EUR Once Again Bearish Ahead of Debt Auctions

Ahead of a key European interest rate announcement scheduled for later today, the EUR once again has turned bearish following comments from a from a leading credit agency which highlighted just how vulnerable the currency is. With Spanish and Italian debt auctions scheduled to close out the week, traders can count on heavy volatility throughout the day today.

Forex Market Trends

Daily Trend down up up up up down
Weekly Trend down down down down up up
Resistance 1.2977 1.5534 77.32 0.9590 1.0382 0.8367
1.2918 1.5491 77.16 0.9515 1.0263 0.8333
1.2871 1.5456 77.03 0.9467 1.0189 0.8295
Support 1.2823 1.5421 76.88 0.9387 1.0130 0.8278
1.2764 1.5378 76.76 0.9338 1.0071 0.8257
1.2669 1.5308 76.59 0.9259 0.9997 0.8223

Economic News

USD – Return to Safe-Havens Turns USD Bullish

The US dollar recouped many of its losses from earlier in the week yesterday, as traders once again abandoned riskier assets in favor of safe-haven currencies like the greenback. The move brought the EUR/USD just shy of its 16-month low, while the GBP/USD fell to right around the 1.5300 level. The dollar’s bullish movement began after comments by a leading credit agency regarding the euro-zone debt crisis sent traders to more secure currencies. The comments highlighted just how fragile the euro-zone situation is.

Turning to today, while most of the day is likely to be dominated by euro-zone news, traders will want to pay attention to several US economic indicators which may influence the markets. Both the Core Retail Sales and Retail Sales figures are forecasted to come in above last month’s figures. Additionally, the weekly US Unemployment Claims figure is predicted to show continued positive movement in the American employment sector. If so, investors may be more inclined to shift their funds to riskier assets. That being said, if any negative European news is released today, it would likely lead to heavy EUR losses in mid-day trading.

EUR – Euro Dips Ahead of Minimum Bid Rate

Negative comments by a top credit agency turned the euro bearish in yesterday’s trading, following several days of upward movement. The comments served as a warning to any trader who thought that the currency could maintain its bullish momentum. The EUR/USD once again dropped toward a 16-month low as investors reverted their funds back to safe-haven currencies.

Today, a batch of European news is forecasted to influence the market-place. The European Central Bank’s interest rate decision and subsequent press conference is expected to generate heavy market volatility. Additionally, euro-zone debt auctions scheduled for today and tomorrow will illustrate just how bad the current euro-zone crisis actually is.

Traders should note that unless the debt auctions go smoothly, the euro is unlikely to stage any kind of meaningful recovery before the end of the week. With market sentiment overwhelmingly against the euro at the moment, it would take substantially good news to turn the currency bullish.

JPY – Yen Drops to 5-Day Low against USD

The USD/JPY broke the 77.00 barrier yesterday to reach a 5-day high before edging back down in late day trading. Analysts attributed the spike to a return to safe-have assets following another negative day for the euro. The yen faired significantly better against its other main currency rivals, like the euro and British pound, as it was able to take advantage of its reputation as a stable currency during market volatility.

Today, the JPY is forecasted to remain bullish against the EUR and GBP, as a batch of euro-zone news is likely to create major price movements in the market. Without positive European news, the yen may continue its bullish run to close out the week. At the same time, the USD seems to be benefitting most from the current bout of negative euro-zone data. If the current trend remains, the USD/JPY is likely to rise even further.

Crude Oil – Oil Prices Fall Amid Euro-Zone Debt Fears

The price of crude oil fell on Wednesday, as fears of an economic slowdown in Europe prompted investors to shift their funds away from the commodity. With the USD once again rising, crude oil has become less attractive of an investment. A strong US dollar makes oil more expensive for international buyers and drives investors away.

Crude was still able to stay well above the $100 a barrel level, as continued tensions between Iran and the West kept supply side fears on investors’ minds. Today, with plenty of euro-zone news forecasted to impact the markets, traders can expect another hectic day for oil. Any increase in the value of the US dollar is likely to send the price of oil down further.

Technical News

A bullish cross on the daily chart’s Stochastic Slow is a sign that upward movement may occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which has drifted into the oversold zone. Traders may want to go long in their positions today.
The Williams Percent Range on the weekly chart has dipped well into the oversold region, indicating that bullish movement may be on the horizon. Additionally, the Relative Strength Index is hovering close to the 20 level. Going long may be the preferred strategy today.
Technical indicators are still providing mixed signals for this currency pair. While the Relative Strength Index on the 8-hour chart is in oversold territory, most other indicators are in the neutral zone. Taking a wait-and-see approach may be the preferred strategy today.
The daily chart’s Williams Percent Range has drifted above the -20 level, indicating that bearish movement may occur in the near future. Traders may want to go short in their positions before any downward correction.

The Wild Card

The 8-hour chart’s technical indicators show that this commodity has been overbought for some time. A bearish cross has formed on the Stochastic Slow, while the Relative Strength Index shows that a downward correction could take place. Forex traders may want to take this opportunity to open short positions ahead of a bearish correction.

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