Euro Bullish Ahead Of Busy Trading Week

The euro saw bullish movement against most of its main currency rivals on Friday, as investor confidence in the EU economic recovery remained high after the European Central Bank left interest rates unchanged earlier in the week. This week, news out of the US and eurozone is expected to generate significant volatility in the marketplace. Today, traders will want to pay attention to a speech from the Fed Chairman, followed by US retail sales data tomorrow, a Spanish bond auction on Thursday, and finally a US consumer sentiment report on Friday.

Economic News

USD - Bernanke Speech Set to Impact Markets Today
Positive eurozone growth forecasts caused the US dollar to take losses against several of its higher-yielding currency rivals on Friday, including the Swiss franc, while expectations of additional monetary easing in Japan sent the USD/JPY to a new 2 ½ year high.

The USD/CHF fell close to 70 pips during European trading, eventually reaching as low as 0.9109, before closing out the week at 0.9135. The USD/JPY advanced 69 pips during the mid-day session to trade as high as 89.43 before dropping back to 89.18.

Traders can anticipate significant market volatility as a result of US economic indicators in the coming days. Specifically, a speech from Fed Chairman Bernanke today, retail sales data tomorrow, the Core CPI figure on Wednesday, Thursday's Philly Fed Manufacturing Index and Friday's Prelim UoM Consumer Sentiment all have the potential to boost the USD if they signal improvements in the US economy. Additionally, dollar traders will want to pay attention to news out of the eurozone, which could generate risk taking and send the safe-haven dollar lower.

EUR - Euro Extends Gains amid EU Growth Expectations
The euro saw bullish movement on Friday, as EU growth expectations, highlighted by recent comments from ECB President Draghi and the decision to leave interest rates at their current levels, supported riskier assets. The EUR/GBP gained close to 80 pips during the European session, eventually reaching as high as 0.8286, before finishing out the week at 0.8270. Against the US dollar, the common currency advanced more than 120 pips during mid-day trading to peak at 1.3365, its highest level since last April.

This week, a batch of eurozone news has the potential to generate additional gains for the common currency. An industrial production figure today, CPI data on Wednesday and a Spanish 10-year bond auction on Thursday are all forecasted to generate volatility for the euro. The bond auction in particular could boost confidence in the eurozone economic recovery if there is high demand for Spanish debt, in which case the euro is likely to see bullish movement as a result.

Gold - Chinese Inflation Data Turns Gold Bearish
The price of gold took significant losses throughout the day on Friday, following the release of a higher than expected Chinese CPI figure which led to speculations that demand for the safe-haven precious metal would drop. Gold fell close to $22 an ounce during afternoon trading, eventually reaching as low as $1653.10, before bouncing back to $1662.78 when markets closed for the weekend.

This week, gold traders will want to pay attention to a batch of economic data out of the US, specifically the CPI, Core CPI and Philly Fed Manufacturing Index. If any of the data comes in above their forecasted levels, the USD could receive a boost which would result in gold taking additional losses.

Crude Oil - US News Set to Create Volatility for Oil
After falling by more than $1.20 a barrel during the first part of the day on Friday, largely as a result of Chinese inflation data, crude oil prices were able to bounce back during the second half of the day. The commodity gained $0.80 throughout afternoon and evening trading, to finish out the week at $93.69.

This week, oil traders will want to pay attention to several key indicators out of the US. If the Retail Sales, Core Retail Sales, or Philly Fed Manufacturing Index comes in above their forecasted levels, it may be taken as a sign that American demand for oil will increase which would lead to an increase in prices.

Technical News

EUR/USD
A bearish cross has recently formed on the weekly chart's Slow Stochastic, indicating that a downward correction could occur in the coming days. This theory is supported by the Williams Percent Range on the same chart, which is currently in overbought territory. Opening short positions may be the smart choice for this pair.

GBP/USD
While the Bollinger Bands on the weekly chart are narrowing, indicating that a shift in price could occur in the near future, most other long-term technical indicators are in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself soon.

USD/JPY
The Relative Strength Index on the weekly chart is in overbought territory, indicating that a downward correction may occur in the coming days. Furthermore, a bearish cross has formed on the same chart's Slow Stochastic. Traders may want to open short positions for this pair.

USD/CHF
The Bollinger Bands on the weekly chart are narrowing, indicating that a price shift is likely to occur in the near future. Additionally, the Williams Percent Rang on the same chart has dropped into oversold territory, signaling that the price shift could be bullish. Opening long positions may be the smart choice for this pair.

The Wild Card

USD/MXN
A bullish cross has formed on the daily chart's Slow Stochastic, signaling that upward movement could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which is in oversold territory. This may be a good time for forex traders to open long positions ahead of a possible upward correction.