EUR/USD Trading Near a 9-Month Low

This week began with a relatively quiet trading session; however this calmness is likely to end today. The German ZEW Economic Sentiment and the U.S. Long-Term Purchases reports look to create large volatility in the market today. In addition, the problematic Greek economy is likely to continue and affect the market today.

Economic News

USD – Dollar Retains Steady Rates

The Dollar saw a very stabile session during yesterday’s trading. The Dollar continues to trade at a very high rate against the Euro, as the EUR/USD has bottomed at the 1.3578 level, trading near a 9-month low.

The Dollar’s trading was quite flat yesterday, mainly because U.S. banks were closed in observance of President’s Day. There seems to be two main reasons that keep the Dollar at its strong form at the moment. The first reason is the European concerns regarding Greek debt. Investors still have fears regarding a possible slowdown in the Euro-Zone economic recovery. This leads them to look for safe haven investments such as the Dollar and the Yen, and retains the Dollar’s bullish tend against most of the major currencies. In addition, the Dollar is also affected by the prices of crude oil. Crude oil dropped almost consistently for the past 4-weeks, further boosting the Dollar.

Looking ahead to today, the most impacting event on the economic calendar looks to be the Long-Term Purchases report, which will be released at 14:00 GMT. This report measures the difference in value between foreign long-term securities purchased by U.S. citizens and U.S. long-term securities purchased by foreigners during December. This reports the trust of foreign investors in the U.S. economy, and thus has a large impact on the Dollar. If the end result will reach above expectations for 50.3B, the Dollar is likely to strengthen as a result.

EUR – German ZEW Economic Sentiment on Tap

The Euro continues to weaken against the major currencies. The Euro dropped against the Dollar, the Pound and the Yen during yesterday’s trading. The Euro is currently trading near a 9-month low against the Dollar.

The Euro dropped further vs. the major currencies mostly due to market concerns over Greek debt. For the time being, the European leadership refuses to expose their rescue plan for the Greek economy. This keeps a high level of uncertainty in the market regarding the Euro-Zone economic recovery. The lack of progress by the Euro-Zone’s leadership during the last 2 weeks is turning investors to look for safer investments, and by so to weaken the Euro. It currently seems that the Greek deficit crisis has potential to weaken the Euro further, especially against the Dollar and the Yen.

As for today, the German ZEW Economic Sentiment report is expected at 10:00. This is a survey of German institutional investors and analysts who are asked to rate the German economic outlook for the next 6 months. Analysts forecast that the German Economic Sentiment dropped from 47.2 in January to 42.5. Such a decline in German economic optimism could extend the Euro’s bearish trend. Traders should also follow the European ZEW Economic Sentiment, which is scheduled for the same time, yet tends to have less impact on the market.

JPY – Yen Strengthens Following Positive GDP Figures

The Yen saw a rising trend against most of the major currencies during yesterday’s trading session. The Yen rose against the Dollar and the Pound, and so a 60 pips rise vs. the Euro.

The Yen was boosted by better than expected Gross Domestic Product (GDP) figures for the 4th quarter of 2009. The report shows that the Japanese economy rose by 1.1% during the 4th quarter of 2009. It seems that a global trade revival has increased demand for Japanese exports. This proves that the Japanese economy is indeed recovering, and in a faster pace than expected. The Yen also rises as a result of the Greek debt crisis. There are concrete concerns at the moment regarding how this will affect the Euro-Zone’s economic recovery. For as long that the uncertainty on this matter remains, the Yen, which is considered to be a relatively safe investment, is likely to rise.

Today, the most interesting publication from the Japanese economy looks to be the Tertiary Industry Activity. This report measures the change in the total value of services purchased by businesses. Businesses are usually quickly affected by market conditions, and thus this indicator is considered to be quite reliable. If the actual result will be positive, it is likely to support the Yen.

Crude Oil – Crude Oil Remains at $74 a Barrel

Crude oil saw a relatively peaceful session during yesterday’s trading. Crude oil dropped to $73.70 a barrel by midday, yet rose back up to $74 as the trading day reached its end.

A barrel of oil lost about $10 of its value over the last month. Crude oil seems to be largely affected by the European uncertainty regarding the Greek deficit crisis. The worries of a possible slowdown in European recovery may damage the demand for energy, and thus decrease the value of oil. In addition, the bullish trend of the Dollar also has a negative affect on crude oil. Oil is valued in Dollars, and thus when the Dollar is boosted, crude oil tends to drop in response.

Looking ahead to today, traders should follow the main publications from the U.S. economy and the Euro-Zone, as they are likely to impact crude oil the most. Traders should also look for developments regarding the Greek debt crisis, as any development on this issue is likely to have a strong impact on the market.

Technical News

The charts are showing some resistance to the pair’s bearish trend. The weekly chart shows a bullish cross has formed on the Slow Stochastic Oscillator, indicating the potential for the pair to appreciate in price. The daily chart may confirm this price action. The MACD shows as a bullish cross has formed as well as the histogram moving above the 0 line, indicating a buy signal. Traders may want to scale back their long term short positions in light of this potential pullback.
The pair looks to take a pause from its sharp downward trend. The weekly chart shows a potential bullish cross forming on the Slow Stochastic Oscillator, indicating the potential for an upward price movement. This is supported by an entrance and then a breach of the lower barrier on the chart’s 7-day and 14-day RSI. Traders may want to use the 1.5745 resistance level for a target price to enter short after the pullback.
The daily chart may present a good opportunity to get into the downward trend. Yesterday the pair climbed and then bounced off its major downward sloping trend line. The pair has continued its depreciation since. Traders may want to go short and use the support line of 89.13 as a level to take profit.
The pair shows the bullish trend in tact, but may be showing signs of weakening. The weekly chart shows a potential bearish cross forming on the Slow Stochastic Oscillator, indicating the potential for a downward price movement. The weekly also shows the 10-day Relative Strength index has broken its upward trend line. While the price appreciation continues, traders may want to begin scaling back any long positions they may have in preparation for possible pullback in the price.

The Wild Card

A period of consolidation has left the pair tight against the daily chart’s downward sloping trend line that began on January 14th. The 7-day daily chart shows the pair has hit a significant resistance level for the fourth time. The previous occurrences were followed by a sharp drop in the price. This may give forex traders an opportunity to go short on this pair.

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