR/USD

The weekly chart's Williams Percent Range is currently in overbought territory, signaling that this pair could see a downward correction in the coming days. This theory is supported by the same chart's Slow Stochastic, which has formed a bearish cross. Traders may want to open short positions for this pair.

GBP/USD

The Relative Strength Index on the weekly chart is approaching the overbought zone. Furthermore, the MACD/OsMA appears close to forming a bearish cross. Traders will want to keep an eye on both of these indicators, as they may signal a possible downward correction in the near future.

USD/JPY

The daily chart's Slow Stochastic has formed a bearish cross, indicating that this pair could see downward movement in the near future. Additionally, the Relative Strength Index on the same chart is in overbought territory. Going short may be a wise choice for this pair.

USD/CHF

The MACD/OsMA on the daily chart has formed a bullish cross, indicating a possible upward correction in the near future. Additionally, the weekly chart's Williams Percent Range has crossed into oversold territory. Opening long positions may be the smart choice for this pair.