Greek Debt Swap Fears Continue to Weigh on EUR

Ongoing concerns regarding the Greek debt swap later this week, weighed down on the euro throughout yesterday’s trading session. Risk aversion kept the EUR/USD close to the 1.3200 level, while the EUR/JPY dropped some 100 pips before staging a slight recovery during the evening session. Today, traders will want to continue monitoring any announcements out of the euro-zone for clues as to the level of risk appetite in the marketplace. Positive news may help the euro recoup some of its recent losses.

Forex Market Trends

Daily Trend up up up no up up
Weekly Trend no up down down down down
Resistance 1.3299 1.5948 81.89 0.9196 1.0792 0.8461
1.3256 1.5900 81.38 0.9142 1.0734 0.8417
1.3229 1.5872 81.07 0.9109 1.0698 0.8390
Support 1.3185 1.5823 80.61 0.9055 1.0641 0.8346
1.3158 1.5795 80.30 0.922 1.0605 0.8320
1.3115 1.5744 79.84 0.8968 1.0547 0.8276

Economic News

USD – US Indicators Signal Further Growth in US Economy

Confidence in the US economic recovery was boosted yesterday, following the release of a better than expected ISM Non-Manufacturing PMI. The PMI, which came in at 57.3, was seen as further evidence that the US economy is growing and helped the USD extend its recent upward momentum. Additionally, ongoing concerns regarding a Greek bond swap later this week, led to some risk aversion in the marketplace which benefitted the greenback. The USD/JPY spent most of yesterday’s session trading around the 81.40 level, while the EUR/USD hovered around 1.3200.

Turning to today, a lack of US fundamental indicators means that any dollar volatility will likely occur as a result of euro-zone news. Uncertainties regarding the Greek debt situation may continue to weigh down on riskier currencies, which could help the dollar extend its recent bullish trend.

On Wednesday, traders will want to monitor a batch of US news. Specifically, the ADP Non-Farm Employment Change figure is forecasted to generate significant market activity. The figure is considered an accurate predictor of Friday’s all-important Non-Farm Payrolls figure, and investors will be monitoring Wednesday’s results for clues as to the state of the US economic recovery.

EUR – Risk Aversion Keeps EUR Low vs. USD

The euro remained bearish against most of its main currency pairs yesterday, as investor fears regarding the upcoming Greek debt swap led to risk aversion in the marketplace. The EUR/USD spent much of the day trading below the 1.3200 level before staging a slight upward correction during the evening session. Against the Japanese yen, the euro dropped as low as 106.90 during mid-day trading. The pair later staged an upward correction before stabilizing at 107.70.

Unease regarding the upcoming Greek debt swap deal was largely to blame for the euro’s bearish trend. Greece needs to successfully complete the debt swap before receiving a $130 billion bailout it desperately needs to avoid a messy default later this month. Traders will want to monitor any announcements out of the euro-zone today regarding the Greek debt situation. Any positive developments could help the common currency move up against its safe-haven counterparts. Later in the week, the currency may be influenced following the European Central Bank meeting and Minimum Bid Rate announcement.

JPY – Yen Comes Off 9-Month Low vs. USD

The USD/JPY turned bearish during yesterday’s trading session, after hitting a 9-month high last Friday. The pair tumbled some 70 pips, reaching as low as 81.13 during mid-day trading, before staging a modest upward correction. The GBP/JPY also saw downward movement yesterday, dropping some 150 pips before rebounding during the afternoon session. The pair eventually stabilized around 129.10.

Turning to today, risk appetite will likely be determined by any announcements out of the euro-zone. Any positive developments regarding Greece’s prospects for completing a scheduled debt swap on time may boost riskier currencies at the expense of the yen. At the same time, if euro-zone news continues to come out negative, the yen may be able to extend its gains against the common currency.

Crude Oil – Crude Oil Goes Up amid Increased Middle East Tensions

After dropping approximately $1.62 a barrel during overnight trading yesterday, crude oil bounced back as increased tensions regarding the conflict between Iran and the West generated supply side fears among investors. Iran is one of the world’s leading exporters of crude oil. As such, any potential disruption to the country’s oil industry tends to drive up prices. The price of crude eventually rose above $107 a barrel during the evening session.

Today, oil traders will want to continue monitoring any developments in the situation between Iran and the West. Substantial price shifts often occur following the most minor news event, making crude oil one of the more volatile instruments in the forex marketplace. In addition, the ongoing euro-zone debt crisis means that risk aversion could bring oil prices lower during tomorrow’s session. Traders will want to watch for any announcements regarding the upcoming Greek debt swap for clues as to the current level of risk appetite in the market.

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

A bearish cross on the daily chart’s Slow Stochastic indicates that downward movement may occur in the near future. This theory is supported by the Williams Percent Range on the same chart, which is hovering around the -20 level. Forex traders may want to go short in their positions ahead of a possible downward correction.

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