EUR Rebounds on Stronger than Expected ZEW Sentiment

The EUR/USD cross edged above the $1.35 level after the German ZEW Institute’s April economic sentiment index came in well above previously forecasted levels. That being said, the Euro-Zone currency fell later in the session amid persistent worries about debt-stricken Greece.

Economic News

USD – Dollar Tumbles as Risk Taking Resumes

The U.S currency eased on Tuesday as a sell-off in growth linked currencies waned and risk taking increased on expectations of a global economic recovery. The greenback had weakened earlier, with losses against the EUR recorded. Europe’s currency edged above the $1.35 level, boosted by a stronger than expected rise in the closely watched ZEW gauge of German investor sentiment.

Against its counterpart in Canada the U.S. dollar weakened after that country’s central bank signaled its willingness to tighten monetary policy. The U.S. dollar dropped 1.6% against the Canadian loonie after the decision, extending losses of about 0.3% before the central bank’s statement was released. The greenback bought C$0.9991, pushing the Canadian currency back above parity, where one U.S. dollar buys one Canadian dollar.

EUR – Euro pressured vs. Dollar on Greece Debt Worries

The European currency rose to session highs against the Dollar after the German ZEW Institute’s April economic sentiment index came in above forecasted levels. The brighter Euro Zone data followed UK consumer price inflation, which came in at a higher than expected 3.4 percent in March, compared with forecasts of 3.2 percent, and underpinned the British pound.

The EUR hovered near the day’s high of $1.3522, up 0.2% for the day. The single currency also got a mild boost after strong investor demand at a 1.5 billion euro sale of Greek 13-week T-bills, which showed a bid-to-cover ratio of 4.6.

At the same time, traders remained wary of chasing up the EUR on concerns about highly-indebted Greece. The single currency fell earlier after European Central Bank Governing Council member Axel Weber said Greece may require assistance of up to 80 billion euros to avoid default.

JPY – Yen Gains vs. Euro on Greek Concerns

The Japanese yen rose against the EUR for the first time in 3 days as concerns about debt-stricken Greece boosted demand for Japan’s currency as a refuge. The Yen rose to 124.90 per EUR from 125.24 in New York yesterday.

Japan’s currency was near a 1 week low against the U.S dollar after stocks rose and before reports forecasting a recovery in the U.S. housing market, one of the main causes of the financial crisis. Japan’s currency traded at 93.11 per Dollar from 93.22. Yesterday it touched 93.39, the weakest since April 15.

The Yen may weaken further against higher yielding currencies including the Australian dollar as optimism that the global economic recovery remains on track dented demand for the relative safety of the Japanese currency.

Crude Oil – Crude Extends Gains Past $84 a Barrel

Oil prices rose on Tuesday after stunning earnings by Goldman Sachs Group Inc improved risk appetite and some European flights resumed as the threat from Iceland’s volcanic ash cloud receded. In addition, analysts said that the prices were higher because of stronger equities and lower risk aversion.

Oil climbed yesterday as European airspace began to reopen, restoring some demand for jet fuel. Prices also advanced as U.S. equities rose, snapping a 2 day drop for the MSCI World Index, because of improving corporate earnings that boosted confidence in the global recovery. The Dollar also fell slightly on Tuesday, supporting oil by making it cheaper for buyers holding other currencies.

Technical News

The Relative Strength Index (RSI) on the 8-hour chart indicates that this pair is currently in oversold territory, meaning that an upward correction is forthcoming. This sentiment is supported by the RSI on the 1-hour chart. Going long may be a wise strategy for this pair today.
Most technical indicators show the pair currently trading in neutral territory. While it does not look like any major price shifts will be occurring in the near future, traders will want to watch out for any surprises. A wait and see approach is advised today.
The Relative Strength Index (RSI) on the 4-hour chart shows the pair well in overbought territory, indicating that a bearish correction may take place soon. This sentiment is supported by the Stochastic Slow on the 8-hour chart. Traders are advised to go short with tight stops today.
The Relative Strength Index (RSI) on both the 1 and 2-hour charts indicate that this pair is currently overbought. A downward correction is forecasted in the near future for the pair, and traders are advised to go short with tight stops today.

The Wild Card

S&P 500
The Relative Strength Index (RSI) on the 1-hour chart currently shows that the CFD is well into overbought territory. This sentiment is supported by both the RSI and Stochastic Slow on the 2-hour chart. Going short may be a wise move for CFD traders today.

Written by