Euro Zone Struggling Once More with Debt

Though the USD is gaining ground on the euro, the blame lies not on US strength but in euro zone weakness. The EUR failed to break above key resistance levels and promptly dropped as a result, pushing the EUR/USD pair back towards 1.4375 as of this morning.

Forex Market Trends

Daily Trend up no down down up up
Weekly Trend up up down down up up
Resistance 1.4395 1.6325 83.15 0.8953 1.0574 0.8830
1.4389 1.6314 83.05 0.8944 1.0565 0.8826
1.4385 1.6307 83.00 0.8939 1.0560 0.8824
Support 1.4379 1.6295 82.91 0.8930 1.0550 0.8820
1.4376 1.6291 82.86 0.8926 1.0546 0.8817
1.4370 1.6279 82.77 0.8917 1.0537 0.8813

Economic News

USD – US Dollar Bullish as Euro Zone Struggles with Debt Woes

The US dollar has continued to make gains against most of its currency rivals in trading as we head into this week’s start. Though the USD is gaining ground on the euro, the blame lies not on US strength but in euro zone weakness. The EUR failed to break above key resistance levels and promptly dropped as a result, pushing the EUR/USD pair back towards 1.4375 as of this morning.

The GBP/USD underwent a similar bearish twist, as the pair spiked up over the past week to trade near 1.6385 before coming down gradually this morning, trading right at the 1.6300 price mark at 6:00 GMT. The greenback was also able to push higher versus the Japanese yen, as the island economy continues to struggle with reconstruction efforts meant to stave off further nuclear disasters.

With a light news day ahead, traders will likely be watching the series of speeches being delivered from members of the Federal Open Market Committee (FOMC) as they speak about regulatory reform, risk management and economic outlook. Each of these speeches carries the potential to affect currency values as speculators attempt to analyze any hints at interest rate changes.

EUR – EUR Bearish on Regional Debt Concerns

The euro has turned bearish against most of its currency rivals after the pair failed to breach key resistance levels and then fell on renewed concern over sovereign debt. The EUR/USD has fallen to 1.4375 as of this morning and does not appear to be revealing any signal of correcting back up in the near future. The EUR/JPY has also revealed sudden weakness, reaching down towards 119.13 in today’s early morning trading.

The region continues to grapple with debt concerns from Portugal and Spain, but area-specific shifts in risk appetite have helped drive the EUR’s surge last week. Soaring oil prices also supported the euro as the US dollar came under pressure, but such strength may have overextended the euro and is now applying heavy weights to its value.

With only a minor confidence report expected out of the euro zone, the 17-nation single currency is expected to maintain its current course against its currency rivals in the hours ahead. Tomorrow’s news should be much more affecting on the region’s currency values, but as for today traders may want to look to the USD for market direction.

JPY – JPY Trading Higher as Europe Suffers Strains

The Japanese yen rose against its major counterparts in early Asian deals on Monday. Presently, the yen is trading at 82.88 against the U.S. dollar and 135.07 versus the pound. Against the euro, the yen is trading much higher at 119.13, compared to an early Asian session’s multi-month low of 123.35.

Growing concerns regarding Japan have driven the JPY lower recently amid deteriorating fundamentals out of the island economy. But those weakening fundamentals are being offset by debt concerns out of Europe as the European Monetary Union (EMU) persists in dealing with a burgeoning debt crisis that simply won’t dissipate. For today traders will want to look to the USD for market direction, but so long as Europe continues to fear rising debt out of Spain and Portugal, going long on the yen may continue to remain appealing.

Oil – Crude Oil Price Climbing; Strong USD in its Way

Oil prices have turned upward heading into this week, with the price elevating itself beyond $109 a barrel as of this morning. Continued fighting in Libya is partially behind the sell-resistance among global commodities like oil. Concerns about Japan’s reconstruction, declining production, and ever-present nuclear crisis are also pushing economic fundamentals in a direction favoring the purchase of physical assets.

The only counterforce to enter the market at the start of this week, however, was a resurgent USD versus its main rival, the EUR. If the dollar can continue to make gains, buyers may begin to shift out of oil purchases as they become too expensive. Traders will be eyeing further events in the Middle East this week as the risk of crude oil supply disruptions could continue to spread throughout the region, especially as protests in Syria become more volatile.

Technical News

In overnight trading the pair dipped below the short term support at 1.4365 and is back above this level at the opening of European trading. Traders should be looking to buy the euro on a dip to the rising trend line from the January low and the 20-day moving average. The two coincide near 1.4300.
The pair’s weekly low at 1.6225 coincided with the previous trend line off the 2007 high and rising weekly stochastics hint at further gains. As such, the pair could move higher with initial targets at 1.6460 followed by 1.6880.
Downside momentum is building as the pair is unable make any new highs. A move below 82.80 would target 82.00 with a further move towards the 80.20 level. Resistance is located at 83.50 and 84.00.
Last week the pair dipped below the 0.8900 level but failed to make a close below it, a signal that this support level may temporarily hold. Rising daily stochastics point to a move higher, potentially to the previous lower channel line off of the October low which comes in today at 0.9070.

The Wild Card

The pair failed to move above the 0.8000 resistance line and pulled back to 0.7930. A big round number may have a psychological effect on traders and can serve as a resistance or support level. Both weekly and daily stochastics are overbought and a pullback in the pair may be in order before a retest of 0.8000. Forex traders may find buying opportunities at the support level of 0.7830 with a target at the 2008 high at 0.8200.

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