The Forex Market Insight Report shows charts on different major currencies and commodities, with brief commentaries on how new data releases and news cause movements in the market.

Headline:

  • Markets shaken as credit agency S&P downgrade US debt outlook to ‘negative’
  • Flight to safety sees gold, US dollar gain
  • Risk currencies sharply lower, with EUR/JPY down over 200 pips on the news
  • AUD also weaker, with EUR and GBP also lower overnight
  • Commodities climb, with precious metals leading. Gold, silver hit new record highs
  • Equities across the globe finish deeply underwater, but Dow bounces 100 points from low to close down 1.1%

AUD/USD
The AUD lost ground in line with most other risk currencies overnight after S&P downgraded the US’s debt outlook. However, the AUD held up as gold and silver surged higher. Technically, we saw the AUD break below the bearish wedge formation and this is negative for the AUD in the near term. A break of 1.0455 could see further selling. Watch for RBA minutes at 11.30am

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XAU/USD
Gold surged higher overnight on the S&P news. This news caused investors to move into gold rather than US dollars on fears for the long-term health of the US economy. Gold made new record highs, trading as high as $1497, before drifting back lower. A move above $1500 appears just a matter of time, although a short term move back to $1475 remains a possibility

EUR/USD
The EUR/USD dropped sharply over the last 24 hours as debt worries both in the Eurozone and the US produced heavy selling in the single currency. The move has now pushed the EUR into an important zone, with it currently trading near the key 1.4250 level. A move back above 1.4250 would be bullish, but if the EUR can’t push back higher, 1.4000 is on the cards

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GBP/USD
The GBP/USD was also pushed lower overnight, but found support at the previous highs around 1.6180. Just like the Euro, while the pound is showing some signs of weakness, the market remains focused on the strong uptrend that has dominated trade over the last few months. However, a clear break below 1.6180 would be seen as bearish.

USD/JPY
The USD/JPY saw some selling on the S&P news, but the ‘safe haven’ nature of the greenback meant that the USD losses were capped owever, traders remains focused on the downside, and the downtrend that has driven trade on this pair recently has provided traders with great opportunities. Major support is not seen until 81.00.

AUD/JPY
The AUD/JPY was sent lower overnight as traders moved out of risk currencies after S&P cut the US’s debt outlook. This caused the AUD/JPY to break below the bearish descending triangle and could indicate that further selling is ahead. The market has already re-tested the lower support at 87.00 overnight and this now becomes resistance

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OIL
Crude didn’t benefit from the S&P news like the precious metals did overnight with worries the US’s debt load could hit economic growth causing crude to lose ground. We’re now at a crucial level for oil with any break of 106.50 having the potential to see oil head back to 105.30. A break of 105.30 would be seen as a further negative.

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