EUR Tumbles in Overnight Trading

Although the euro had a very positive day on Thursday, the currency peaked against most of its main currency rivals in overnight trading and is currently in the middle of a bearish trend once again. The EUR/JPY is down almost 50 pips since last night, while the EUR/USD has dropped more than 30 pips in the same amount of time. Analysts are saying that the single currency is likely to drop further in trading today, as there are still significant doubts regarding the euro-zone economic situation.

Forex Market Trends

Daily Trend up up down down up up
Weekly Trend up up down down no up
Resistance 1.3425 1.5915 83.35 0.9715 1.0040 0.8505
1.3405 1.5895 83.15 0.9695 1.0020 0.8485
1.3375 1.5865 82.85 0.9665 0.9990 0.8455
Support 1.3315 1.5805 82.25 0.9605 0.9930 0.8395
1.3285 1.5775 81.95 0.9575 0.9900 0.8365
1.3265 1.5755 81.75 0.9555 0.9880 0.8345

Economic News

USD – USD Gains Forecasted for Today

The cycle of positive news out of the US came to an end yesterday, when the most recent unemployment figure showed a jump in the number of new people filing for unemployment insurance from the previous week. The greenback turned bearish following the report, and took losses against virtually all of its main currency rivals. The GBP/USD went up close to 140 pips yesterday, and peaked at the 1.5883 level. Meanwhile, the EUR/USD shot up over 260 pips, reaching as high as 1.3380.

While the dollar had an unusually bearish day yesterday, there are already signs that the currency is recovering. Investors are still concerned with exactly how far reaching the euro-zone debt crisis is and have returned to the safe haven buck as a precaution. The EUR/USD has fallen some 30 pips in overnight trading, while the GBP/USD has tumbled close to 60 pips since yesterday afternoon.

Today, investors will be paying attention to a batch of significant US news, set to be released at 13:30 and 14:55 GMT. The US Retail and Core Retail Sales figures as well as the Prelim UoM Consumer Sentiment report all promise to generate high levels of market activity before we close out the week. At the moment, analysts are predicting a slight decline in the Core Retail Sale figure and an improvement in Consumer Sentiment. How this will affect the greenback is yet to be seen, but traders can count on some dramatic price shifts to occur this afternoon.

EUR – Euro Hits Strong Resistance and Turns Bearish Once Again

The euro had an unusually positive day yesterday, as a positive Portuguese debt sale and a strong Spanish bond auction drew investors to the 17-nation common currency. Strong gains were recorded against practically all of the euro’s main currency rivals throughout the day yesterday, including the US dollar and yen.

The currency was not able to maintain its upward momentum past evening trading, as investors once again determined that the euro-zone economic recovery is still anything but certain. The EUR encountered strong resistance against the greenback at around the 1.3400 level, and is currently dropping toward 1.3300. Similarly, the EUR/JPY was not able to move past 110.70 yesterday, and is currently approaching the 110.00 level.

Turning to today, euro traders will want to pay careful attention to the euro-zone CPI and Core CPI figures, set to be released at 10:00 GMT. The Consumer Price Index is a measurement of the change in price of goods and services in the euro-zone, and is considered a key gauge of economic health. A positive figure may help the EUR turn around once again and close out the week on a positive note.

JPY – Yen Bullish Following Poor US Employment Figure

The yen was able to capitalize on its status as a safe-haven refuge yesterday, after a disappointing US unemployment figure led to investor doubts regarding the pace of the US economic recovery. Since yesterday afternoon, the USD/JPY has tumbled more than 40 pips, officially putting to an end what had been an impressive run by the dollar. Currently the pair is trading close to the 82.70 level. The yen has also recorded gains against its other currency rivals, including the euro and UK pound.

Today, yen traders will want to pay attention to the main economic indicators coming out of the US. Publications like the US Core Retail Sales figure and the Prelim UoM Consumer Sentiment are likely to be the deciding factors regarding whether investors turn to higher yielding or safe-haven assets to close out the week. Positive figures out of the US may cause the USD/JPY to turn bullish, but would still likely lead to more gains for the yen against the European currencies.

Crude Oil – Crude Oil Retreats to Below $91 a Barrel

The price of crude oil dropped to below $91 a barrel in overnight trading, as investors began to shy away from higher yielding assets in overnight trading. In addition, the disappointing US unemployment figure yesterday led to skepticism that demand in the US will increase, driving prices down further.

Still, there is hope that the price of oil will bounce back before the end of the week. Another winter storm that has blanketed a sizeable portion of the United States is likely to increase the usage of crude oil by US customers. Furthermore, should any of today’s US or euro-zone economic indicators come in above expectations, investors are likely to return to the higher yielding commodity. It appears entirely possible that prices could rise above $92 a barrel before the day’s end.

Technical News

Most technical indicators are currently showing this pair in overbought territory, indicating that a downward correction is likely to occur today. The Williams Percent Range on the daily chart and the RSI on the 8-hour chart are both showing the pair in the overbought region. Traders are advised to go short with tight stops today.
The Stochastic Slow on the 8-hour chat has formed a bearish cross, indicating that downward movement is likely to occur today. This theory is supported by the Relative Strength Index on the 4-hour chart, which is currently in overbought territory. Going short may be the wise choice today.
Most technical indicators currently show this pair trading in neutral territory. That being said, the Bollinger Bands on the 8-hour chart are currently tightening, indicating that a price shift is likely to occur in the near future. Still, traders will want to pay attention to the hourly charts in order to better determine the direction the pair is taking today.
Technical indicators are providing mixed signals for this pair. On the one hand, a bullish cross appears to be forming on the 4-hour chart’s Slow Stochastic. On the other hand, the RSI on the daily chart is approaching overbought territory. Taking a wait and see approach is likely the preferred strategy for the pair today.

The Wild Card

Technical indicators are providing us with strong signals that this pair is likely to face heavy downward pressure today. A bearish cross on the 8-hour chart’s Slow Stochastic and the Williams Percent Range on the daily chart are just two examples showing a likely downward correction will occur. Forex traders have an excellent opportunity to short their positions at a great entry price, before the correction takes place.

Written by