EUR Likely to See Additional Volatility This Week

Following significant euro movements throughout last week’s trading session, analysts are once again forecasting volatility for the common-currency in the coming days. In addition to several debt auctions out of the euro-zone and a meeting of euro-zone leaders to give final approval to the Greek bailout package, the US Non-Farm Employment Change figure is set to generate heavy market activity this week. Today, the US ISM Non-Manufacturing PMI should provide traders with a valid indicator of US economic health. A better than expected figure may boost the greenback.

Forex Market Trends

Daily Trend down down down up down down
Weekly Trend down down up up up down
Resistance 1.3280 1.5800 82.05 0.9210 1.0800 0.8420
1.3260 1.5780 81.85 0.9190 1.0780 0.8400
1.3230 1.5750 81.55 0.9160 1.0750 0.8370
Support 1.3170 1.5780 80.95 0.9100 1.0690 0.8310
1.3140 1.5750 80.65 0.9070 1.0660 0.8280
1.3120 1.5730 80.45 0.9050 1.0640 0.8260

Economic News

USD – Dollar Sees Major Gains to Close out Week

The US dollar moved up against virtually all of its main currency rivals last week, as poor fundamental news out of both the euro-zone and Japan sent investors to the greenback. The EUR/USD fell below the 1.3200 level on Friday, after a worse than expected German retail sales figure led to risk aversion in the marketplace. The USD/JPY closed the week at 81.78, a 9-month high, largely due to the Bank of Japan’s recent monetary easing policy.

Today, in addition to any announcements out of the euro-zone that always have the potential to impact the EUR/USD, dollar traders will want to keep an eye on the US ISM Non-Manufacturing PMI. The PMI is considered a leading indicator of economic health, and has been known to influence USD pairs. Analysts are forecasting the figure to come in around 56.2. If true, it would be a sign of industry expansion and may lead to dollar gains as a result.

Taking a look at the rest of the week, significant volatility is expected, as the US gets set to release its latest employment statistics on Friday. The Non-Farm Payrolls figure is widely considered the most important economic indicator, and consistently leads to major price shifts in the marketplace. Traders will also want to note the results of the ADP Non-Farm Employment Change figure on Wednesday. The ADP number is known to be a valid predictor of the official employment statistic on Friday, and has the potential to create a hectic trading environment.

EUR – Greek Debt Worries May Extend EUR Bearishness

The euro closed out a particularly bearish week by extending its losses against several of its main currency rivals. The EUR/USD dropped approximately 130 pips on Friday, to close out the week at 1.3197. Against the Canadian dollar, the euro dropped over 100 pips during the morning session, following the release of a worse than expected German retail sales figure. Pessimism regarding the prospects of a euro-zone economic recovery has weighed down on the common-currency. Furthermore, fears that Greece could still default on its debt have once again led to risk aversion in the marketplace.

Turning to this week, euro traders will want to pay attention to any announcements regarding the Greek bailout. Greece is unable to receive its bailout funds before it completes a bond swap with its private investors. With the due date to complete the swap on Friday, investors will be watching the situation in Greece carefully. Any signs that the bailout package will not be delivered as planned could put further pressure on the euro. In addition, the euro-zone’s Minimum Bid Rate, scheduled to be announced on Thursday could create market volatility if the figure does not come in as expected.

JPY – JPY Drops to 9-Month Low against Greenback

The Japanese yen hit a fresh 9-month low against the US dollar on Friday, as poor Japanese fundamentals caused the yen to extend its bearish trend. The Bank of Japan’s recent focus on monetary easing has created doubt in the strength of the Japanese economy. At the same time, a generally upbeat attitude regarding the US economic recovery has helped boost the dollar.

The week was not entirely bearish for the yen. The Japanese currency was able to advance on the euro after poor euro-zone news sent investors to safe-haven assets. The EUR/JPY dropped close to 90 pips on Friday before it staged a mild recovery to close out the week at 107.93.

Turning to this week, the yen is forecasted to once again see heavy volatility as significant news out of both the euro-zone and US are likely to influence risk appetite in the marketplace. Traders will want to pay attention to any announcements out of the euro-zone regarding the Greek debt crisis. Any news that indicates Greece could still default on its debt may boost the yen against the common-currency. Against the dollar, the yen may drop further if the US Non-Farm Payrolls figure shows additional growth in the US labor sector.

Crude Oil – Crude Oil Retreats to close out the Week

The price of crude oil dropped more than $2 a barrel on Friday, following comments from US President Obama that signaled that the US is not ready to use military force against Iran to halt that country’s nuclear program. The news calmed investors immediate supply side fears and resulted in crude closing out the week at $106.53 a barrel.

Turning to this week, oil prices are forecasted to see additional volatility as significant news out of the euro-zone is scheduled to be released. Any negative fundamental indicators out of the euro-zone, particularly with regards to the Greek debt crisis, could lead to risk aversion which may result in crude oil dropping further. That being said, any escalation in tensions with Iran could limit oil’s bearish trend.

Technical News

The daily chart’s Williams Percent Range has dropped into oversold territory, indicating that the pair could see some upward movement. That being said, most other technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer trend is likelier to present itself in the near future.
Most long term technical indicators show this pair range trading at the moment. The weekly chart’s Relative Strength Index is at 50, while the Williams Percent Range on the same chart has dropped below -20. Taking a wait and see approach for the pair may be the best option.
Long term technical indicators show this pair may have finally hit overbought territory following weeks of upward movement. The weekly chart’s Slow Stochastic appears to be forming a bearish cross, while the Williams Percent Range is currently at -10. Traders may want to go short in their positions.
Technical indicators on the daily chart show this pair may move into overbought territory in the near future. The Williams Percent Range is hovering close to the -20 level, while the Slow Stochastic may be forming a bearish cross. Traders will want to keep an eye on these two indicators for signs of impending downward movement.

The Wild Card

The 8-hour chart’s Relative Strength Index has dropped into oversold territory, indicating that bullish movement could occur in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bullish cross. Forex traders may want to go long in their positions ahead of a possible upward breach.

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