Spanish Debt Auction Leads to Moderate Euro Losses

The euro took moderate losses against its main currency rivals during yesterday’s trading session, following a Spanish long-term debt auction. While the auction was successful, it came at a higher than expected cost to the Spanish government, and did little to ease investor fears regarding the overall euro-zone debt crisis. Turning to today, traders will want to pay attention to the German Ifo Business Climate. A positive figure may help boost confidence in the euro-zone economic recovery ahead of markets closing for the week.

Forex Market Trends

Daily Trend up up no down up up
Weekly Trend up up up down down down
Resistance 1.3248 1.6156 82.41 0.9228 1.0422 0.8283
1.3219 1.6124 82.12 0.9192 1.0392 0.8250
1.3187 1.6095 81.83 0.9163 1.0364 0.8221
Support 1.3126 1.6034 81.24 0.9103 1.0305 0.8160
1.3097 1.6003 80.94 0.9070 1.0273 0.8128
1.3065 1.5970 80.63 0.9039 1.0240 0.8095

Economic News

USD – Dollar Turns Bullish vs. EUR

The US dollar turned bullish against several of its main currency rivals during yesterday’s trading session, following a Spanish long-term debt auction which failed to convince investors that the euro-zone debt situation is improving. Additionally, the weekly US Unemployment Claims came in slightly below last week’s, signaling slight improvement in the US employment sector. The EUR/USD, which rose as high as 1.3164 immediately after the auction, dropped close to 100 pips throughout the European session. The pair eventually corrected itself and stabilized around the 1.3100 level.

Turning to today, a lack of US news events means that any volatility the dollar sees will be a result of indicators out of Europe. Traders will want to note the result of the German Ifo Business Climate, scheduled for 8:00 GMT, followed by the British Retail Sales figure at 8:30. Positive German data may lead to some risk taking in the marketplace, which could hurt the dollar against currencies like the euro and AUD. With regards to the British data, analysts are forecasting today’s news to come in well above last month’s. If true, the GBP/USD could extend its current upward trend.

EUR – Euro Fails to Capitalize from Spanish Debt Auction

The euro fell vs. its main currency rivals during yesterday’s trading session despite a successful Spanish long-term debt auction. Investor concerns still persist regarding whether the euro-zone debt-crisis can spread to other countries in the region, and what impact that may have on the broader global economic recovery.

The EUR/GBP, which earlier in the week fell some 65 pips following a positive UK employment report, dropped an additional 30 pips yesterday. The pair reached as low as 0.8160 during mid-day trading. Against the Japanese yen, the euro fell around 75 pips, reaching as low as 106.50 before staging a slight correction and stabilizing around 106.99.

Turning to today, the German Ifo Business Climate and UK Retail Sales are forecasted to generate market volatility. The German figure in particular may help the euro recoup some of its recent losses, should it come in above expectations. At the same time, with analysts predicting that the British Retail Sales figure to come in well above last month’s result, there is a possibility that the EUR/GBP could drop further.

AUD – Aussie Takes Losses vs. USD, JPY

The Australian dollar turned bearish vs. safe-haven currencies yesterday, including the US dollar and Japanese yen, as concerns regarding the euro-zone debt crisis persist among investors. The AUD/USD fell close to 80 pips during the European session, reaching as low as 1.0312. The pair eventually staged a slight correction and stabilized at 1.0335. Against the JPY, the aussie fell as low as 83.94, down around 70 pips for the day.

As we close out the week, analysts are warning that riskier currencies like the AUD may have a hard time reversing their current downward trends. Investor sentiment is still overwhelmingly bearish with regards to the euro-zone debt crisis. That being said, the aussie may have a chance to recoup some of yesterday’s losses if today’s German Ifo Business Climate comes in above expectations.

Crude Oil – Risk Aversion Causes Crude Oil to Extend Bearish Trend

Crude oil extended its downward movement yesterday, as investors shifted their funds away from riskier assets following Spain’s debt auction. Concerns regarding the euro-zone debt crisis led to gains for safe-haven currencies, including the US dollar. Typically, the price of oil falls when the dollar is strong, as the commodity becomes more expensive for international buyers. The price of oil fell over $1 a barrel during European trading, reaching as low as $102.45 before staging a slight upward correction.

Turning to today, traders will want to pay close attention to news out of the euro-zone and the UK for clues as to risk sentiment in the marketplace. Positive news may lead to gains for the euro, which could cause oil to turn bullish. At the same time, should the news come in below analyst forecasts, investors may abandon their riskier assets which could cause oil to extend its downward movement further.

Technical News

In a sign that a price shift for this pair could occur in the near future, the Bollinger Bands on the weekly chart are narrowing. While most other technical indicators are currently in neutral territory, the MACD/OsMA on the same chart appears close to forming a bullish cross. Traders will want to keep an eye on this indicator, as it may be a sign of future upward movement.
A bearish cross has formed on the daily chart’s MACD/OsMA, indicating that this pair could see downward movement in the near future. In addition, the Williams Percent Range on the same chart is approaching overbought territory. Traders may want to go short in their positions, ahead of a possible downward correction.
In a sign that this pair may see downward movement in the coming days, both the Relative Strength Index and Williams Percent Range on the weekly chart are moving toward overbought territory. Traders will want to keep an eye on both of these indicators. Should they continue moving up, it may be a sign of an impending bearish correction.
Most long term technical indicators show this pair trading in neutral territory, meaning that no defined trend can be predicted at this time. Traders may want to take a wait and see approach, as a clearer trend is likely to present itself in the near future.

The Wild Card

The Relative Strength Index on the daily chart is hovering close to oversold territory, indicating that an upward correction could occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which has dropped below the -80 level. Forex traders may want to go long in their positions ahead of a possible upward breach.

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