Greek Bailout Prospects Boost Riskier Currencies, Dampen Demand for USD, JPY

The USD and JPY declined Thursday on hopes the EU and International Monetary Fund will soon formulate an aid package for Greece. Crude Oil rose above $85 a barrel, boosted by rising global equities.

Economic News

USD – USD Down Slightly as Market Sentiment Improves

The USD declined slightly against the EUR and GBP yesterday after concerns eased over the Euro-Zone debt issues. Market sentiment rose after EU officials signaled the imminent conclusion of the Greek bailout talks.

The Dollar was little changed versus the Yen at Y94.07 from Y94.11. The EUR/USD pair is currently trading at $1.3226 after previously reaching a high of $1.3256 during today’s early Asian trading. The British Pound broke through the 1.53 level against the USD after recovering from the daily low of 1.5141 and is currently trading at $1.5322.

Along with news regarding the Greek bailout plan, markets are awaiting the release of the Advance U.S. Gross Domestic Product figures, which are due to be published today at 12:30 GMT.

EUR – EUR Gains on Greek Bailout Package Prospects

The EUR was up modestly against the Dollar Thursday as Euro-Zone officials signaled the impending completion of the Greek bailout package. Further supporting the EUR was the release of encouraging data from Germany and the European Union, as well as strong earnings reports from European and U.S. companies which boosted overall economic sentiment, supporting higher yielding currencies.

The EUR is currently at $1.3238 and at Y124.53 from Y124.27. The U.K. Pound is at $1.5323 from a low of $1.5192.

Overall investor sentiment is still EUR negative as other EUR-Zone countries, such as Portugal and Spain, are close to a debt crisis of their own. Therefore, any rally which may follow the conclusion of the Greek crisis will likely be short lived.

JPY – AUD, NZD Gain on Improved Market Sentiment, Interest Rates Outlook

The AUD reached its highest level in a week, boosted by market optimism over an imminent solution to Greece’s debt crisis which boosted demand for riskier assets such as the south pacific currency. The NZD also gained after central bank governor Alan Bollard stated his intent to start raising interest rates sooner than expected.

New Zealand’s Dollar rose to 72.47 U.S. cents from 72.37 cents in New York yesterday. Australia’s currency advanced to 93.06 U.S. cents from 92.77 cents, after earlier touching a high of 93.13 cents.

Looking ahead to today, traders should follow the release of the Japanese Overnight Call Rat and the BOJ Press Conference. Although the interest rate is expected to remain unchanged, the BOJ statement is expected to provide direction for the Yen as it should provide clues as to the future monetary policy and current economic conditions.

Crude Oil – Crude Stable above $85 a barrel

Crude Oil continued its advance Thursday, boosted by the release of positive economic data from the EU and U.S., raising the level of confidence in the global economic recovery. Crude oil for June delivery rose 35 cents, or 0.4%, to $85.52 a barrel, in electronic trading on the New York Mercantile Exchange.

Better than expected employment data from Germany as well as strong equity performances from Europe and the U.S. helped boost Oil levels Thursday, however, investors worry that the price of Oil is now above the level which is justified by fundamentals, particularly as the U.S. inventories remain high.

Looking ahead to today, investors should continue following any developments regarding the Greek bailout plan as these seem to have the strongest affect on markets. The U.S. GDP data should also provide some direction as it will shed light on the strength of the U.S economy.

Technical News

After dropping to an annual low, the pair saw a mild bullish correction yesterday. There is now a series of 4 consecutive doji candles on the 4-hour chart, indicating that a sharp movement is impending. As a bearish cross takes place on the Slow Stochastic, the move looks to be downwards.
The cable has recently peaked at the 1.5360 level, after completing a 230 pips rise. However, the 1-hour chart is currently providing several bearish signals. The RSI has dropped below the 70 line, and in addition, the MACD has completed a bearish cross. The key-target level seems be the 1.5250 price.
Following a very peaceful trading over the past couple of days, the pair looks to break out of the range today. The 1-hour chart shows that the Bollinger Bands have significantly tightened, indicating that a sharp movement is forthcoming. As all oscillators on the 4-hour chart point down, the movement might be bearish.
The pair saw very little volatility over the past few days, as it bounced up and down between the 1.0800 and the 1.0900 levels. Today however, the flat trading is likely to end. As a bullish cross takes place on the 4-hour chart, the price may rise in the near term.

The Wild Card

There is a very distinct bullish channel on the 4-hour chart, as gold is now trading in the middle of it. As the next significant resistant level is located at the $1,192 price, it seems that the bullish trend has more room to go. This might be a good opportunity for forex traders to join a popular trend.

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