Euro Weakens on Talk of New Stimulus

The EUR/USD broke sharply today although it remained inside of last week’s range. The catalyst behind the move was speculation the European Central Bank is looking to buy corporate bonds on the secondary market. This move would increase liquidity, which would put pressure on the currency.

The Forex pair likely stayed inside last week’s range and didn’t break further because the ECB is denying the story about buying corporate debt.

The GBP/USD edged a little higher on Tuesday in limited price action. Today was a light trading session as many traders took to the sidelines ahead of Wednesday’s MPC Asset Purchase Facility Votes and the MPC Official Bank Rate Votes. Traders believe the vote was 7 to 2 to hold interest rates at historical levels.

December Comex Gold rallied on Tuesday as traders increased bets the U.S. Federal Reserve will push back its decision to increase interest rates in 2015. This news weakened the U.S. Dollar which supported gold prices.

Gold rallied on Tuesday to $1254.10. This completed a move into the major 50% level at $1253.80. This retracement zone was created by the $1324.30 to $1183.30 trading range.

December Crude Oil continued to consolidate despite the bearish fundamentals. The consolidation taking place is just position squaring and profit-taking because of oversold conditions. Once this passes then look for the price slide to continue.

Overproduction is the main concern. Although most reports suggest that OPEC is not going to cut production, some short-sellers may be lightening up their positions in case there is a surprise. There are also rumors circulating that the U.S. is manipulating the demand figures in order to drive prices lower. This move is intended to hurt the Russian economy which relies heavily on crude oil production.

Russia needs cash right now to sustain its economy and is heavily producing crude to maintain its cash flow. The sanctions imposed on the country by Europe because of the crisis in Ukraine is preventing the Russians from accessing bank loans.