The euro saw gains across the board on Friday, as investors were confident that whatever the outcome of the Greek election being held over the weekend, the international community would actively work to support the euro-zone. The EUR/USD closed the week at 1.2662, up over 70 pips for the day. This week, traders will want to continue monitoring news out of Greece. It is unlikely that a new government will be formed immediately following the election. Therefore, the potential for heavy euro volatility still exists depending on what the makeup is of the new Greek government.
Forex Market Trends
USD – Dollar Extends Bearish Trend Following Poor US News
The US dollar took additional losses against its main currency rivals on Friday, following the release of a worse than expected Prelim UoM Consumer Sentiment figure which investors took as a sign that the US economic recovery is stalling. Against the JPY, the dollar dropped 90 pips for the day, reaching as low as 78.60 during early morning trading. The greenback was able to stage a minor correction to close out the week at 78.75. The USD/CHF dropped over 50 pips during evening trading, eventually finishing out the week at 0.9483.
Taking a look at this week, Wednesday may turn out to be a volatile day for the USD, as the FOMC Statement at 16:30 GMT, followed by the FOMC Press Conference at 18:15 are expected to give clues as to any plans the Fed has to initiate a new round of quantitative easing to stimulate the US economy. Any talk of a new stimulus package in the US this week may lead to significant dollar losses, particularly against the safe-haven Japanese yen.
EUR – Greek News Set to Generate Euro Volatility
The euro was able to extend its bullish trend to finish out the week on Friday, as investors were fairly confident that despite the outcome of this past weekend’s Greek elections, the international community would actively work to boost euro-zone economies. In addition to gaining some 70 pips against the US dollar, the euro advanced over 60 pips against the Japanese yen and 50 pips against the Canadian dollar. That being said, the euro was not at fortunate against the British pound. The EUR/GBP dropped close to 100 pips on Friday to finish out the week at 0.8052.
This week, Greece is once again likely to dominate the headlines and create the most market volatility. Depending on what the final makeup of the new Greek government is, the euro could either turn significantly bullish or bearish. That being said, any gains the euro makes could be short-lived. Analysts are warning that even if a pro-austerity government is elected in Greece, economic troubles in both Spain and Italy may continue to weigh down on the euro.
Gold – Gold Continues to Benefit from Global Economic Turmoil
Gold saw additional gains in trading on Friday, following poor US news which caused investors to shift their funds to safe-haven assets. The price of gold increased by over $10 an ounce by the mid-day session, eventually reaching as high as $1632.23. A slight downward correction during evening trading eventually led to gold finishing the week at $1626.55.
This week, gold traders will want to continue monitoring news out of the US. In particular, Wednesday’s FOMC press conference may offer clues as to any plans the Fed has to initiate a new round of quantitative easing to stimulate growth in the US economy. If the Fed does mention any form of monetary stimulus in the coming days, investors may continue shifting their funds to safe-havens, which could cause gold to extend its bullish trend.
Crude Oil – Crude Oil Trades Flat to Finish out the Week
The price of crude oil saw little movement on Friday, as weak economic data out of the US and investor anxiousness regarding the outcome of the Greek election kept the commodity close its recent lows. After reaching as high as $84.75 a barrel during overnight trading, crude oil saw a slight downward correction, which brought the price down to $83.39 during the mid-day session.
Turning to this week, the direction crude oil takes is likely to depend on how investors interpret the results of Greece’s election. Any sign that the results of the election will lead to further euro-zone troubles may cause oil to turn bearish in the coming days. At the same time, should a pro-austerity government be formed in Greece, fears regarding the euro-zone could calm down which could lead to gains for crude.
Long term technical indicators are providing mixed signals for this pair. On the one hand, the weekly chart’s MACD/OsMA seems like it is about to form a bullish cross. On the other hand, the daily chart’s Williams Percent Range is in overbought territory, indicating that downward movement could occur. Taking a wait and see approach for this pair may be the best choice.
The Williams Percent Range on the daily chart is currently in the overbought zone, indicating that downward movement could occur in the near future. In addition, the Slow Stochastic on the same chart seems like it is about to form a bearish cross. Traders will want to pay attention to this indicator. If it forms the cross, it may be a good time to open short positions.
The Bollinger Bands on the weekly chart are narrowing, indicating that this pair could see a price shift in the coming days. Furthermore, the Williams Percent Range on the same chart is hovering close to the oversold zone. Traders may want to go long in their positions for this pair.
A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see an upward correction in the near future. This theory is supported by the Williams Percent Range on the same chart. Going long may be the best choice for this pair.
The Wild Card
The Williams Percent Range on the daily chart is currently in the overbought zone. In addition, the Slow Stochastic on the same chart has formed a bearish cross, while the Relative Strength Index is hovering close to the 70 line. This may be a good time for forex traders to open short positions ahead of a downward breach.
Written by Forexyard.com