Euro Higher On Greece Aid Package, U.S. Budget Deficit Narrowed

The European Union finally agreed upon an aid package for Greece. The aid package of $61 Billion sent investors to buy the EUR, pushing it significantly higher against all its major counterparts. Greek fiscal problems seem close to be over, however, investors are still suspicious of other European nations, and the EUR pulled back against the dollar later during the trading day, currently the EUR/USD pair is trading at 1.3584 after trading at 1.3691, yesterday’s highest price.

Economic News

USD – U.S. Budget Deficit Narrowed

In the absence of major news from the U.S. yesterday, trade was mainly influenced by the aid package provided to Greece. Later, during yesterday’s trading, the U.S. published the budget balance, which showed improvement over previous months. However, the figure was negative, indicating the government was still spending more than making revenue during March.

The EUR/USD pair was quite volatile yesterday, as the euro increased the most in seven months against the greenback. The trend turned around as the trading day advanced, and the euro lost a part of its gains against the U.S. Dollar, as investors are still cautious about the global economy and in particular Europe. The change in investor mood influenced commodities and dependent commodities currencies such as the AUD which ended lower against the USD, the pair is currently trading at 0.9257.

The USD is expected to continue to strengthen today against its major counterparts. Investors are advised to follow the Trade Balance today at 12:30GMT, and thereafter follow the outcome of Treasury Secretary Geithner’s speech at 16:45GMT.

EUR – Euro Gains on Greek Bailout

Greek fiscal problems seem close to an end. The aid package offered to Greece, sent investors to accumulate the recently over sold currency. The support of the European Union helped eliminate some of the uncertainty around Greece. Investors are advised to continue to monitor news regarding the aid package. New developments about Greece’s debts or aid plan would have an impact over the euro against its major counterparts.

The British pound also gained by the rush to riskier assets. However, it is viewed as a short term correction rather than a new long term trend. With UK election coming up beginning of May, investors are expected volatility to increase for the GBP/USD pair. The pair is currently trading at 1.5349.

Later today, the UK will publish trade balance figures, and although it is not forecasted to turn positive, a better than expected figure may support the GBP against its major counterparts.

JPY – USD/JPY Crosses Below 93

The Japanese Yen saw some volatility yesterday versus the USD and is currently trading at 92.63, below a key support level at 93. Investors forecast the pair would reach 100, after BOJ Governor signaled he prefers a weak Yen in order to support the Japanese economy, which is facing deflation. Producer Prices published yesterday declined less than expected, but the figure was still negative. On Wednesday, BOJ Governor Shirakawa will probably relate to interest rates and easing measures in his speech.

The EUR/JPY also saw high volatility yesterday, while investors sold EUR and bought the JPY. The pair was down by almost 150 pips from yesterday’s trade high price.

OIL – Crude Oil Prices Continue to Rise

Oil is currently trading at $84.00, down for the fourth day after it traded last week at almost $87 a barrel. The price started to decline after last week’s inventories report which was less than expected. The day actually started positive for crude oil as the euro’s rally weakened the greenback and helped to push price of spot crude oil higher at the start of the day. However, as the day progressed and the USD strengthened, spot crude oil prices were sent lower to $84 during yesterday’s trade.

Technical News

Yesterday the pair was unable to breach below the 1.3567 support line on the 4-hour chart. This level may provide further support for the pair today as the chart shows a potential bearish cross forming on the Slow Stochastic. Should the cross take place, the price could rise in the short term. A price target may be the 50% Fibonacci retracement level at 1.3800.
The pair dropped below the support line of 1.5380, but found support at the 1.5350 level. The support line happens to be a 50% Fibonacci retracement level on the daily chart. This may be an opportunity for traders to enter into a strong trending environment. The ADX 14 on the daily chart shows a reading of 39 and rising. This indicates a strong bullish trend. Traders may want to go long on the pair as it appears the price could rebound from this retracement level.
The Stochastic Slow lines on the 1-hour chart appear to be close to forming a cross at the lower resistance level, indicating a bullish correction is possible. This sentiment is supported by the Bollinger Bands on the daily chart. The widening of the bands indicates a price change may occur soon, but the direction is unknown. Traders may want to take a wait and see approach for this pair today.
Most technical indicators show that this pair is currently trading in neutral territory, and will likely continue to do so today. The exception is the Relative Strength Index, (RSI) on both the 4-hour and 8-hour charts, which shows the pair currently in oversold territory. This usually indicates a bearish correction could take place in the near future. Traders may want to go long with tight stops today.

The Wild Card

Dow Jones Industrials
Following the Dow Jones recent climb to above 11000, most technical indicators are now showing the CFD trading in neutral territory. Still, the Relative Strength Index, (RSI) on both the 1-hour and 2-hour charts show signs that a bullish move may be possible in the next few hours. Forex traders may want to go long with tight stops today, as it is possible the CFD will continue moving upward.

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