The EUR/USD slipped on Monday after mixed Euro-Zone Purchasing Managers’ Indexes gave investors a reason to book profits after last week’s lofty gains. Earlier in the session, the market was underpinned by the news German Chancellor Angela Merkel won a third term to lead Europe’s biggest economy.
The Euro began to weaken against the dollar after a series of preliminary Euro Zone PMI data showed the manufacturing sector expanded less than expected in September. This erased some of the gains that were made last week after the Fed surprised investors by refraining from reducing monetary stimulus as expected.
The GBP/USD rebounded after a two-day setback. Speculators supported the market in anticipation of friendly economic later this week. Investors expect the UK domestic product to show an increase. Housing prices are also expected to show a rise. Because of the improving economic picture, investors are also looking for consumer confidence to improve.
Momentum appears to be building for a near-term test of the recent top at 1.6162. Solid economic data along with thoughts the Fed will continue to refrain from tapering are two reasons why the British Pound may continue its strong uptrend over the near-term.
A slightly better U.S. Dollar and continuing speculator liquidation pressured November crude oil on Monday. Although the Fed’s failure to reduce stimulus as expected drove the U.S. Dollar lower last week, crude oil traders decided to focus on the sputtering economy as one of the main reasons why demand for crude oil could fall over the near-term. Additionally, speculators appear to have lost interest in the long side of the market since Russia brokered a deal between Syria and the U.S. to prevent a military conflict. So far the break has been orderly, but could begin to accelerate once support at $103.07 is violated.
December gold traders continued to take back all of the gains triggered by last week’s short-covering rally. Last week’s surprise announcement by the Fed to curtail its plans to reduce its monthly monetary stimulus shocked gold traders who quickly covered their short positions.
After reaching a major retracement zone at $1362.50 to $1379.37, short-sellers quickly regained control, putting the market in a position to retest the recent bottom at $1291.50. It looks as if the trend is likely to continue over the near-term since gold has lost its luster as an investment. Unless the dollar completely falls apart, look for an eventual test of the August bottom at $1271.80.
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