Euro Maintains Strength Ahead of ECB Meeting

The euro remained bullish in overnight trading as investors eagerly await the results of the ECB meeting scheduled to take place tomorrow. It is widely anticipated that the ECB will raise euro-zone interest rates, a move which is likely to cause the value of the currency to spike.

Forex Market Trends

Daily Trend up up up up up down
Weekly Trend up up up no up down
Resistance 1.4245 1.6410 86.10 0.9340 1.0435 0.8810
1.4215 1.6390 85.90 0.9320 1.0415 0.8790
1.4285 1.6360 85.60 0.9290 1.0385 0.8760
Support 1.4225 1.6300 85.00 0.9230 1.0325 0.8700
1.4195 1.6270 84.70 0.9200 1.0295 0.8670
1.4175 1.6250 84.50 0.9180 1.0275 0.8650

Economic News

USD – USD Hits Six Month High Against Yen

The US dollar continued to slide against most of the riskier currencies in overnight trading, as investors eagerly await the results of the ECB meeting tomorrow. Analysts are nearly unanimous in saying that euro-zone interest rates are likely to go up tomorrow, a move which would likely cause the EUR to spike. While the greenback remained extremely bearish against its European currency rivals, a rise in US Treasury yields helped the dollar extend its recent gains against the yen to hit a six month high.

Currently the EUR/USD is trading close to the 1.4260 level, up over 40 pips since last night. The GBP/USD has gone up a similar amount, and is currently trading steadily at the 1.6330 level. The USD/JPY shot up some 55 pips last night, peaking at 85.51 before staging a slight correction. The pair currently stands at 85.33.

Turning to today, a lack of significant US news means that dollar values will continue to be determined by external events. With the ECB meeting scheduled for tomorrow, the greenback is unlikely to make significant gains against the euro or British pound. Against the yen, the dollar may be able to extend its bullish trend, but traders should not count on the spikes we saw yesterday occurring again today.

EUR – Possible Interest Rate Hike Boosts EUR

The prospect of a euro-zone interest rate hike tomorrow continued to dominate market news throughout the day yesterday and into overnight trading. Should the hike take place, (as is widely predicted), it would be for the first time since July of 2008. The fact that other central banks, like in the US and Japan, remain largely averse to raising interest rates has helped the euro make significant gains against its main currency rivals as of late.

Analysts are saying that the EUR/USD, currently trading around the 1.4260 level, may rise as high as 1.4500 following the ECB meeting. Against the yen, the euro hit a fresh 11-month high during the overnight session and is currently trading at the 121.65 level. That being said, the news for the euro has not been all positive. After tumbling close to 100 pips against the British pound yesterday, the euro was unable to regain its footing in overnight trading and is currently trading around the 0.8728 level.

Turning to today, the ECB meeting is likely to continue dominating market sentiment, meaning that euro bullishness against the dollar and yen is likely to continue. With no significant news scheduled for the other main global economies, going long on the EUR appears to be a safe bet.

JPY – Yen Continues to Slide across the Board

The yen took heavy losses throughout the day yesterday and into overnight trading. The currency hit a six month low against the US dollar, an 11-month low against the euro, and a staggering 2-1/2 year low against the aussie.

Analysts attribute the yen’s bearishness to the prospect of a euro-zone interest rate hike tomorrow. In Japan, the devastation brought by the earthquake and tsunami last month have made the prospect of an interest rate hike practically non-existent at least for the near future.

Turning to today, a lack of significant news out of Japan means that yen values will continue to be determined by the news out of Europe. While it is possible that the yen may hit some strong support levels, traders should not count on any significant breakthroughs that could help the yen recoup some of its recent losses.

Crude Oil – Crude Oil Trades at 30-Month High

Crude oil jumped to a 2-1/2 year high above $108 a barrel on Tuesday, as conflict and unrest in Africa and the Middle East more than offset China’s latest interest rate hike. There’s also an expectation that an improving global economy will increase demand for oil.

The stalemate in Libya has fueled fears of a prolonged loss of its oil exports even as a tanker arrived at an oil terminal in the east of the country to load the first cargo of crude oil to be sold by the anti-Gadaffi rebels.

Crude oil prices have surged more than 20% since mid-February, when pro-democracy movements reached Libya, Africa’s third-largest oil producer.

As for today, traders are advised to follow all the developments from Libya as the conflict there is now the main catalyst in crude trading. In case the conflict escalates, oil prices might climb even further.

Technical News

The EUR/USD went increasingly bullish yesterday, and currently stands at the 1.4260 level. The 8-hour chart’s Slow Stochastic supports this currency cross to rise further today. However the daily chart’s Williams Percent Range signals that a bearish reversal will take place. Entering the pair when the signs are clearer seems to be the wise choice today.
The price of this pair appears to be floating in over-bought territory on the 8-hour chart’s RSI indicating a downward correction may be imminent. The downward direction on the 4-hour chart’s Momentum oscillator also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse soon. For example, the daily chart’s Stochastic Slow signals that a bearish reversal is imminent. Going short with tight stops might be a wise choice.
The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However the 8-hour Chart’s RSI is already floating in the overbought territory indicating that a bearish correction might take place in the near future. Going short with tight stops might be the right strategy today.

The Wild Card

Crude Oil
Oil prices rose significantly in the last few days and peaked at $108.57 per barrel. However daily charts’ RSI is floating in overbought territory suggesting that the recent upwards trend is losing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

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