Greek Debts, Greek Deficit, Euro Tumbles

A volatile day ended yesterday with the U.S. dollar gaining against most currencies after the European Union review over Greece deficit surprised investors sending traders back to the greenback while taking the EUR/USD pair to year low.

Economic News

USD – Dollar Remains Strong after Positive Macro Data Released

Strong macro data published yesterday lifted the greenback against the major currencies. Existing Home sales came in better than forecasted at 5.35M, unemployment claims released came in at 456K compared to 480K previous month.

The greenback managed to gain against the Japanese yesterday, currently trading at 93.44, after a warning of rating downgrade due to government debts, by Fitch Ratings was published yesterday morning. The pair has seen resistance at 93.10 and may well be on its way to 100, supported by lower chances for a near term rate increase by the BoJ as previously anticipated.

Durable goods to be published later today may continue to support the U.S. dollar against other major currencies if data turns out to be better than expected. Greek debts will continue to shadow any movement in the EUR/USD pair today and next week.

EUR – Greek Debts Sends EUR to New Year Low

The EUR tumbled yesterday when the European Union published their conclusion regarding Greek’s deficit. The data surprised investors who are concerned Greece may not have enough to pay its debts. Investors fear that Greece might need to activate the European Union bail out after all. The EUR/USD is currently at 1.3225, falling further during the Asian trading hours. It seems that stop orders which were activated, initiated further sales of the EUR.

The GBP/USD was also trading lower yesterday. The pound improved in recent week against the greenback supported by positive macro data, and despite the weakness of the EUR. The pound lost part of its gains yesterday, due to the sharp decline in the EUR, sending investors away from risky currencies.

The UK election coming in two weeks may add some volatility to the pair which is currently trading at 1.5344. Greek debts will also continue to weigh over the GBP/USD pair today and during next week.

JPY – Yen Slides as Risk Appetite Grows

The Japanese Yen was weaker at the start of yesterday’s trade due to the downgrade warning because of growing Japanese debt. However, when the EUR started to decline after the Greek deficit was released by the European Union, investors responded by moving back to safe heaven currencies such as the Yen and the USD. The EUR/JPY pair was lower at the end of yesterday’s trading, currently at 123.51, and the GBP/JPY was down slightly and currently trading at 143.34.

As long as the Greek debt issue continues to occupy investors, the trend will continue to support the JPY against the EUR and against the GBP. The JPY might however be less bullish against the USD. Expectations for the USD/JPY pair would reach 100 because the U.S. economy seems stronger while the Japanese economy is still experiencing deflation.

OIL – Crude Oil Prices Rebounded Strongly

Crude Oil price started yesterday’s trading lower, reaching as low as $82 per barrel. The price decline came along with fears from the European economy and a strongly hit EUR. However, later during yesterday’s trade after the release of positive existing home sales and unemployment claims by the U.S., Crude Oil rebounded and ended the trading day slightly higher. Currently Spot Crude Oil is at $83.65.

Crude Oil was also supported by Obama’s speech to Wall Street, in which he emphasized the improvement in employment and the overall U.S. economy, compared to previous year. Any change in the positive sentiment in regards to the economic recovery might send Oil prices down rapidly.

Core Durable Goods and New Home Sales to be published later today should support Oil prices in the last trading day for this week. So far Crude Oil for the week is slightly down, but crude oil might end higher for this week if it is supported by further positive data.

Technical News

Yesterday the EUR/USD fell as low as 1.3200. This price level is the 76.4% Fibonacci level from pair’s previous uptrend on the monthly chart that began in October of 2008. The pair also breached the lower channel line that the pair had been trading in on the 4-hour chart. The price move broke past the short term 1.3280 support level. Traders may want to be short and target the next support level on the daily chart of 1.3070.
The pair’s Bollinger Bands appear to be tightening on both the daily chart and the 4-hour. The price action has also shown resilience to trade above the 20-day moving average line of the daily chart. Traders may want to wait for the price to break above the resistance line of 1.5380 and go long with a price target of 1.5510.
The daily chart shows a bullish flag that formed since the beginning of the month. To verify a true breakout of the chart pattern, traders may want to wait for the price to rise to the 94.93 price level (10% of the flag pole) and go long, with a first price target of 250 pips, the length of the flag pole.
The pair has appreciated for the last 7-consecutive trading days. The recent bullish run began from the 38.2% Fibonacci retracement level on the daily chart near the price of 1.0500 and appears to be targeting the high of the long term bullish trend that began in December. Traders may want to be long with a price target of 1.0890.

The Wild Card

Dow Jones Industrials
The 4-hour chart displays a strong uptrend with a tightening of the pair’s Bollinger Bands. This signals a possible breakout move. The MACD histogram is also trending higher, indicating the momentum is to the upside. CFD traders may want to go long prior to a breakout to the upside.

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