Stock markets carried on their recent upward march yesterday and central bank meetings ensured plenty of action for forex traders.
The Dow Jones Industrial Average opened sharply higher on the open and ended up closing up by 0.38%, while the S&P 500 advanced by 0.17%.
In currencies, EUR/USD soared to its highest level in a month, after the ECB kept its currency policy measures unchanged.
ECB Chief Mario Draghi stated that the bank sees inflation increasing gradually and that economic output in the Eurozone should improve over time. The comments came as a big surprise to traders, many of whom were expecting some form of definitive action from the bank yesterday.
Elsewhere, the USD/JPY finished at its highest level in five weeks and gold remained solid at $1350.
Today
Tensions in Ukraine seem to be calming so the big event for traders will be the non-farm payrolls report, released at 1:30 GMT. According to analysts, non-farm payrolls should have increased by around 149,000 workers in February and the underlying rate is expected to hold steady at 6.6%. The big question for traders will be how badly winter weather conditions seem to have affected the labor market. We have had two disappointing monthly labor reports in a row so this should be an important one for traders.
The EUR/USD exploded yesterday in response to the bullish statement from the ECB. The market soared around 120 pips, moving through the pivot and past all three resistance levels. Confidence from the ECB indicates that the Eurozone economy may be turning a corner and this could lead to a break out in the EUR/USD. However, the market is currently overbought and should fall back over the next couple of days.
The USD/JPY moved to a 5 week high yesterday and is likely to continue it’s current upward trend when markets resume today. Technical levels are playing fairly well for day traders and now that the overbought condition has been cleared, the USD/JPY should carry on its bull trend. The calming of tension in Eastern Europe should give traders further reason to go long the USD/JPY.