Dollar Gains from Greece Rescue Plan

The U.S Dollar touched a 7-month high against the EUR Thursday after European leaders indicated they will support Greece, but not necessarily deliver direct aid. The greenback added to gains after the U.S. Labor Department said initial claims for unemployment benefits dropped 43,000 to 440,000 in the last week, a bigger decline than economists had estimated.

Economic News

USD – The U.S. Dollar Rallies after Jobless Claims

The U.S Dollar trimmed losses against the Yen and rose against the EUR the most in three weeks on Thursday after data showed U.S. jobless claims fell over the last week. The number of U.S. workers filing new claims for unemployment benefits fell more than expected, reviving a demand for the U.S currency.

In early sessions the greenback weakened versus 13 of its 16 most-traded peers after the European Commission President said in Brussels that EU officials reached an accord to deal with Greece’s debt crisis. The USD fell against higher-yielding currencies such as the Australian and New Zealand dollars as the European Union reached an agreement to help Greece tackle its budget deficit.

With a number of important data releases expected today, the dollar could experience a fair amount of volatility before the trading week comes to an end. At 13:30 GMT the American economy will publish its retail sales reports, giving investors an idea as to how well the American economy fared last month and whether it is really recovering the way most are expecting. The University of Michigan’s Consumer Sentiment report will also be published at 14:55 GMT.

EUR – EUR Falls on Concern Greece Measures Not Enough

The European currency fell to a new 8-month low, revisiting a low point touched last week, amid concerns that the financial troubles of Greece and other peripheral members of the European Union may withhold growth in the region.

The single currency also dropped against the Japanese yen and British pound after European leaders sought to prop up Greece with words of support at a summit on Thursday, but failed to make concrete pledges. The EUR fell 0.6% against the Yen to 122.78 yen and lost 1.1% vs. Sterling to 87.16 pence.

Europe’s currency is headed for a 5-consecutive-week loss versus the U.S dollar as statements by European leaders left open how the EU would respond to a fresh wave of speculative attacks against the bonds of Greece, or other countries such as Spain and Portugal, which are also struggling to reduce their budget deficits.

In late trading, the EUR was down 0.3% at $1.3680, bouncing off a session low at $1.3596. The EUR climbed as high as $1.3801 earlier, following the EU announcement. Traders are focused on option barriers around $1.3550 and $1.3500, which suggests the EUR could fall near those levels.

JPY – Asian Stocks Climb on Growth Optimism

Asian stocks rose, lifting the MSCI Asia Pacific Index to its first weekly gain in four weeks, as optimism on the global economy overcame concern about Greek finances. Japan’s Nikkei 225 Stock Average advanced 1%, while Hong Kong’s Hang Seng Index rose 0.4%. Japan’s markets were closed for a holiday yesterday, when the MSCI Asia Pacific, excluding the Japan Index, climbed the most since Feb. 3.

The Japanese yen has been the main beneficiary since late last month on increasing worries that the pace of global growth will slow and that problems plaguing Greece may spread to Spain and Portugal. As a result, speculators built record short EUR positions and went long on the JPY, pushing the island currency to recent highs.

Crude Oil – Crude Touches $75 on Greece Aid

The price of Crude Oil rose Thursday, tracking a rebound in commodities and stocks on Wall Street after the European Union pledged to support Greece weather its debt crisis.

Crude Oil prices rose 1% to above $75 a barrel as a plan made by European leaders to support Greece sparked investor interest in riskier assets. However, traders remained concerned about whether the aid would be enough to pull Greece out of fiscal crisis, and the EUR slipped against the U.S. Dollar as a result.

The oil market’s focus on Wall Street and the U.S Dollar may have been due, in part, to a delay in the U.S. weekly inventory data from the Energy Information Administration (EIA), which traders scour for clues on demand in the world’s top oil user. The EIA will release its weekly report on petroleum supplies on Friday, instead of Wednesday.

Technical News

This pair has been trading in a downtrend since 3 December 2009. After yesterday’s short downturn in late trading, the pair has begun to show a few signs of upward pressure to offset this movement. The daily RSI shows the price just exited the over-sold territory and remains in an upward posture, suggesting upward pressure. Going long might not be a bad idea this morning.
There appears to be a bearish cross on the 4-hour Stochastic (slow) on this pair, suggesting an impending downward movement. On the other hand, the price of this pair is currently floating in the over-sold territory on the daily RSI, which highlights a level of upward pressure as well. We could see some downward corrections today, but there’s a good chance this pair will begin to change course by the beginning of next week.
This pair continues to float within a narrow bullish channel, and also appears to have entered a consolidation trend recently. Once the consolidation point is reached near the 89.75 level, there’s a good change the bullish channel will continue. Going long appears to be today’s preferable strategy.
The price of this pair has recently flattened out with what appears to be a pause in its movement. The hourly RSI is touching the over-sold border, while the daily RSI shows the price touching the over-bought border. Weekly momentum remains in an upward posture, but today’s movement appears to be anticipating a break in the market. Waiting for a clearer signal from this pair may be a smart move today.

The Wild Card

A few months back this pair’s long-term bullish channel was breached and the pair now appears to be forming a double-top (or “M”) candlestick formation on the weekly chart. The weekly RSI shows the price cascading downward, highlighting plenty of downward momentum. The 4-hour RSI shows the pair in the over-bought territory, and the 4-hour Stochastic (slow) shows a fresh bearish cross. All suggesting that this pair is due for bearishness. Forex traders have a rare opportunity to spot this “M” formation at its second peak and ride out a tremendous wave for potentially large profits.

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