USD Bearish Ahead of Heavy Trading Week

The US dollar closed last week on a bearish note, as it took significant losses against most of its main currency rivals, including the euro and Japanese yen. The dollar began to decline during the middle of the week, following an announcement from the Fed saying that record low US interest rates would likely remain for the next several years. A softer than expected US Advanced GDP figure on Friday only caused the currency to drop further. This week, all eyes will be on the US Non-Farm Payrolls figure. Should the figure come in below expectations, the dollar will likely extend its bearish trend.

Forex Market Trends

Daily Trend down down up up down down
Weekly Trend down down down up down down
Resistance 1.3227 1.5737 77.30 0.9305 1.0680 0.8421
1.3148 1.5675 77.16 0.9269 1.0614 0.8389
1.3100 1.5637 77.04 0.9240 1.0573 0.8370
Support 1.3061 1.5606 76.92 0.9211 1.0540 0.8354
1.3022 1.5576 76.77 0.9176 1.0505 0.8338
1.2974 1.5538 76.54 0.9118 1.0464 0.8319

Economic News

USD – USD Looks to Reverse Last Week’s Losses

Last week’s announcement by the Fed that US interest rates would likely remain at their current, near-zero levels until 2014 sent the USD tumbling against virtually all of its main currency rivals. The announcement was followed up by a worse than expected US Advance GDP figure, which added to the gloomy outlook investors have regarding the US economic recovery. The dollar closed out the week above the 1.3200 level against the euro, while it gave back virtually all of the gains made against the yen several days before.

The greenback will have ample opportunities to recoup its earlier losses this week, as a series of significant US economic indicators are scheduled to be released. While all eyes will most certainly be on Friday’s Non-Farm Employment Change figure, traders will also want to note the results of Wednesday’s ADP Non-Farm Employment Change and ISM Manufacturing PMI. A solid figure from either of the two indicators may help the USD in mid-week trading.

Turning to today, the direction markets take will likely be determined by euro-zone news. Specifically, investors will be eyeing Greece to see if it reaches a debt-swap deal with its creditors. Should such a deal be announced, riskier currencies may see a boost which would likely mean that the dollar will extend its losses.

EUR – Possible Greece Debt Deal May Boost EUR

Negative economic news out of the US last week briefly overshadowed the euro-zone debt crisis and led to significant gains for the euro to close out the week. A worse than expected US Advance GDP figure sent the EUR/USD above the 1.3200 level on Friday. Whether or not the pair will continue to rise this week depends on a number of economic indicators which are sure to generate plenty of market volatility in the coming days.

Today, traders will want to watch out for any announcements out of the euro-zone concerning a Greek debt-swap deal. Greece has been in negotiations with its creditors for some time now regarding its debt. A successful deal will likely give the euro a boost against its main currency rivals. At the same time, fears that Portugal could also default on its debt in the near future could limit the common currency’s upward momentum. Analysts are quick to warn that while the euro has turned bullish in trading as of late, much still has to be done before a euro-zone debt crisis is resolved. Any negative European news could bring the currency tumbling down.

JPY – Yen May Be Able to Extend Gains This Week

Despite the significant losses the Japanese yen took during mid-week trading, the currency was able to stage a recovery on Thursday and Friday following negative US news which sent trader to the safe-haven currency. The USD/JPY tumbled over 150 pips over the course of two days to close out the week at the 76.66 level. Against the euro the yen had more mixed results, but was still able to close Friday’s session at 101.39. The EUR/JPY was down some 75 pips from its weekly high when markets closed for the weekend.

Turning to this week, yen values will likely be determined by euro-zone and US news. Today, the yen could take some losses should the details of a Greek debt deal be announced. At the same time, traders will want to pay attention to any negative news out of Portugal which could limit the euro’s upward momentum. Later in the week, significant US news is scheduled to be released. Any indicator which causes investors to doubt the US economic recovery is likely to boost the yen.

Crude Oil – Crude Closes Out Week below $100 Level

Despite the boost riskier currencies like the euro saw toward the end of last week, crude oil saw mixed trading during Friday’s session and eventually closed below the $100 a barrel level. Analysts attributed the downward movement to the news that any EU embargo on Iranian oil will likely not go into effect for several months. The news calmed supply side fears among investors which eventually brought the commodity down.

This week, oil traders will want to pay attention to both euro-zone and US news. Should the euro maintain its bullish momentum, oil will likely become more attractive to international investors and prices could go up as a result. At the same time, any better than expected US news could lead to the opposite affect and turn oil bearish.

Technical News

According to technical indicators on the daily chart, this pair is in overbought territory and may see a downward correction in the near future. A bearish cross has formed on the Stochastic Slow, while the Williams Percent Range is currently at the -10 level. Traders may want to go short in their positions ahead of the downward breach.
Technical indicators are showing that this pair may have hit a significant resistance point and could see a correction in the near future. The daily chart’s Relative Strength Index is in well into the overbought zone, while a bearish cross has formed on the Stochastic Slow. Going short may prove to be the wise choice.
Technical indicators on both the daily and weekly charts are showing that this pair is oversold and may see an upward correction in the near future. The daily chart’s MACD/OsMA has formed a bullish cross, while the weekly chart’s Relative Strength Index is hovering close to the oversold zone. Traders may want to go long in their positions.
Most technical indicators show this pair trading in the oversold zone, meaning that an upward correction could take place in the near future. The Williams Percent Range on the daily chart is at the -90 level, while the Relative Strength Index on the same chart has dropped to the 15 level. Going long may be the preferred strategy today.

The Wild Card

The 8-hour chart’s Stochastic Slow has formed a bullish cross, indicating that upward movement may occur in the near future. This theory is supported by the daily chart’s Williams Percent Range, which is currently at the -90 level. This may be a good opportunity for forex traders to open long positions ahead of a possible upward correction.

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