EUR Tumbles vs. Main Currency Rivals

The euro extended its bearish trend against virtually all of its main currency rivals during yesterday’s trading session, as investor fears regarding Spanish debt led to risk aversion in the marketplace. Turning to today, traders will want to pay attention to a batch of news out of both the US and euro-zone. Specifically, the German ZEW Economic Sentiment and US Building Permits figures, scheduled for 9:00 and 12:30 GMT respectively, are expected to generate volatility. Positive German news may help the euro recoup some of its recent losses.

Forex Market Trends

Daily Trend down down down up down up
Weekly Trend up up down down down up
Resistance 1.3186 1.5986 81.58 0.9234 1.0433 0.8308
1.3141 1.5940 81.16 0.9188 1.0390 0.8285
1.3112 1.5912 80.91 0.9160 1.0364 0.8270
Support 1.3067 1.5866 80.50 0.9114 1.0320 0.8246
1.3039 1.5837 80.24 0.9086 1.0294 0.8231
1.2993 1.5791 79.83 0.9041 1.0251 0.8208

Economic News

USD – Dollar Continues to Fall against Safe-Haven Currencies

The US dollar fell vs. its safe-haven currency rivals yesterday, including the Japanese yen, as investors continued to flee riskier assets amid poor international news. Better than expected US Retail Sales and Core Retail Sales reports did little to help the USD/JPY, which hit a seven-week low at 80.28 during afternoon trading. The greenback had better luck against higher yielding currencies, like the AUD and EUR, during the morning session. That being said, those gains were eventually erased toward the end of European trading.

Turning to today, USD traders will want to focus on today’s US building permits figure, scheduled to be released at 12:30 GMT. Analysts are forecasting the figure to come in at 0.71M, which if true, would signal additional growth in the US economy. The dollar could receive a boost against the yen following the news, assuming that it comes in at or above expectations. At the same time, analysts are warning that should the news come in below expectations, the USD/JPY could continue to fall.

EUR – Spanish Debt Worries Send EUR to New Lows

The euro fell to a two-month low vs. the US dollar and a one and a half year low against the British pound during trading yesterday, as investors continue to flee riskier assets due to debt concerns out of Spain. The EUR/USD briefly dropped below the psychologically significant 1.3000 level during mid-day trading before staging a slight recovery during the afternoon session. By the end of the day, the pair was stable at around the 1.3050 level. The EUR/GBP dropped as low as 0.8208 yesterday before staging a reversal. At the end of the European session, the pair was trading at the 0.8240 level.

Today, traders will want to note the results of the German ZEW Economic Sentiment, scheduled to be released at 9:00 GMT. As the biggest euro-zone economy, German indicators tend to have a significant impact on the euro. At the moment, analysts are predicting today’s news to come in at 19.7, which if true, would signal optimism in the German economy and may help the euro bounce back from its current trend.

Later in the week, traders will want to pay attention to Thursday’s Spanish bond auction. With concerns regarding the Spanish debt situation dominating market sentiment, significant volatility is expected following Thursday’s news.

JPY – Yen Sees Major Gains vs. EUR, USD

The yen saw significant gains against its main currency rivals yesterday, as investors continued to shun riskier assets amid Spanish debt worries. The EUR/JPY dropped well over 100 pips, reaching as low as 104.61 before staging a slight upward correction during afternoon trading. The pair eventually found stability around the 105.00 level. The USD/JPY fell to a seven-week low at 80.28 before staging a minor correction to stabilize at 80.40.

Turning to today, traders will want to pay attention to news out of both the euro-zone and US. While analysts are predicting market sentiment to remain bullish toward the yen for foreseeable future, positive news today may help the euro and USD recoup some of their recent losses.

Crude Oil – Oil Continues to Fall amid Risk Aversion in the Markets

Crude oil saw another bearish day in the marketplace, as an increase in risk aversion due to the Spanish debt crisis drove investors away from the commodity. Furthermore, a gradual reduction in tensions between Iran and the West has lessened supply side fears among traders. Crude reached as high as $103.82 a barrel during afternoon trading, before tumbling to $102.25 toward the end of European trading.

Today, oil traders will want to pay attention to the German ZEW Economic Sentiment. Should the figure come in at or above analyst forecasts, investors may decide to return to higher yielding assets, which could boost the price of oil. That being said, with market sentiment still bearish toward the euro, any gains oil makes could be short lived.

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

Hang Seng Index
A bearish cross on the daily chart appears to be forming at this time, indicating that a downward correction may occur in the near future. Furthermore, the Williams Percent Range on the same chart is moving into the overbought zone. Forex traders will want to watch both of these technical indicators, as they may be a sign of an impending bearish correction.

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