Slow News Day May Lead to Further Euro Losses

The euro remained relatively unchanged vs. its main rivals throughout the European session yesterday, as political uncertainty in the euro-zone kept the currency near its recent lows. After dropping as low as 1.3000 during early morning trading, the EUR/USD spent most of the day trading around 1.3010. Turning to today, a slow news day may lead to low liquidity in the marketplace. Traders will want to note that a low liquidity environment can often lead to unexpected price shifts for seemingly no reason. Given the euro’s recent bearish trend, the possibility for further downward movement for the common currency exists.

Forex Market Trends

Daily Trend up up down down up no
Weekly Trend down down down up down down
Resistance 1.3082 1.6265 80.86 0.9363 1.0169 0.8166
1.3030 1.6213 80.31 0.9309 1.0130 0.8124
1.2996 1.6183 79.96 0.9276 1.0101 0.8096
Support 1.2943 1.6132 79.39 0.9220 1.0065 0.8048
1.2909 1.6102 79.05 0.9187 1.0041 0.8015
1.2857 1.6051 78.49 0.9133 0.9988 0.7980

Economic News

USD – Dollar Remains Bearish vs. JPY

The US dollar remained below the psychologically significant 80.00 level vs. the Japanese yen throughout yesterday’s trading session, as investors remain bearish toward the currency following last week’s poor US Non-Farm Payrolls figure. After climbing as high as 80.01 during overnight trading, the USD/JPY dropped over 30 pips and subsequently spent much of the day trading around 79.80. The greenback had more luck against the Canadian dollar over the course of the day. The USD/CAD was up close to 50 pips during the European session, eventually reaching as high as 0.9978.

Turning to today, a slow news day means that any dollar movement will likely be a result of announcements out of the euro-zone. Given the current political uncertainty in Greece, investors continue to remain bearish toward the euro. Should any additional negative news out of Greece be released today, investors may remain risk averse which could bring the dollar lower against the JPY. Later in the week, traders will want to remember to pay attention to a speech from Fed Chairman Bernanke on Thursday. The speech could include clues regarding a possible new round of quantitative easing in the US, which could create dollar volatility.

EUR – Political Uncertainty Continues to Weigh Down on Euro

The inability of Greece’s biggest political parties to form a parliamentary majority raised the prospects that there will be another round of elections in the country next month. The news generated additional concerns among investors about the prospects of euro-zone economic growth, which subsequently kept the euro near its recent lows throughout trading yesterday. While the EUR/JPY advanced some 30 pips earlier in the day, it quickly gave back its gains and spent the majority of the day trading around the 103.80 level. Similarly, the EUR/USD reversed slight upward movement it saw during the morning session to spend most of the day trading around the 1.3010 level.

Turning to today, traders will want to monitor any developments out of the euro-zone, particularly with regards to the political situation in Greece. Any indications that Greece will move away from the fiscal austerity measures it promised to undertake could result in further euro losses. Additionally, investor concerns regarding France’s new government could cause the euro to extend its bearish trend. The French President is known to differ with Germany regarding the best way toward euro-zone economic growth. Any signs of a future conflict may lead to additional risk aversion in the marketplace.

AUD – Risk Aversion Leads to Additional Aussie Losses

Ongoing concerns regarding the political situation in the euro-zone caused investors to abandon riskier assets during yesterday’s trading session, resulting in losses for the Australian dollar. The AUD/USD fell over 90 pips during European trading, reaching as low as 1.0101. Against the Japanese yen, the aussie dropped over 95 pips, reaching as low as 80.59 during the afternoon session.

Turning to today, the AUD may continue to drop depending on any announcements out of the euro-zone. Should investors determine that new governments in Greece and France will conflict with other euro-zone countries regarding the best way toward euro-zone economic growth, riskier currencies like the Aussie may extend their bearish trends.

Crude Oil – US Crude Inventories May Bring Oil Down Further

Crude oil dropped over $1 a barrel during trading yesterday, as risk aversion continued to dominate market sentiment following poor US and euro-zone news. After peaking at $97.90 during the overnight session, the commodity proceeded to fall throughout the day, eventually dropping as low as $96.53 during mid-day trading.

Turning to today, traders will want to pay careful attention to the US Crude Oil Inventories figure, scheduled to be released at 14:30 GMT. A steadily increasing level of US stockpiles has been interpreted as a sign of declining demand in the US, the world’s largest oil consuming country. Should today’s news come in above 2.0M, the price of oil may fall further during the afternoon session.

Technical News

The Williams Percent Range on the weekly chart has dropped into oversold territory, indicating that this pair could see upward movement in the coming days. Furthermore, the MACD/OsMA on the same chart appears to be forming a bullish cross. Traders will want to keep an eye on this pair, as it could stage an upward correction in the near future.
A bearish cross has formed on the weekly chart’s Slow Stochastic, in a sign that downward movement could occur for this pair. In addition, another bearish cross on the daily chart’s MACD/OsMA is providing further evidence of an impending correction. Traders may want to go short in their positions.
Most long term technical indicators place this pair in neutral territory, meaning that no definitive trend can be predicted at this time. The one exception is the weekly chart’s MACD/OsMA, which has formed a bearish cross. Traders will want to keep an eye on some of the other indicators on the weekly chart for signs of an impending downward correction.
The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that this pair could see downward movement in the near future. Furthermore, the Relative Strength Index (RSI) on the same chart is moving upward and appears poised to cross into the overbought zone as well. Traders will want to keep an eye on the RSI. If it crosses above 70, it may be a good time to open short positions.

The Wild Card

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement in the near future. The Relative Strength Index on the same chart has dropped into oversold territory, giving further support to the theory of an impending upward correction. Forex traders may want to go long in their positions.

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