The euro tumbled throughout the trading day yesterday, after a planned meeting of euro-zone finance ministers was canceled. The meeting was supposed to result in Greece receiving a badly needed bailout package. The cancellation was taken as a sign that other euro-zone countries are worried that Greece will not stand by the conditions required of it to receive the bailout. Turning to today, traders will want to continue monitoring the Greek situation for clues as to where the market is heading. In addition, a batch of US data set to be released at 13:30 GMT may generate heavy volatility.
USD – USD Moves Up Following Fresh Euro-Zone Worries
The US dollar saw gains against several of its main currency rivals yesterday, following negative euro-zone news that cast doubts on whether Greece will be able secure a much needed bailout package. The EUR/USD dropped as low 1.3065 before staging an upward correction and stabilizing around the 1.3100 level. Against the Swiss franc, the USD jumped close to 100 pips before stabilizing around the 0.9215 level.
Turning to today, a batch of US news is likely to generate significant market volatility. Traders will want to pay attention to the Building Permits and PPI figures, as well as the weekly Unemployment Claims. They are all considered valid indicators of economic health, and if positive, could result in gains for the greenback during the afternoon session. Additionally, a speech from Fed Chairman Bernanke at 14:00 GMT may lead to market activity. An optimistic speech regarding the US economy may help the dollar extend its bullish trend against the euro.
EUR – Risk Aversion Turns EUR Bearish
The euro tumbled against its safe-haven currency rivals yesterday, following news that approval for a Greek bailout package has been delayed. The news caused investors to abandon the euro in favor of safer assets, such as the US dollar and Japanese yen. Earlier pledges by China to keep on buying European debt were largely ignored following the Greek news. The EUR/USD fell below the psychologically significant 1.3100 level, while against the JPY, the common currency dropped over 100 pips during the afternoon session.
Turning to today, traders will want to continue monitoring the Greek situation for clues as to where the euro will be heading. With the bailout deal currently in question, the euro may have a hard time reversing its bearish trend. In addition, fears that Greece could still default on its debt even if it secures a bailout deal do not bode well for the euro. That being said, with China maintaining that it will continue to buy euro-zone debt, the common currency may be able to stabilize against its main rivals.
JPY – JPY Moves Up on EUR Following Greek News
The EUR/JPY spiked as high as 103.50 during European trading yesterday, following a pledge by China to continue buying euro-zone debt. The pair was not able to maintain its upward momentum, and tumbled well over 100 pips after it was announced that there may be delays in Greece receiving it’s much needed bailout package.
Turning to today, euro-zone news is once again forecasted to influence the level of risk taking in the market place. Traders will want to pay attention to any updates regarding the Greek debt crisis. Unless positive news is released, the JPY may continue to move up against riskier currencies like the euro.
Crude Oil – Oil Maintains Bullish Trend amid Middle East Tensions
The price of crude oil continued to go up yesterday, as Iranian threats to limit exports led to supply side fears among investors. Crude went as high as $102.44 a barrel late in the European session before stabilizing around the $101.50 level. Oil was able to maintain its bullish momentum despite Greek debt worries that drove investors away from riskier assets throughout the day.
Today, traders will want to continue monitoring the situation in the Middle East. Any actions by Iran to limit oil exports to Europe may result in prices going up further. For the time being, it appears that unless the situation dramatically calms down, crude is likely to remain above the $100 level.
Following dramatic shifts in recent days, technical indicators are inconclusive as to what direction this pair is headed. The Stochastic Slow on the weekly chart has formed a bearish cross, indicating that downward movement could occur in the near future. At the same time, the Williams Percent Range is hovering in oversold territory. Traders may want to take a wait and see approach for this pair.
The daily chart’s Bollinger Bands have begun to narrow, indicating that a major price shift could occur in the near future. The Stochastic Slow on the same chart has formed a bullish cross, which typically means upward movement could occur. Traders may want to open long positions ahead of a possible upward breach.
Most technical indicators place this pair in overbought territory, indicating that downward movement could occur in the near future. These include the Williams Percent Range on the weekly chart, which is currently at -10, and the Relative Strength Index on the daily chart, which has leveled out at 90. Traders may want to go short in their positions.
Most technical indicators on the daily and 8-hour charts place this pair in neutral territory, meaning that no major market shifts are expected to take place. That being said, the Williams Percent Range is slowly drifting into overbought territory. Traders will want to keep an eye on this indicator. If it goes above -20, the pair may see a downward reversal.
The Wild Card
The daily chart’s Williams Percent Range has drifted into oversold territory, indicating that an upward correction could take place in the near future. This theory is supported by the Relative Strength Index on the same chart, which has dropped below the 30 level. Forex traders may want to go long in their positions ahead of a possible upward correction.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.