Spain Concerns Cause Additional Euro Losses

After reaching as high as 1.2573 against the US dollar in early morning trading yesterday, the euro once again turned bearish as investor concerns regarding the health of Spanish banks weighed down on the common currency. Turning to today, traders will want to pay attention to the results of an Italian debt auction followed by a speech from the ECB President. Any signs that the euro-zone debt crisis is spreading to other countries in the region may lead to further euro losses. In addition, the US Pending Home Sales figure may lead to some market volatility. With analysts predicting the figure to come in below last month’s the dollar could see losses against the JPY.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend down down down up up down
Resistance 1.2599 1.5711 80.34 0.9699 0.9903 0.8061
1.2562 1.5682 80.02 0.9648 0.9855 0.8035
1.2535 1.5654 79.82 0.9629 0.9828 0.8018
Support 1.2473 1.5602 79.30 0.9562 0.9782 0.7975
1.2441 1.5573 78.98 0.9530 0.9754 0.7949
1.2400 1.5520 78.60 0.9495 0.9710 0.7911

Economic News

USD – Home Sales Data May Lead to Dollar Losses

The US dollar was able to advance on several of its higher-yielding currency rivals during European trading yesterday, as investors reverted to safe-haven assets amid concerns regarding the health of the Spanish banking system. After coming within reach of the 0.9900 level during early morning trading, the AUD/USD began to fall, eventually reaching as low as 0.9822 during mid-day trading. The EUR/USD fell close to 60 pips yesterday, eventually hitting 1.2516 before staging a slight upward correction to stabilize at 1.2540.

Turning to today, dollar traders will want to pay attention to the US Pending Home Sales figure, scheduled for 14:00 GMT. At the moment, analysts are forecasting the figure to come in well below last month’s result. If true, investors may take is as a sign that the US economic recovery is not proceeding quickly enough, which could result in dollar losses against the safe-haven Japanese yen. That being said, with the majority of attention still being devoted to euro-zone news, it is unclear how a disappointing home sale figure would impact the dollar against riskier currencies like the euro and GBP.

EUR – Italian Bond Auction Set to Impact EUR

Fears that a weakening banking sector in Spain may soon cause the country to request a bailout resulted in significant losses for the euro during trading yesterday. Spain’s fourth largest bank recently requested significant amounts of aid to help it recover from recent losses. Against the Japanese yen, the common-currency fell 45 pips over the course of the day, eventually reaching as low as 99.48. The euro performed even worse against the aussie. The EUR/AUD dropped as low as 1.2691 during the afternoon session, down close to 60 pips for the day.

Today, euro traders will want to carefully monitor the results of the Italian 10-y Bond Auction. Analysts are warning that the slightest bit of negative news out of the euro-zone could result in additional losses for the common-currency. Should today’s bond auction not perform as expected, the euro could see further downward pressure. Later in the day, ECB President Draghi is scheduled to give a speech. Unless his speech offers concrete proposals on how to help the euro-zone recover from the debt crisis, the EUR could extend its bearish trend.

Gold – Gold Fails to Break Above $1600

Euro-zone debt fears prevented gold from making any significant gains during yesterday’s trading session. While the precious metal has turned bullish over the last week, it has been unable to break past the psychologically significant $1600.00 an ounce level. The price of gold increased by just over $10 yesterday, reaching as high as $1582.36 before staging a slight downward correction.

Today, analysts are warning that it will be difficult for gold to move up significantly higher without the release of positive global economic data. Traders will want to monitor potentially impacting news out of the euro-zone and US. Should any of the data disappoint, the price of gold may fall as a result.

Crude Oil – Iran Worries Lead to Modest Increase in Price of Oil

Crude oil saw additional bullish movement during mid-day trading yesterday after hitting a seven-month low last week. Analysts attributed the commodity’s upward momentum to supply side fears out of Iran following inconclusive talks with the West regarding that country’s disputed nuclear program. The price of crude reached as high as $92.03 a barrel yesterday, up over $1 for the day.

Today, oil traders will want to pay attention to euro-zone news. While the situation in Iran has turned the commodity slightly bullish as of late, any disappointing European news could result in significant risk-aversion in the marketplace which has the potential to weigh down on riskier assets, like oil. In addition, with US Pending Home Sales expected to come in below last month’s figure, investors may choose to place their funds with more stable assets.

Technical News

A bullish cross on the weekly chart’s Slow Stochastic indicates that this pair could see upward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into oversold territory. Going long may be the preferred strategy for this pair.
Technical indicators on the daily chart, including the Relative Strength Index and the Slow Stochastic, indicate that this pair could see an upward correction in the near future. In addition, the weekly chart’s Williams Percent Range has crossed into oversold territory. Opening long positions may be the wise choice for this pair.
While the Williams Percent Range on the weekly chart is in oversold territory, most other long term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s MACD/OsMA has formed a bearish cross, indicating that downward movement could occur in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Going short may be the wise choice for this pair.

The Wild Card

The Relative Strength Index on the daily chart has dropped into oversold territory, indicating that this pair could see upward movement in the near future. Furthermore, the Williams Percent Range is moving downward and appears close to dropping below the -80 level. Forex traders will want to keep an eye on this indicator. If it drops below -80, it may be a good time to open long positions.

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