EUR Bearish Following Weak German Manufacturing Data

Yesterday’s trading began with a sharp decline for the euro, following a disappointing German Factory Orders report. However, the euro managed to correct most of its losses afterwards on speculation the ECB might hike interest rates in March, in response to accelerating inflation.

Forex Market Trends

Daily Trend up up down no up up
Weekly Trend up up up down up up
Resistance 1.3745 1.6250 83.15 0.9635 1.0255 0.8540
1.3700 1.6210 82.80 0.9600 1.0225 0.8505
1.3660 1.6175 82.50 0.9575 1.0185 0.8475
Support 1.3600 1.6110 82.00 0.9510 1.0100 0.8400
1.3575 1.6080 81.70 0.9475 1.0070 0.8370
1.3520 1.6040 81.35 0.9445 1.0025 0.8340

Economic News

USD – Dollar Sees Modest Gains vs. Majors

The U.S. dollar slightly gained against most of the major currencies during Monday’s trading session. The dollar began yesterday’s trading session with a 60 pip gain vs. the euro, and a 30 pip gain vs. the Japanese yen. However, by the end of the day the dollar corrected most of its gains.

The dollar’s appreciation came after Germany reported weak manufacturing data. Germany’s factory orders declined in December by 3.4 percent, more than economists estimated. The lower-than-expected figures have weakened the euro, and as a result strengthened its greatest rival, the greenback.

The dollar was also supported by the better-than-expected U.S. Unemployment Rate figures, released last Friday. The U.S. Labor Department said on Friday that the U.S. unemployment rate fell to 9 percent in January, the lowest level since April 2009. This has boosted the dollar by 120 pips against the euro on Friday, and continued to impact the greenback on Monday.

Looking ahead to today, the most significant release from the U.S. economy looks to be the Economic Optimism report. This is a survey of about 900 consumers, who are asked to rate their next six-month financial outlook. A positive publication has the potential to further strengthen the dollar.

EUR – Euro Falls on Disappointing German Manufacturing Report

The euro failed to recover from last week’s bearish session, and remained at low levels against most of its major currency counterparts in Monday’s trading. The EUR/USD pair continues to trade below the 1.3600 level, and the EUR/ JPY pair remains below the 112.00 level.

The euro fell against the U.S. dollar and the Japanese yen in early trading yesterday after Germany, Europe’s largest economy, reported weak manufacturing data. German Factory Orders fell by 3.4 percent in December, well below expectations for a 1.4 percent drop. The market promptly reacted to the disappointing release, and the euro fell about 100 pips against both the dollar and the yen.

However the euro managed to erase most of its losses on speculation the European Central Bank (ECB) will hike rates. Governing Council member Yves Mersch said yesterday that the ECB will raise rates if the increase in inflation is not temporary. He added that as there would have to be a rigorous intervention by the monetary authorities if across the second-round effects there’s the risk that this increase transforms into a plateau.

As for today, the most interesting release on the economic calendar looks to be the German Industrial Production data. Economists predict that the German industrial production grew by 0.2% on December. If the end result will provide yet another disappointing data release, then the euro might proceed with its recent bearish trend.

JPY – Yen Sees Mixed Trading

The Japanese yen saw a rather volatile trading session on Monday. The yen saw several ups and downs against the U.S. dollar, which eventually ended near to market’s opening price. The yen also saw a sharp gain of 100 pips against the euro in early trading, just to undergo a 70 pips correction afterwards.

The Japanese currency began yesterday’s trading with a rising trend following a weak German manufacturing data. German Factory Orders declined in December by 3.4 percent from November, and as a result boosted demand for safer assets, such as the yen.

Looking ahead to today, traders are advised to follow the Japanese equity markets, as no significant release is expected from the Japanese economy. Traders should also follow the leading economic releases from the U.S. and euro zone, as these usually have a large impact on yen trading as well.

Crude Oil – Crude Oil Falls To $87.20 as Tensions in Egypt Ease

Crude Oil continued to fall from its recent high of $92.80 a barrel, and is currently trading near the $87.40 level. Crude began this week’s trading session the same way it ended last week’s session, with falling prices. The price for a barrel of oil also slid yesterday as tensions in Egypt appeared to ease. It seemed as if the expectations that Egypt’s political turmoil would affect oil flows in the region have diminished.

In addition, U.S. crude oil inventories will likely show that stockpiles rose for a fourth consecutive week, contributing to the weakening oil prices. Analysts estimate that domestic stockpiles rose by 2.4 million barrels last week. This inventories figure will be released on Wednesday.

As for today, traders are advised to follow the economic releases from the U.S. and euro zone as these tend to have a large impact on crude prices. Traders should also take under consideration that as long as the tensions in the Middle East continue to ease, crude prices might face further declines.

Technical News

The EUR/USD pair saw a falling trend for the past couple of days, and reached as low as the 1.3507 level. Nevertheless, it can be seen on the 4-hour chart that a double-top pattern is beginning to form, with potential to take the pair to the 1.3780 level in the short-term.
The bullish trend that formed on the 4-hour chart has been breached and, ever since, the Cable has been trading near the 1.6130 level. However, as a bearish cross appears to have taken place on the daily chart’s Slow Stochastic, it seems that a bearish session might be impending. Going short might be the right choice today.
The pair has been trading within a restricted range for the past three months now, trading between the 80.30 and the 84.40 levels. Currently, as both the Slow Stochastic and the MACD on the 4-hour chart are providing bearish signals, it appears that the pair might correct the past week’s gains, with potential to reach the 81.30 level.
There is a very distinct bullish channel formed on the 1-hour chart, as the pair is now floating in its middle. However, the RSI on the 4-hour chart has recently dropped below the 70-line, indicating that a bearish correction might be imminent. Going short with tight stops might be the right strategy today.

The Wild Card

Crude Oil
Ever since Crude Oil peaked at $92.80 a barrel, it has seen a sharp bearish correction. Crude fell about 550 pips, and a barrel of crude is currently trading near the $87.30 level. In addition, as all the oscillators on the 4-hour chart are pointing down, it looks that the bearish correction might have more steam remaining. This might be a great opportunity for forex traders to join what appears to be a very popular trend.

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