EUR/USD Hits 2-Week Low amid Spanish Debt Concerns

Investor concerns regarding Spain’s ability to handle its debt issues once again weighed down on the euro, which hit a two-week low against the US dollar during trading yesterday. The news also resulted in bearish movement for commodities, like crude oil which fell below the psychologically significant $90 a barrel level. Today, traders will want to pay attention to several economic indicators out of both the euro-zone and US. An Italian 10-year bond auction will provide important clues as to how quickly the euro-zone economic recovery is progressing. In addition, the US Core Durable Goods Orders, Unemployment Claims and Pending Home Sales have the potential to create market volatility.

Forex Market Trends

Daily Trend up up up down up up
Weekly Trend down down down up down down
Resistance 1.2985 1.6273 78.73 0.9482 1.0496 0.8068
1.2937 1.6229 78.26 0.9435 1.0451 0.8014
1.2906 1.6201 77.95 0.9406 1.0423 0.7988
Support 1.2858 1.6155 77.49 0.9358 1.0377 0.7936
1.2827 1.6127 77.18 0.9329 1.0349 0.7905
1.2776 1.6082 76.71 0.9281 1.0304 0.7854

Economic News

USD – Batch of US News Set to Create Dollar Volatility

The US dollar saw modest gains yesterday, as risk aversion in the marketplace, due to euro-zone debt concerns, caused investors to shift their funds to safe-haven assets. The USD/CHF traded as high as 0.9416 during European trading, up just under 30 pips, before a mild downward correction brought the pair to the 0.9410 level. Against the Canadian dollar, the greenback advanced close to 40 pips before peaking at 0.9842. A slight downward correction brought the USD to 0.9835 by the evening session.

Today, traders will want to pay attention to a batch of potentially significant US news. Specifically, the Core Durable Goods Orders and Unemployment Claims, both scheduled for 12:30 GMT, followed by the Pending Home Sales at 14:00, have the potential to create market volatility. Any better than expected news could help the greenback extend yesterday’s gains during mid-day and afternoon trading. At the same time, traders should note that if any of the data comes in below the forecasted levels, the dollar could turn bearish.

EUR – Euro Slides Further amid Debt Worries

The euro took losses against virtually all of its main currency rivals yesterday, as fears regarding Spanish debt and rising borrowing costs led to risk aversion in the marketplace. The EUR/USD, which only last week was at a four-month high, fell some 40 pips yesterday to trade as low as 1.2836, its lowest point in two weeks. Against the British pound, the euro dropped more than 20 pips to trade as low as 0.7939. A modest upward correction brought the common currency to 0.7947 toward the end of the European trading.

Today, in addition to any of the ongoing developments regarding the Spanish debt crisis, euro traders will also want to pay attention to an Italian ten-year bond auction. High Italian borrowing costs were one of the contributing factors behind the euro’s bearish movement over the summer. Should today’s bond auction indicate decreased demand for Italian debt or an increase in borrowing costs, the euro may extend yesterday’s bearish trend.

Gold – Risk Aversion Causes Gold to Tumble

A strengthened US dollar due to risk aversion in the marketplace yesterday resulted in the price of gold tumbling throughout the day. A strong dollar means that gold is more expensive for international buyers and typically causes the precious metal to fall. Overall, gold fell close to $30 an ounce during mid-day trading, eventually reaching as low as $1736.20.

Today, gold traders will want to pay attention to a batch of US data including the weekly Unemployment Clams and Pending Home Sales figures. Any better than expected news could result in the greenback extending its recent upward trend, which could result in additional bearish movement for gold.

Crude Oil – Crude Oil Falls Close to $2 a Barrel

The price of crude oil fell throughout the day yesterday, as investors chose to shift their funds from higher-yielding assets to safe-haven currencies due to concerns about euro-zone debt. Overall, the commodity fell close to $2 a barrel, eventually reaching as low as $88.93.

Today, data out of the US may be able to help crude oil recover some of its recent losses. Traders should note that any better than expected US news may signal to investors that demand for oil may increase, which could result in bullish movement for the commodity. At the same time, should any of the news disappoint, the price of oil could fall further.

Technical News

The Bollinger Bands on the weekly chart are beginning to narrow, indicating that a major price shift could occur in the coming days. A bearish cross on the same chart’s Slow Stochastic signals that the price shift could be downward. Opening short positions may be the wise choice for this pair.
The weekly chart’s Slow Stochastic has formed a bearish cross, indicating that this pair could see downward movement in the coming days. Furthermore, the Williams Percent Range on the same chart has crossed into overbought territory. Traders may want to open short positions for this pair.
Both the Relative Strength Index and Williams Percent Range on the weekly chart are approaching oversold territory. Traders will want to keep an eye on both of these indicators. If they cross below the oversold line, it may be a sign of impending upward movement.
While a bullish cross has formed on the weekly chart’s Slow Stochastic, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach for this pair, as a clearer picture is likely to present itself in the near future.

The Wild Card

The MACD/OsMA on the daily chart has formed a bullish cross, signaling that this pair could see upward movement in the near future. Furthermore, the Williams Percent Range on the same chart has crossed into oversold territory. This may be a good time for forex traders to open long positions.

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