Spanish Debt Worries Cause Euro to Tumble

Investor concerns regarding Spanish debt led to an increase in risk aversion on Friday, and caused the euro to tumble vs. its main currency rivals. Furthermore, news that the Chinese economy grew at a slower than expected rate last quarter resulted in safe-haven assets, including the US dollar and Japanese yen, turning bullish. Turning to this week, traders can expect market volatility as significant news from both the euro-zone and US is scheduled to be released. Today, US retails sales data may help the dollar extend its current upward momentum, should it come in at or above expectations.

Forex Market Trends

Daily Trend up up down down up up
Weekly Trend down down down up down down
Resistance 1.3119 1.5961 81.85 0.9312 1.0433 0.8322
1.3097 1.5916 81.39 0.9264 1.0390 0.8298
1.3079 1.5887 81.11 0.9234 1.0363 0.8271
Support 1.3038 1.5842 80.66 0.9187 1.0321 0.8245
1.3002 1.5813 80.38 0.9157 1.0293 0.8221
1.2985 1.5768 79.92 0.9109 1.0251 0.8205

Economic News

USD – Risk Aversion Leads to Dollar Gains

The US dollar turned bullish vs. most of its main currency rivals on Friday following poor euro-zone news which led to an increase in risk aversion. The EUR/USD fell well over 100 pips for the day and closed out the week at 1.3078. The GBP/USD also dropped around 120 pips to finish Friday’s session at 1.5845. Against the JPY, the dollar had a more mixed session. The USD/JPY fluctuated between 80.80 and 81.15 for much of the day. Eventually, the pair closed out the week at 80.88.

Today, investors will likely be focusing on a batch of US news, including the Core Retail Sales and Retail Sales figures. Both indicators are forecasted to show a slight drop over last month’s. That being said, should they come in at or above their expected levels, the dollar may be able to extend its current bullish momentum. Additionally, the TIC Long Term Purchases, scheduled to be released at 13:00 GMT, is forecasted to come in significantly below March’s figure. If true, the result may negatively impact the dollar.

Later in the week, traders will want to pay attention to the US Building Permits, Philly Fed Manufacturing Index and Unemployment Claims figures. All three are considered important signs of overall economic health, and are likely to generate significant volatility when they are released.

EUR – Euro May Extend Bearish Trend This Week

The euro-zone debt crisis once again dominated the news cycle on Friday, resulting in the common-currency tumbling across the board to close out the week. Worse than expected Spanish bond swaps were the main reason behind the euro’s bearish session. Against the Japanese yen, the euro fell over 120 pips before finishing out the day at 105.79. Similar losses were taken against the US dollar. The EUR/USD closed out Friday’s session at 1.3078, virtually erasing the gains it had made earlier in the week.

This week, the Spanish debt situation is likely to continue influencing the euro’s movement in the marketplace, with any further negative announcements likely to cause the currency to fall further. Additionally, traders will also want to note Tuesday’s German ZEW Economic Sentiment figure. As the biggest euro-zone economy, German indicators tend to have a significant impact on the euro. Analysts are forecasting the figure to come in at 20.2, slightly below last month’s result of 22.3. Should the news come in above expectations, the euro may be able to offset some of its recent losses.

AUD – Chinese Data Weighs Down on AUD

A worse than expected quarterly GDP figure out of China caused the Australian dollar to slide during Friday’s trading session. Chinese fundamental news tends to have a significant impact on the AUD, as Australian exporters rely heavily on demand from China. The AUD/JPY fell close to 100 pips on Friday, before closing out the week at 83.88. Against the US dollar, the aussie fell 78 pips for the day to close at 1.0371.

Turning to this week, aussie traders will want to pay attention to news out of the euro-zone, as it will likely determine the level of risk taking in the marketplace. The AUD is considered a growth-linked currency, and tends to increase in value when positive international news is released. In addition, the Reserve Bank of Australia’s Monetary Policy Meeting Minutes, scheduled for Tuesday at 1:30 GMT, are likely to generate market volatility. Positive news may help the aussie recover some of its recent losses.

Crude Oil – Crude Oil Finishes Week on Bearish Note

Crude oil fell on Friday, following the release of a worse than expected Chinese GDP figure. The figure showed that growth in the Chinese economy fell to its lowest level since 2009, and resulted in fears that global demand for oil would drop as a result. For the day, crude oil was down just over $1 a barrel to close out the week at $102.81.

This week, euro-zone news is likely to determine oil movement in the marketplace. Recent concerns over Spanish debt have weighed down on growth related commodities, like crude oil. Should these concerns persist, oil could extend its recent bearish trend. Furthermore, talks between Iran and the West this past weekend have helped ease concerns that a military conflict will occur in the near future. As a result, supply side fears have eased which could result in the price of crude oil dropping further.

Technical News

The daily chart’s Williams Percent Range has entered the oversold zone, indicating that an upward correction may occur in the near future. That being said, most other technical indicators show this pair range trading. Taking a wait and see approach may be the wise choice until a clearer picture presents itself.
Technical indicators on the weekly chart show this pair range-trading, meaning that no defined long term trend can be determined at this time. The Williams Percent Range on the daily chart points to possible bullish movement in the near future. Traders may want to go long in their positions for time being, but beware of any sudden downward corrections.
A bearish cross appears to be forming on the weekly chart’s MACD/OsMA, meaning that downward movement could occur in the coming days. Opening short positions may be a wise long term strategy, but traders will want to watch out for any minor upward corrections.
A narrowing of the Bollinger Bands on the weekly chart indicates that this pair could see a price shift in the coming days. Traders will also want to note that a bearish cross appears to be forming on the same chart’s MACD/OsMA. Should the cross form, it may be a sign of an impending downward correction.

The Wild Card

The daily chart’s Williams Percent Range has entered the oversold zone in a sign of an impending upward correction. Additionally, the Relative Strength Index (RSI) on the same chart is right on the border of oversold territory. Forex traders will want to keep an eye on the RSI. If it drops below 30, it will be another sign of future bullish movement.

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