EUR Gains May be Temporary

The euro was able to bounce back from a two-year low against the US dollar on Friday, as Chinese economic indicators led to a moderate amount of risk taking in the marketplace. That being said, analysts were quick to warn that given the current economic state of the euro-zone, the common-currency may not be able to hold onto its recent gains. Today, traders will want to pay attention to the US Retail and Core Retail Sales figures, both scheduled to be released at 12:30 GMT. Analysts are forecasting today’s news will show improvement in the US retail sector, which if true, could result in the dollar recouping its losses vs. the euro from Friday.

Forex Market Trends

Daily Trend up up no no up up
Weekly Trend down down down up up down
Resistance 1.2377 1.5672 80.30 0.9904 1.0327 0.7957
1.2326 1.5622 79.76 0.9869 1.0279 0.7923
1.2294 1.5591 79.42 0.9835 1.0248 0.7889
Support 1.2243 1.5540 78.86 0.9780 1.0200 0.7857
1.2211 1.5509 78.52 0.9753 1.0169 0.7830
1.2159 1.5458 77.98 0.9708 1.0121 0.7795

Economic News

USD – USD Turns Bearish to Close Out Week

The US dollar turned bearish against most of its main currency rivals on Friday, as the combination of moderate risk taking in the marketplace due to Chinese news, combined with a worse than expected American consumer sentiment figure, caused investors to shift their funds away from the greenback. The AUD/USD advanced more than 100 pips over the course of the day, and eventually closed out the week at 1.0227. Against the Swiss franc, the dollar fell close to 70 pips during afternoon trading and ended up finishing out the week at 0.9804.

Today, the dollar may be able to recover some of its recent losses when the US Retail Sales and Core Retail Sales figures are released at 12:30 GMT. With analysts forecasting today’s news to show improvements in the American retail sector, investors may revert their funds back to the greenback during afternoon trading. Later in the week, traders will want to pay attention to speeches from Fed Chairman Bernanke on Tuesday and Wednesday. Should the Fed Chairman voice any optimism regarding the US economic recovery, the dollar could see gains as a result.

EUR – Euro May See Additional Losses

The euro bounced back against several of its main currency rivals on Friday, as a moderate level of risk taking returned to the marketplace following the release of Chinese economic indicators. After falling as low as 1.2161 during the first half of the day, the EUR/USD was able to advance close to 90 pips and ended up finishing out the week at 1.2248. The EUR/JPY gained close to 60 pips during the afternoon session. After trading as low as 96.42, the pair was able to stage a recovery and eventually closed out the week at 96.98.

This week, euro traders should be warned that given the current state of the euro-zone debt crisis, any gains the common-currency makes may turn out to be temporary. On Tuesday, traders will want to pay close attention to the German ZEW Economic Sentiment figure, scheduled to be released at 9:00 GMT. There are concerns among investors that the debt crisis may be spreading to the EU’s biggest economy. Should Tuesday’s indicator come in below expectations, the euro could resume its bearish trend.

Gold – Gold Gains Close to $20 Following Chinese GDP Data

Risk taking in the marketplace following the release of the Chinese GDP figure on Friday, resulted in the price of gold gaining close to $20 an ounce for the day. Investor confidence in the global economic recovery was boosted following the Chinese news, which came in close to its expected level. The precious metal ended up finishing the week at $1589.26.

This week, analysts are warning that gold may not be able to extend Friday’s gains. While the Chinese GDP figure was viewed as positive by many investors, it still did not signal any expansion in the global economy. Given the current state of the euro-zone, as well as fears that the region’s debt crisis could spread further, gold may reverse some of its gains in the coming days.

Crude Oil – Iran Sanctions Lead to Gains for Crude Oil

The price of crude oil climbed will over $1 a barrel on Friday, as new American sanctions on Iran led to supply side fears among investors. Typically any escalation in the ongoing dispute over Iran’s nuclear program causes oil prices to go up, as the country has the third largest oil reserves in the world. Crude finished out the week at $87.05 a barrel.

Turning to this week, traders will want to continue monitoring the situation in Iran. Any additional escalation in the conflict between the country and Western powers could lead to substantial gains in the price of crude oil. At the same time, if tensions calm down, oil could reverse some of its recent gains.

Technical News

The weekly chart’s Williams Percent Range has dropped into oversold territory, signaling that an upward correction could occur in the coming days. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bullish cross. Going long may be the correct strategy for this pair.
A bullish cross on the daily chart’s MACD/OsMA indicates that this pair may see upward movement in the near future. In addition, the Williams Percent Range on the weekly chart is currently angling downward, and may soon cross into oversold territory. Traders will want to keep an eye on this indicator, as it may signal possible bullish movement in the near future.
Most long-term technical indicators show this pair trading in neutral territory, 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 may present itself in the near future.
The daily chart’s Relative Strength Index has crossed into overbought territory, indicating that this pair could see a downward correction in the near future. Furthermore, the weekly chart’s Williams Percent Range is currently at the -10 level. Traders may want to go short ahead of possible bearish movement.

The Wild Card

Hang Seng Index
A bearish cross appears to be forming on the daily chart’s Slow Stochastic, signaling that this pair could see an upward correction in the near future. Furthermore, the Williams Percent Range on the same chart has crossed over into oversold territory. This may be a good time for forex traders to open long positions ahead of possible upward movement.

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