EUR/USD Stabilizes After Hitting 2-Year Low

The euro stabilized against the US dollar yesterday after hitting a two-year low last week. A disappointing US jobs report contributed to the significant risk-aversion in the marketplace and played a role in the euro’s renewed bearish trend. Today, analysts are warning that even though the euro has staged a very minor recovery, the overall trend for the currency is still bearish. With little significant news forecasted for the near future that could generate risk taking, the euro could remain at or near its current levels for the time being.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend no up down up down down
Resistance 1.2399 1.5622 80.45 0.9872 1.0284 0.8018
1.2353 1.5568 80.01 0.9820 1.0231 0.7985
1.2320 1.5535 79.74 0.9791 1.0198 0.7957
Support 1.2272 1.5481 79.31 0.9743 1.0146 0.7919
1.2245 1.5448 79.04 0.9708 1.0113 0.7891
1.2191 1.5394 78.60 0.9667 1.0059 0.7850

Economic News

USD – USD Sees Mixed Trading Day

The US dollar had a decidedly mixed day yesterday, as a slow news day resulted in low volatility in the marketplace. Against the Australian dollar, the USD gained some 40 pips during the morning session before correcting itself later in the day. After trading as low as 1.0153, the AUD/USD was able to bounce back to the 1.0175 level during the afternoon session. The GBP/USD increased by over 40 pips during European trading, eventually peaking at 1.5511, before staging a very minor downward correction late in the day.

Turning to today, another slow news day means that dollar movement is likely to be a result of euro-zone news. Traders will want to pay attention to announcements out of the euro-zone, particularly with regards to the recent deal among euro-zone leaders to reduce Spanish and Italian borrowing costs. Any signs of further euro-zone trouble may result in the greenback resuming its bullish movement against riskier currencies. Later in the week, the US Trade Balance figure could lead to dollar volatility, with any disappointing news likely to weigh down on the greenback vs. the JPY.

EUR – Euro Remains Bearish amid Risk Aversion in the Marketplace

While the euro was able to come off it recent lows against the dollar and yen during trading yesterday, the common currency remained bearish overall as investors continued to be averse to shifting their funds to riskier assets. The EUR/USD advanced some 60 pips early in the day, eventually peaking at 1.2315. That being said, the pair was not able to maintain its upward momentum and spent most of the European session trading around the 1.2280 level. Against the Japanese yen, the euro gained around 55 pips, reaching as high as 98.04, before turning bearish again and falling to the 97.80 level.

Today, analysts are warning that a lack of significant news means that the euro may not have many opportunities to reverse its current bearish trend. Traders will want to continue monitoring any developments out of the euro-zone particularly with regards to Spain’s high borrowing costs. On Wednesday, a German 10-year bond auction is likely to provide valuable clues as to whether the euro-zone debt crisis is spreading to the region’s largest economy. Should demand for German bonds come in below expectations, the euro could see additional bearish movement during the second half of the week.

Gold – Gold Stages Minor Recovery

After tumbling over $20 an ounce last Friday, gold was able to stage a moderate recovery during yesterday’s trading session. The precious-metal advance over $12 an ounce over the course of the European session to trade as high as $1589 during the afternoon session.

Turning to today, gold traders will want to monitor the US dollar’s movements, as they seem to be an accurate indicator of the level of risk taking in the marketplace. Should the dollar resume its bullish trend against riskier currencies like the euro and Aussie, the price of gold may move downward again.

Crude Oil – Oil Corrects Losses, Gains Close to $2

The price of oil advanced close to $2 a barrel yesterday, eventually reaching above the $85.50 level, after investors determined the commodity was oversold following last Friday’s extreme bearish movement. Additionally, a worse than expected Chinese CPI figure convinced traders that China may ease monetary policy further in order to stimulate economic growth.

Turning to today, any gains crude oil makes are likely to be limited as risk aversion is still dominating the marketplace. Negative euro-zone, US and Chinese data are all signaling that demand for crude is low, meaning that bullish movement may be temporary. That being said, any escalation in the conflict with Iran could result in a temporary spike in oil prices.

Technical News

The Williams Percent Range on the weekly chart has fallen into oversold territory, signaling that an upward correction could take place in the coming days. Additionally, the Slow Stochastic on the daily chart appears to be forming a bullish cross. Traders may want to open long positions ahead of possible upward movement.
While the Williams Percent Range on both the daily and weekly chart is currently in oversold territory, most other technical indicators show this pair trading in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.
Most long term technical indicators are currently showing this pair range-trading, meaning that no defined trend can be predicted at this time. Taking a wait and see approach may be a wise choice, as a clearer picture is likely to present itself in the coming days.
The Relative Strength Index on the weekly chart is hovering close to the overbought zone, indicating that downward movement could occur in the near future. This theory is supported by the daily chart’s Slow Stochastic, which has formed a bearish cross. Going short may be the wise choice for this pair.

The Wild Card

The Relative Strength Index on the daily chart has crossed over into overbought territory, meaning that downward movement could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a possible downward correction.

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