Euro Receives Boost, but Gains May be Temporary

The euro saw upward movement against several of its main currency rivals yesterday, as hopes that the European Central Bank would move in to help debt stricken countries in the region boosted risk appetite in the marketplace. That being said, analysts were quick to warn that disagreements among euro-zone leaders about how to best combat the region’s debt crisis could limit the common-currency’s gains. Today, traders will want to pay attention to several potentially significant news events, including a German economic sentiment figure, and retail sales data out of the US. Any better than expected results could lead to risk taking and help the euro extend yesterday’s gains.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend up up up down down up
Resistance 1.2473 1.5815 79.32 0.9833 1.0614 0.7980
1.2421 1.5762 78.93 0.9780 1.0566 0.7932
1.2390 1.5729 78.68 0.9747 1.0537 0.7902
Support 1.2336 1.5676 78.29 0.9695 1.0489 0.7853
1.2308 1.5643 78.04 0.9662 1.0460 0.7824
1.2259 1.5590 77.65 0.9609 1.0413 0.7775

Economic News

USD – Dollar Takes Losses amid Increase in Risk Taking

The dollar fell during European trading yesterday, as an increase in risk taking caused investors to abandon safe-haven currencies. Against the Swiss franc, the greenback dropped more than 60 pips to reach as low as 0.9716 during the mid-day session. The GBP/USD shot up some 55 pips to peak at 1.5711, before staging a slight downward correction and stabilizing at the 1.5700 level. One notable exception to the dollar’s bearish trend was against the JPY. After falling during Asian trading, the USD/JPY was able to rebound during the mid-day session to trade as high as 78.36.

Turning to today, dollar traders will want to note the results of the US Core Retail Sale, Retail Sales and PPI figures, all set to be released at 12:30 GMT. Analysts are forecasting all three indicators to come in well above their previous figures, which if true, could lead to risk taking in the marketplace and additional losses for the safe-haven greenback. That being said, traders will also want to pay attention to a batch of euro-zone news set to be released during morning trading. If any of the news indicates a further slowdown in the euro-zone economic recovery, the dollar could climb against its riskier currency rivals.

EUR – German Data Could Lead to EUR Volatility Today

Risk taking in the marketplace led to euro gains yesterday, even as analysts continued to warn investors that disagreements among euro-zone leaders could limit any bullish movement by the common-currency. The EUR/USD advanced close to 100 pips over the course of the day to reach as high as 1.2372. Against the yen, the euro moved up close to 90 pips before peaking at 96.89. A very mild downward correction brought the EUR/JPY to the 96.75 level toward the end of European trading.

Today, in addition to any announcements from the ECB regarding plans to lower Spanish and Italian borrowing costs, euro traders will also want to pay attention to the German ZEW Economic Sentiment, scheduled to be released at 09:00 GMT. Last week, the euro saw a significant downward correction following the release of disappointing German data. With today’s news forecasted to come in at -19.2, which would indicate pessimism in the economic outlook for Germany, the euro could potentially reverse yesterday’s gains during mid-day trading.

Gold – Gold Maintains Earlier Gains

Despite a downward correction during Asian trading yesterday, gold was largely able to maintain last Friday’s gains as risk taking among investors boosted commodities and precious metals throughout the day. Gold spent much of the day range trading, bouncing back and forth between $1625 and ounce and $1619. By the end of the European session, prices were stable at the $1620 level.

Today, gold prices could see considerably more volatility as a batch of significant euro-zone and US data is set to be released. Traders will want to pay particular attention to the news out of the EU. Should any of it come in below the forecasted levels, investors may revert to safe-haven assets which could result in the price of gold falling.

Crude Oil – Oil Tumbles during Evening Trading

After steadily gaining throughout the European session due to increased tensions in the Middle East, the price of crude oil tumbled during evening trading yesterday. Crude advanced more than $1 a barrel to peak at $94.11 before staging a downward correction to trade as low as $92.09.

Today, the price of oil is forecasted to once again see heavy volatility, as a batch of significant US data is set to be released. If any of the indicators come in above expectations, risk taking could help oil recoup some of yesterday’s losses. Furthermore, any positive US data could signal to investors that demand in the world’s leading oil consuming country could go up, which may also help oil turn bullish.

Technical News

A bullish cross appears to be forming on the weekly chart’s MACD/OsMA, indicating that upward movement could occur in the coming days. That being said, most other technical indicators show this pair range trading, making a definitive trend hard to predict. Taking a wait and see approach may be the best choice at this time.
Most long term technical indicators place this pair in neutral territory, meaning that a definitive trend is hard to predict at this time. Taking a wait and see approach may be the best option, as a clearer picture is likely to present itself in the near future.
The Bollinger Bands on the weekly chart are narrowing, signaling that a price shift could occur in the coming days. Additionally, the Williams Percent Range on the weekly chart is currently about to drop into oversold territory, indicating that the shift could be bullish. Going long may be the right approach for this pair.
Both the Williams Percent Range and the Relative Strength Index on the weekly chart are very close to crossing into overbought territory, signaling that downward movement could occur in the coming days. Traders will want to closely watch these two indicators. If they do signal that the pair is overbought, 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 upward movement could occur in the near future. In addition, the Williams Percent Range on the same chart has crossed into oversold territory. Forex traders may want to open long positions for this pair ahead of a possible upward breach.

Written by