EUR Falls Ahead of EU Summit

The euro started the week off by extending its recent bearish trend, as investors remain doubtful that any meaningful strategy for combating the euro-zone debt crisis will be unveiled during an EU summit later in the week. The common currency took losses against its safe-haven currency rivals, including the US dollar and Japanese yen, over the course of the day. Today, in addition to any announcements out of the euro-zone, traders will want to pay attention to the US CB Consumer Confidence figure. Should it come in above the expected 64.0, the dollar could extend its gains vs. the euro.

Forex Market Trends

Daily Trend down down up up no down
Weekly Trend down down down up down down
Resistance 1.2610 1.5679 80.49 0.9726 1.0129 0.8128
1.2558 1.5626 80.04 0.9673 1.0075 0.8086
1.2526 1.5592 79.80 0.9641 1.0041 0.8060
Support 1.2476 1.5540 79.40 0.9588 0.9987 0.8017
1.2444 1.5507 79.15 0.9555 0.9905 0.7991
1.2393 1.5454 78.75 0.9502 0.9901 0.7949

Economic News

USD – Euro-Zone Fears Lead to Dollar Gains

The US dollar was able to benefit from its status as a safe-haven currency during trading yesterday, as investor concerns regarding the euro-zone debt crisis led to risk aversion in the marketplace. The EUR/USD fell more than 50 pips during European trading, eventually reaching as low as 1.2469. Against the Australian dollar the greenback gained close to 60 pips, eventually peaking at 0.9979 during afternoon trading. That being said, the news was not all positive for the USD. The USD/JPY fell close to 100 pips yesterday, eventually reaching 79.55 before staging a modest upward correction.

Turning to today, USD traders will want to pay attention to the US CB Consumer Confidence figure, set to be released at 14:00 GMT. American housing data came in above expectations yesterday, signaling modest growth in the US economy. If today’s news also comes in higher than the forecasted level of 64.0, the dollar may receive an additional boost against some of its higher-yielding currency rivals, including the EUR, AUD and GBP. Furthermore, any negative news out of the euro-zone could result in risk aversion, which may benefit the greenback.

EUR – Euro Resumes Bearish Movement

The euro took losses against several of its main currency rivals yesterday, as fears that the euro-zone debt crisis may be spreading, combined with doubts that leaders will be able to come up with new ways to stimulate economic growth in the region led to risk aversion in the marketplace. In addition to a 50 pip loss against the US dollar, the euro also tumbled well over 100 pips against the JPY during European trading. The EUR/JPY eventually fell as low as 99.24 during the afternoon session.

Today, traders will want to pay attention to any announcements out of the euro-zone and in particular Germany, which has recently signaled it was against different ways to solve the debt-crisis that have been offered by other countries in the region. Analysts are warning that the inability of leaders in the euro-zone to come to an agreement until now regarding the best way to combat the debt crisis, means that any agreement at an EU summit later this week is unlikely. The euro could remain under pressure until a clear plan is established to stimulate growth in the region.

Gold – Gold Range Trades ahead of EU Summit

Gold started off the week yesterday with little movement, as investors remained concerned regarding the results of an EU summit, set to take place on Thursday and Friday. While the precious metal has been used as a safe-haven asset in recent weeks, investors were reluctant to open long positions before any information out of the EU was released. Gold spent much of the day trading around the $1570 an ounce level.

Turning to today, gold traders should note that any developments out of the EU could have a dramatic effect on the precious metal. Furthermore, if US news, scheduled to be released this afternoon, comes in below expectations, investors may choose invest in gold as a safe-haven instead of the USD.

Crude Oil – Risk Aversion Leads to Losses for Oil

After staging a slight recovery to finish out last week, crude oil resumed its bearish trend yesterday as investor worries regarding the euro-zone debt crisis resulted in risk aversion. Oil once again fell below the psychologically significant $80 a barrel level, eventually reaching as low as $78.22 during the afternoon session.

Today, analysts are warning that oil could remain under pressure as long as news out of the euro-zone keeps on coming out negative. Furthermore, should today’s US CB Consumer Confidence figure come in higher than expected, the USD could see gains, which may result in oil taking additional losses during the afternoon session.

Technical News

Both the Relative Strength Index and the Williams Percent Range on the weekly chart are very close to dropping into oversold territory, signaling that an upward correction could take place in the coming days. Traders will want to keep an eye on both of these indicators. Should they drop further, it may be a sign to open long positions.
Long-term technical indicators show this pair range-trading, meaning that no defined trend can be predicted at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.
The daily chart’s Slow Stochastic has formed a bearish cross, indicating that downward movement could occur in the near future. Additionally, the Williams Percent Range on the same chart is currently in the overbought zone. Opening short positions may be a wise choice for this pair.
The weekly chart’s Williams Percent Range is approaching overbought territory, indicating that a downward correction could take place in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently near 70. Going short may be the wise choice for this pair.

The Wild Card

MSCI Taiwan
The daily chart’s Williams Percent Range has fallen into oversold territory, indicating that an upward correction could happen in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross. This may be a good time for forex traders to enter into long positions, as bullish movement could occur shortly.

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