After a Greek poll over the weekend indicated that pro-austerity political parties are gaining popularity ahead of next month’s elections, the euro turned bullish against several of its main currency rivals to start off the week. That being said, the common-currency was not able to hold on to its gains, and by mid-day trading was once again falling against the USD, JPY and GBP. Today, in addition to any announcements out of the euro-zone, traders will also want to pay attention to the US CB Consumer Confidence figure. Analysts are predicting a slight increase over last month’s figure, which if true, could help the dollar in afternoon trading.
USD – Consumer Confidence Set to Create Dollar Volatility
The US dollar took losses against several of its main currency rivals during trading yesterday, following mildly positive Greek news which led to risk taking in the marketplace. The EUR/USD started off the week on a bullish note by gaining over 100 pips during overnight trading, reaching as high as 1.2623. That being said, the pair was not able to maintain its upward trend, and by the mid-day session was trading around the 1.2530 level. Against the British pound, the dollar was down almost 60 pips during overnight trading. The GBP/USD was able to reach as high as 1.5715 before staging a slight downward correction to stabilize at 1.5693.
Turning to today, traders will want to pay attention to the CB Consumer Confidence figure, scheduled to be released at 14:00 GMT. With analysts predicting the figure to come in slightly above last month’s, the dollar may be able to recoup some of yesterday’s losses during afternoon trading. In addition, traders should remember that this week is packed with significant US news, culminating in Friday’s all- important Non-Farm Payrolls figure. Any positive developments out of the US economy could lead to prolonged dollar gains.
EUR – EUR Resumes Bearish Trend
Following a brief upward correction during overnight trading yesterday, the euro once again turned bearish as concerns regarding Spanish debt weighed down on the common currency. The EUR/GBP, which had reached as high as 0.8035 during early morning trading, turned bearish over the course of the day and eventually dropped as low as 0.7987. Against the Canadian dollar, the euro opened the week by gaining close to 50 pips during the Asian session. The common currency was not able to hold onto its gains, and proceeded to tumble some 70 pips during European trading.
Turning to today, euro traders will want to pay attention to any developments out of both Greece and Spain regarding their respective political and economic crises. Any additional negative developments are likely to weigh down on the euro and could even bring it within reach of its recent two-year low against the dollar. Later in the week, traders should monitor the results of the Italian 10-y Bound Auction. Any indications that the euro-zone debt crisis is spreading to countries like Italy may result in further losses for the euro.
AUD – Aussie Turns Bullish Against USD
The Australian dollar staged a significant upward correction against its US counterpart throughout yesterday’s trading session, as some positive euro-zone developments led to risk taking in the marketplace. The AUD/USD shot up over 140 pips, reaching as high as 0.9887 before staging a slight downward correction in the afternoon session. The pair eventually stabilized at 0.9841.
As we move into the rest of the week, aussie traders will want to monitor any developments out of the euro-zone for clues as to the level of risk-taking in the marketplace. Any indications that Spain’s current debt crisis is spreading to other countries in the region could lead traders to shift their funds to safe-haven assets, which may result in the AUD giving up yesterday’s gains.
Crude Oil – Risk Taking Leads to Gains for Oil
Crude oil started off the week on a bullish note as risk taking in the marketplace led to gains for commodities and higher-yielding currencies. In addition, inconclusive talks between Iran and the West last week led to some supply side fears among investors which further boosted prices. The price of oil increased by over $1 a barrel, reaching as high as $91.95 before staging a downward correction and stabilizing at $91.45.
Today, whether or not oil will be able to extend its recent gains will largely be determined by any news out of the euro-zone. Any indications that more pro-austerity political parties will win in Greek elections next month could ease fears that Greece will have to leave the euro-zone, in which case crude oil may extend its bullish run.
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 crossed into overbought territory, indicating that downward movement could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a possible downward correction.
© 2006 by FxYard Ltd
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